Our goal as writers is to craft a story so interesting that strangers will pay money to hear it.
Let’s start with definitions: ROI stands for Return On Investment. The equation: Revenue minus Costs divided by Costs. In publishing, this is a very tricky number because books have a startup cost but very little operational or maintenance cost. Especially true now that you can Print On Demand (POD) and e-publish.
Our costs are pretty simple and can be negated or minimized pretty quickly. What we need to pick is a time frame. For most indie authors, the first 3-6 months are filled with frantic efforts to get the word out. Newer authors, like me, are reading the posts of pioneers like Joanna Penn and Rachel Abbott and getting a head start on pre-release marketing earlier than our predecessors. Meaning we now have cash outlays before we have income. ROI becomes increasingly important. And time dependent.
This post examines three aspects: Revenue, Cost, and Time.
Revenue is the amount of money you bring in. You will use your revenue after Amazon, B&N, Kobo, Smashwords take their cut. For this exercise, we are going to use $2.99 at Amazon’s 70% royalty because it represents a lot of books. Later this week, we will get deeper into pricing.
Cost is the amount of money directly tied to this book. Yes, you need a new office chair. Yes, a new laptop would be nice. No, those are not going to count (although they are real outlays, if cash is tight, count them). Count the products and services you have to buy to put Book A on the shelf.
Time can be seen in two ways. ROI is the usual method for an ongoing business to evaluate when a given investment will pay for itself. Usually the period is 1-3 years with a specific target date for “going black” (or paying for itself). There is an inherent expectation that the business has other revenue streams and will continue forward regardless of the outcome of the exercise. Writers are usually on more of a shoestring budget and hope to go black in days not years. Good news/Bad news. Bad news, very few authors go black as soon as they hoped. Good news, once you’ve gone green, the book will continue providing income long into the future.
The numbers below are extrapolated from the previous exercise and represent an author attaining the top 100 books somewhere in month 6 and sustaining that position for six more months. (NOTE: This is extremely rare.) This is a math exercise only. You may or may not have that volume or success. Or, you might not have that expense. Many authors rely on DIY marketing. In addition, there are six thousand other ways you can accomplish this same thing.
| High Volume Sales – 300/day | |||
| Time in months |
3 |
6 |
12 |
| Unit Sales |
1,000 |
18,000 |
78,000 |
| Revenue to date |
2,093 |
37,674 |
163,254 |
| Costs | |||
| Startup |
26,600 |
– |
– |
| Contests |
3,000 |
3,000 |
– |
| Whatever |
3,000 |
3,000 |
3,000 |
| ROI | |||
| Period |
-94% |
528% |
5342% |
| Actual |
-94% |
-2% |
292% |
| Lower Volume Sales – 70/day | |||
| Time in months |
3 |
6 |
12 |
| Unit Sales |
300 |
3,300 |
21,300 |
| Revenue to date |
628 |
6,907 |
44,581 |
| Costs | |||
| Startup |
26,600 |
– |
– |
| Contests |
3,000 |
3,000 |
– |
| Whatever |
3,000 |
3,000 |
3,000 |
| ROI | |||
| Period |
-98% |
15% |
1386% |
| Actual |
-98% |
-82% |
7% |
Not a bad investment on paper. If you have the initial capital and you achieve the unit sales. And the wind blows in the right direction. Achieving top selling status is a lot harder than running a spreadsheet. Do NOT rely on my numbers to fit your writing plans. You need to run these equations for yourself using information you research for your genre.
Erotic authors, whose numbers are low but whose readers are loyal (well, they ‘say’ they’re loyal) have been raising their prices. Can SciFi support higher prices? Romance? I have no idea.
What do you think?
Peace, Seeley James
Coming up next on On Writing v5.2: Cash is Good, Where should I price my ebook?
