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Week 10: Profits and Losses

This week we explored what I believe to be the most important aspect of publishing: profits and losses. I’m normally a risk-averse person, and I don’t really have an aptitude for business. In my ideal world, the effort to introduce a book would follow three simple steps:

  1. Write the book
  2. Print the book
  3. Put the book onto a bookstore shelf

For most other aspects of book publishing and selling, I could understand the components that need to be completed, without necessary knowing the details. I know you need an attractive title and a beautiful cover. I know you need to get reviewers and other writers talking about it. I know you need to advertise and promote yourself so that the reading public is aware of the book. But when it comes to actual fiscal costs, the details are everything. The profits on publishing books are small, and I imagine that the profits on selling them are even smaller. I was very interested in learning as much as possible about lowering costs and increasing margins.

To satisfy this curiosity, our assignment was to read this blog post from Jane Friedman on her own experience with Profit and Loss sheets, or P&Ls. Upon opening up her example, I was surprised–and pleased–to find that she had listed out so much more information other than the printing costs. For example, she allocates separate costs for the freelance design work and paying internal staff, although I assume these are both better known, “stable” figures, budgeted every year.

In addition to the figures, I really appreciate the meticulous descriptions which Jane provides for each category on the P&L. This may not be real data, but it’s based on real experience, which makes plotting and projecting my own figures much more reasonable. I knew authors received royalties, but I didn’t know a rough figure to factor into estimates; I knew that there were different considerations between paperbacks, hardcovers, and e-books, but I didn’t know how to quantify them.

Several weeks ago, Philip Gwyn Jones spoke about a notion which really surprised me, the practice of booksellers being able to return any unsold books back to the publisher for a refund. Jane accounts for this in her P&L, and even assumes that only half of all printed books will ever sell to begin with. The idealist in me frets over how unfair this situation seems, but the pessimist is grateful, because this sets an appropriate baseline for how the business is conducted. The more gotchas, dangers, and otherwise “known unknowns” I can plan for, the less likely an undesirable situation will financially surprise me.

Although Jane’s post has been up for nearly five years, her comments section is still quite active. This tells me that this information is not only still relevant, but that the financials of book publishing are still something of a mystery. I suspect, of course, that publishers communicate with each other about their businesses, what they’re paying out, and what they’re earning. But, since no one is making their balance sheets open to the public, resources like Jane’s are extremely valuable for the beginning publisher.