Books require a lot of time and energy to write. It is natural, not greedy, to wonder whether it’s all going to be worth it in the end.

Good work is its own reward, yes, and it’s hard to put a price tag on the feeling of getting your book into the world, knowing it will be part of your legacy for a long time. But you have every right to wonder how much money you’ll make from your first book.

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Calculating book-based income can feel mysterious and secretive. In this article I want to give you a straightforward explanation of how authors are paid and therefore how much money you can expect to make from your first book.

How Authors Are Paid

Publishers pay royalties to authors based on how many copies of their book sell. There’s really no such thing as “standard book contract royalties.” In my time in the industry, I saw royalty rates as low as 4 percent and as high as 30 percent. Your royalty rate will depend on a wide variety of factors such as your role in the project (are you the sole author or a coauthor or one of several contributors?), your previous book sales (if applicable), the retail price, the publisher’s sales projection, and how much competition there is for your book.

Sometimes royalties are based on the retail price; sometimes they are based on the publisher’s “net receipts,” which is just a fancy term for the revenue a publisher receives from sales.

Let’s say you’re getting a 14 percent royalty based on net receipts. Let’s also say your book retails for $15 and sells 5,000 copies in the first twelve months of publication. Keeping in mind the publisher sells at a 50 percent discount (or higher) to retail outlets, here’s the math:

14 percent royalty x $15 retail price x 5000 copies sold x 50 percent discount = $5,250.

That amount ($5,250) is how much royalty your book would have earned over its first 12 months of publication.

How Advance and Royalties Work

Publishers pay an advance against royalties based on how many copies they think a book will sell over some period of time, often a year. So, using the above example, if a publisher projected that scenario, they might offer an advance of $5,000.

But let’s say your book went on to sell 5,000 more copies for a total of 10,000. Just to make things interesting, let’s say your agreement with your publisher is that after the first 5000 copies sell, your royalty increases to 16 percent. Here’s the math:

14 percent royalty x $15 retail price x 5000 copies sold x 50 percent discount = $5,250.

+

16 percent royalty x $15 retail price x another 5000 copies sold x 50 percent discount = $6,000.

Total: $11,250

Very often publishers hold some number of copies sold in reserve to allow for returns, but assuming all 10,000 copies sold and did not come back to the publisher, you’d be at a total royalty income of $11,250.

If your initial advance was $5,000, the publisher would now pay you an additional $6,250. Different publishers have different cycles for paying royalties, but a fairly common payout is semiannually (twice a year). This is also when you would receive a royalty report—essentially a spreadsheet showing how many copies have sold and the resulting amount due to you.

Influencing Factors

All the variables in this equation have a significant impact on the total at the end of the equation:

• Your royalty rate could be higher or lower.
• Your book’s retail price could be more or less than $14.99.
• The average discount at which a publisher sells your book could be more or less than 50 percent.
• And of course the number of copies will likely be lower or higher than a round 5,000 or 10,000 copies.

You can manipulate any one of these factors to see how it will change the total. I created a tool called the Author Income Calculator which allows you to see how changing any of these factors affects the bottom line. To use the calculator, click here.

Another Way to Make Income from a Book

Another very important opportunity for authors to keep in mind is how much money they can make from selling copies of their own book. Publishers often sell copies of an author’s book back to the author at a discount that is higher than they offer through regular trade channels, as long as the author is buying a significant number of copies. This is referred to as an author’s “buyback discount.”

These copies are typically royalty free; nevertheless, you can generate a significant amount of revenue by buying and selling copies of your book. Let’s say you bought 1000 copies of your own book at 65 percent off the retail price. (Your publisher may not want to offer that high of a discount, but it’s not outlandish.)

Here’s the math on your cost:

1000 copies x $15 retail x 35 percent (the percentage you pay after a 65 percent discount) = $5,250 + shipping.

Now let’s say over the course of a year you are able to sell those copies at the standard retail price of $15. A thousand copies multiplied by $15 is $15,000. Subtract your cost and shipping, and you’re likely to be well over $9,000.

So in this scenario you made over $9000 from 1000 books sold, and this does not include whatever your advance was.

It’s important to your relationship with your publisher and to the overall success of your book to promote your book widely. You don’t want to promote the copies you’re selling at the expense of all the other copies (your publisher has distributed) in the market. You definitely want to take a multi-pronged approach, but hopefully you see how you can make a significant amount of money from a traditionally published book.

The Common Denominator

Whether you’re calculating your advance, your total royalties, or the amount you can make from copies you sell, the common denominator is sales. The amount of money an author can make is not really mysterious. It comes down to math. (To calculate how much money you can make using your own figures, click here.)

If the common denominator is sales, what’s the secret to selling as many copies as possible? Well, again, it’s not really a secret. Selling books is a result of cultivating an audience over a period of time and writing a great book that offers a lot of value.

Next Steps

Here are some questions to ask as you think about writing and publishing your book:

• Who is your audience?
• What problem do they have that you can solve in a practical, meaningful way? I recently heard Pamela Slim say, “Define your audience by their problems, not their demographics.” That’s good advice.
• Are you willing to spend a year or longer helping your readers solve that problem (i.e., promoting your book)?
• Where is your audience already gathering?
• How can you begin attracting them to you and building an email list of potential readers?

Like most things worth doing, building an audience and writing a book take time. But getting your book into the world can be one of the most rewarding things you’ll ever do.

Question: Who do you want to serve, and what sort of book would you like to get into the world? You can leave a comment by clicking here.