Business

Before discussing the self publishing business in its specifics, I want to take a moment to define what I'm talking about. I don't count money losing hobbies as businesses, even if you file a Schedule C with the IRS. If you're not at least trying to make a living at what you're doing, you're in it for reasons that render most of the advice I give to the back bench. There's nothing wrong with publishing for ideological reasons, to promote or defend the things you believe in, it's just that those reasons tend to trump all other considerations, making your job title that of "missionary" rather than the "publisher".

In order to make self publishing into a business, you have to be a commercial author. I mean this in a good way, that your books should be capable of creating commerce from which you can derive a living. Most authors are not commercial, which is why they have to turn to subsidy publishers to get a book published. As it turns out, the majority of titles published by the major trades aren't as commercial as the acquisitions editor and board thought they would be. Nobody has a monopoly on determining whether or not a book will find favor with readers, plenty of bestsellers have been turned down by publishers as "unsuitable for publication at this time." But it's a mistake to start out in business just to prove that the world is wrong about your manuscript. Success in the self publishing business depends on sales, and writing books for which there is a proven demand is the most important thing you can do to tilt the odds in your favor.

Since the Great Depression, large segments of the publishing business have functioned like consignment shops. The vast majority of books you see in bookstores can be returned to the publisher for credit, and that's what allows modern bookstores to speculate on stocking new titles with no proven demand. Like most ideas born in desperation, it works pretty good some of the time, but has some major downsides. For one thing, it's much more efficient for bookstores to stock as many titles as possible from the largest publishers to simplify their returns, which usually amount to exchanges, and it puts a large risk premium on starting a new publishing business.

Most new publishers rely on distributors to handle the bookstore end of their business, and since those distributors take anywhere from 60% to 70% of the cover price, the first concern of most publishers is to lower their unit cost. The sole advantage of the self publishing business model is that there are no acquisition costs, the author works purely on speculation of future profits, but all the other costs remain. The only variable in unit cost for new publishers turns out to be the printing cost. When printing on an offset press, the more copies you print, the cheaper they get, at least up into the tens of thousands. After doing the math on all of the start-up costs, a new publisher will quickly conclude they'll need to sell at least a few thousand copies to claim financial success. So why not print a few thousand more copies and get a cheaper price, or print ten thousand and get them for just 30% more than five thousand?

Because most of the time, the new publisher will be lucky to sell a few hundred copies that don't find their way back as returns. The main culprit is usually a failed marketing plan, but sometimes the publisher totally misjudges the potential demand for a new title or makes some production mistakes that render the book unattractive to potential buyers. New publishers, however, tend to think that the problem was their book didn't get a fair chance in the bookstores. Well, bookstores aren't under any obligation to try your book, and you don't have to get into bookstores to be successful. There are plenty of variables involved here, but one thing I can say with complete confidence is that the new publisher who based their business model on selling several thousand copies of their first title and only sold a few hundred has lost a lot of money. In fact, they've lost so much money they usually give up, so even if that first title would have continued selling at a slow rate for years, they've written it off and sent the remainders to a recycling facility.

The business approach for new publishers that I advocate is to stay away from offset printing and to use print-on-demand, at least to gauge your initial success. The economics of the print-on-demand model are so different from the offset model that an experienced publisher using Lightning Source can get a book in print and available through distribution for a setup fee of about $100 (depends on page count). All of the pre-press costs are nominally the same, but the truth is, you can cut some corners on costs when you know you aren't going to get stuck with a warehouse full of books. The per unit cost of a print-on-demand book is usually triple or quadruple the per copy cost of a modest offset run, but you only pay to have one printed when you have one ordered. I net a little over half the cover price on each print-on-demand book I sell.

When you're in business to make a living, the bottom line is measured in profit, not sales. I've been using print-on-demand for several years, long enough to know the steady-state demand for my titles, and long enough to know that I could sell more books if I changed my approach to include bookstore stocking. The reason I'm sticking with my initial business model is because I don't see the additional risks of the offset model creating enough incremental sales to justify the switch-over. It's not some decision I reached in a vacuum. I've received unsolicited offers from distributors, from a big trade offering a co-distribution deal, not to mention buy-out offers from a variety of trades. One well known and well established distributor who approached me has since gone out of business and might have wiped me out. I'm not offended that these people believe they can do a better job with my titles than I can, I just ask them to show me the money. So far, the short discount print-on-demand approach has made more business sense for me than chasing greater sales that may end up costing me money.