Andrea M. Rotondo - Favorite Books

Resources — Advances & Royalties

As an author, the financial viability of your book should be a primary concern. While it’s wonderful to write and publish for the sake of literary posterity, making a living must be a consideration too.

Advance Against Future Royalty Earnings
Most publishers offer an advance against future royalties. That means you’ll be paid upfront and once your book starts selling, the publisher will keep track and will “deduct” the advance total from the royalties the book has earned. Once the advance has “earned out,” you’ll start accumulating back-end royalties and will receive a check with your royalty statement (once a year, twice a year, or quarterly…depending on your publisher and their policy).

Advance Payment Terms
Advances are generally paid out in several installments. You may receive half upon signing the contract and half upon acceptance of the manuscript. Some publishers split the advance in thirds. There are many options and, depending on your publisher, the payment terms may or may not be negotiable.

No Advance
Some small presses do not offer advances and merely work on back-end royalties.

Royalty Per Copy
Your “royalty” is the amount you’ll be paid for each book sold. There are several ways to mathematically arrive at this figure. Some publishers offer a royalty figured on the suggested retail price.

Hardcover royalty rates are generally higher than trade paperback or mass market paperback. It’s also common to have an “escalator” clause. For example, if your book sells 10,000 hardcover copies, you’ll earn a 10% royalty on each copy. Once the book sells the 10,001st copy, your rate would escalate to, say, 12.5%. Copies sold in excess of 20,001 would earn 15%.

Trade paperback royalty rates range, depending on the publisher, but 7.5% is common.

THE ABOVE RATES ARE FOR ROYALTIES BASED ON SUGGESTED RETAIL PRICE!

There is another method publishers use to figure royalties: royalty on net. This means that the royalty is based on the amount of money the publisher actually receives for any given copy of your book. This means that you’ll earn different royalty rates for books sold at different discounts.

For example, your publisher’s wholesale distributor requires a 55% discount off the srp. If your book retails at $15.95, the distributor is paying $8.77 a copy for it. You’ll receive a royalty based on $7.18.

However, your publisher also sells direct to consumers via their website. The site-wide discount is 20%. So, your book’s srp is $15.95. Direct customers get a $3.19 discount. The final price per copy is $12.76 and that’s the number your royalty will be figured on.

What Is My Book Worth?
Authors often wonder what advance they should expect. Here’s the tough reality: what your book is worth in terms of aesthetics and literary value is not always what you’ll be offered. You may have heard about a few debut novelists snagging $100,000 advances from major publishers, but those instances are few and far between.
To get a rough idea of advance ranges, check the Deals database at PublishersMarketplace.com or read back issues of Publishers Weekly magazine.

Title P&L Worksheet
The truth is that while your advance will be based on many factors, one of the most important is driven by math. Have you ever heard of a title P&L (title profit & loss) worksheet? This is a document that your acquiring editor works up for every title he or she considers for publication.

This worksheet includes information such as:
Gross units (how many copies the publisher thinks will sell, with a percentage of returns factored in)
Suggested retail price
Average discount to the trade
Author advance
Development costs (editing, indexing, interior design, jacket design, etc.)
PP&B (paper, printing, and binding)
G&A (general and administrative costs, such as publicity costs, sales commissions, salaries, warehouse & fulfillment, etc.)

The acquiring editor researches the market and discusses the book with the sales and marketing team. These discussions determine a best guess of how many copies of the book they feel they will sell.

The production department contributes by giving an estimate of the creation costs. Standard G&A costs are factored in, and if your book requires any additional publicity and promotion (above and beyond what is generally budgeted for), that number is added to the worksheet.

When this puzzle is put together, it reveals the gross profit margin for the proposed book. Most publishers look for a gross margin of 50% to 60%. (The higher, the better.)

Because of the sheer cost of PP&B, you can clearly see why books with a high gross unit estimate will be the most appealing to many publishers. PP&B per copy costs go down as the press run gets bigger.

Click here to download a pdf of a print quote from Quebecor (a major print supplier for book publishers).

The quote is for a 320-page hardcover trade book (6.125 x 9.25) with a four-color dust jacket and a 24-page black & white photo insert section. You’ll notice quotes are given for three different quantities. (Remember that print quotes vary depending on current paper inventory and other factors. The prices listed in this quote may not be current now. The document is merely for reference.)

Click here to download a title P&L template (Microsoft Excel format).

The Advance Figure That’s Offered
Once the acquisitions editor has tallied the title P&L, an advance figure will be arrived at. Many publishers, including the one I work for, offer half of what they think the author will earn in royalties during the first year of sales.

When the Numbers Don’t Work Out
Remember that the P&L for your book may not work for one publisher but will for another. It really depends on the goals and operating procedures of the publisher you’ve targeted. A large publisher may not be interested in a book that will only garner sales of 2,000 to 3,000 copies. However, a small independent press that focuses on your book’s genre may be very interested. The numbers only mean something when you understand the microscope being used to view them.

If you’re interested in the business mechanics of publishing, I highly recommend Thomas Woll’s book, Publishing for Profit: Successful Bottom-Line Management for Book Publishers. He’s the principal of Cross River Publishing Consultants and he teaches at NYU’s Center for Publishing.

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