The Economics of Self Publishing A Book (How It All Works)

After publishing my book at the end of last year, something strange happened.

Several readers reached out, asking about the different aspects of the book publishing process.

I think this was simply out of curiosity.  After all, I didn’t use a traditional publisher to get my book printed – instead, taking the less obvious path of self publishing.

In this article, I’ll tell you why I didn’t go the traditional route, how to write a book and get it published and distributed without a publisher.  I’ll also flesh out the details behind how the industry works and how profitable books are (including how much I’m making per copy).

Let’s begin with a chance meeting which helped me decide which book publishing path to take.

My chance meeting with an author

It was early 2022.  I’d written a book draft, and was bumbling through the editing stages.  Looking over the manuscript, tweaking, trimming, changing paragraphs dozens of times but not really getting anywhere.

You know when you say a word so many times it loses all meaning?  I’d also looked at the text so much that’s how my book felt.  I didn’t know if it was terrible and beyond fixing, or fantastic and didn’t need a thing.

I was also at a crossroads.  It was time to either reach out to a publisher, or attempt to publish it myself.  Then something very fortunate happened.

I received an email from a guy who worked for a company providing financial data and online investing related content.  He requested we meet for lunch to discuss the possibility of me creating some FI related articles for them.  I was curious to see what he had to say so I agreed.

Turns out, he was a reader of my blog, and on the FIRE path himself!  During our chat, he casually mentioned that he’d actually written a couple of books on the side, of the fiction variety.

I later reached out for advice on the book publishing process, and after a bit more discussion, he said he’d be thrilled to offer his services to help me finish off the book – having done so in the past for some friend’s books.

What a relief!  Not only was he able to talk me through the experience as an author himself, but he was able to take my book from its questionable state, and polish it up to a reasonable standard.

In case you’re wondering, his name is Jed Herne.  He’s an experienced author, who also has a YouTube channel, and these days he’s doing author coaching as well as writing.  He’s essentially turning his passion into a professional gig, doing what he loves while blazing his own path to FI.

But why self publish, you might be wondering?  Wouldn’t it be better to have a real publisher?

Here’s some of the main differences between traditional and self publishing.

Traditional vs Self Publishing

I thought long and hard about this decision, and in the end, self publishing was the best fit.

As I see it, here are the main differences…

Benefits of traditional publishing: 

— You get paid up front, even if the book eventually makes no money.

— Everything is taken care of (editing, cover design, distribution, etc.).

— No out of pocket costs, since everything is covered by the publisher.

— The book has a good chance of reaching physical bookstores.

— You get the prestige and status of your book being ‘chosen’ and backed by a professional publishing company.

Downsides of traditional publishing:

— Less royalties. The publisher typically takes like 80% of book profit, which means you’re essentially selling an 80% ownership stake in your book for the above benefits.

— Less control. The publisher can say they want certain sections or words changed, a different tone, or go with a cover and blurb you don’t like because they think it’ll sell better.

Benefits of self publishing:

— More royalties. You retain 100% ownership of your book and reap the full benefit if it succeeds.

— More control.  You can make the book exactly how you want it, with nobody able to water down certain parts or choosing a cover and tone you don’t like.

Downsides of self publishing:

— You have to pay for everything yourself up front (professional editing services, cover design, formatting for publishing, audiobook production, etc). This means it takes a while just to breakeven, let alone make any money.

— You have to manage the project yourself. Outsourcing the above, finding people who understand your book and its message, making sure everything goes to plan.

— The book won’t make it to physical stores, and it doesn’t carry any sort of status and prestige of having a big publisher.

— Risk.  If your book doesn’t succeed you get paid absolutely nothing, despite spending hundreds of hours on it and forking out thousands of dollars.

Whether someone chooses traditional or self publishing will come down to the individual person and what’s more important to them.

Why I chose to self publish

Despite the negatives above, let me explain why I self published.

I did not want to give up any creative control of the book.  I couldn’t stomach having some of my writing changed in a way I didn’t like.

The publisher could decide they want to alter the tone, remove things I felt were important or add things I felt were irrelevant.  And what could I do?  They’d be the majority owner.

I’m not saying that would’ve happened.  But the publisher is taking the financial risk, so it’s natural they want a say in things.  Personally, I’d rather have the control.  I don’t need the advance check, or the bookshop status.  Covering the costs myself and taking the risk to retain independence is a much better fit.

All I really needed was editing services and help with finishing it off.  So why give up 80% ownership and the royalties just for that?  Especially when I’m not someone writing books for a living and need those advance cheques to keep the lights on.

I also didn’t like the idea of having to pitch my book to publishers.  My job would be to try and convince them it’s worth taking on and come to some type of deal about what it’s worth.  No thanks.

Ultimately, I wasn’t interested in answering to anyone, trying to sell anyone on the idea, or giving up control and potential earnings.  This is a rare case when I decided the DIY approach was best and where I chose the less simple option.

In short, the freedom, control, and full ownership of self publishing was more attractive than the alternative.

The writing process

My book writing journey went roughly as follows.

December 2020:  The first month was spent fleshing out all the topics, chapter order and general flow of the book.

January 2021:  The next 10-12 months was spent penning a rough draft, or a ‘vomit draft’ as I’ve seen it called 😂

January 2022:  The next 6 months or so was spent doing extensive editing myself and then getting professional help.

June 2022:  The following 3-5 months was spent polishing, last minute changes, formatting it for printing, cover design, blurb, testimonials, setting up on the platforms, and a basic marketing plan.

December 2022:  Launch!

Overall, I worked on it for an average of 1 hour a day for almost 2 years.

The basic writing strategy I used was to simply let my brain dump out everything it wanted to, because it can always be fixed it up later.  But if you try to edit during the early stages you’ll never get anywhere.

I actually learned this from a free online book writing course at Scribe Media.  There was a lot of helpful advice in the course, and frankly, I would’ve been a bit lost without it.

As for the costs of publishing a book, these vary depending on the services you want.  I paid for multiple rounds of extensive editing, cover design, audiobook production, and a bunch of smaller things like formatting and uploading it to all the platforms.

There’s also fees to upload your book to certain places, and registering the book with an ISBN (essentially an official ID number so it can be looked up by libraries and stores).  I also purchased a bunch of copies to give away, and have even been testing out some Amazon advertising.

The bill for all this?  About $7,000.

That sounds like a fair chunk of cash, and it is.  But the book simply wouldn’t exist without it.  Thankfully, the launch went fantastically well and the book hit breakeven in its first month!

I’ll share some royalty numbers with you in a moment.  But first, I’ll explain how you make the book available for sale when you don’t have a publisher doing it for you.

Distribution – the self publishing platforms

There’s a lot to learn about distribution when you choose to self publish.

Honestly, this confused the shit out of me for a while.  So here’s the shortened version of what I eventually came to grasp about making a self published book available in lots of different places.

Paperback:

There are two main options here for self publishers: Amazon Kindle Direct Publishing (KDP) and Ingram Spark.  Setting up with KDP makes your printed book available on Amazon, which is the biggest bookstore of them all.

Ingram Spark is a print-on-demand distributor that connects your book to lots of other stores (like Booktopia, Book Depository and others).  Essentially, the book becomes available to any store (online or physical) who wishes to buy it.

Ebook:

The two options I used here are Amazon, and an ebook distribution platform called Draft2Digital.  This makes my ebook available everywhere outside Amazon – Apple, Kobo, Booktopia, etc.

It’s also these two distribution platforms – Draft2Digital and Ingram Spark – that allow libraries to purchase copies of the book.  Interestingly, libraries can either buy a copy or choose a ‘pay-per-borrow’ type arrangement.

Audiobook:

This one is simpler.  To launch and distribute the audiobook to everywhere (including Amazon’s Audible), I used only one platform – Findaway Voices.

Okay, onto the part you’re probably waiting for – the numbers!

Self Publishing Royalties

I won’t bore us both with all the various royalty rates and complicated figures earned from the various stores and platforms (trust me, it’s not straightforward).

Instead, I’ll give you a simplified version so you can see what the end result looks like, based on the averages of what I’ve seen since launching 5 months ago.

Paper books:

Let’s take a book which sells for $25.

From the price you see, 10% is taken off for GST ($2.50).  Then the retailers – say Amazon – take a nice big chunk of the sale price, often 30-50%, say $10.

Then printing costs are around $6-9.  We’ll use $7.50 as an average (my own book costs $8-9 to print).  At this point you’re left with something like $5 (see below).

Price: $25.
After GST: $22.50
After retailer commission: $12.50.
After printing costs: $5

Ebooks:

This version of book is probably the most profitable for the author, even at the much lower price point.

Because there’s really no costs involved except GST and the retailer’s cut.

From memory Amazon takes about 30% here.  A $12 ebook on Amazon might net the author about $7 after costs.

Outside of Amazon, the royalties are generally lower, since the ebook distribution platform takes a cut, and the retailers pay less.

Audiobooks:

These can be profitable, but there’s a few catches.  It takes a lot of time to produce a good quality audiobook.  You also have to pay a professional audio producer to edit and polish the files, which can take dozens of hours.

There’s no printing cost which is handy.  But the retailer takes their cut, and the audio distributor (which connects you with the retailer) takes another chunk.

The margins here vary a lot depending on where it’s sold.  My audiobook currently sells for about $20.  From Apple, Spotify and Google, the final royalty is something like $6-7.  At Audible though, it’s about $2.50.

Why?  Well, firstly, it’s Amazon so they do whatever they like!  But it’s probably because people typically use their monthly ‘credit’ for audiobooks, so Audible decides to pay very little so it doesn’t cost them very much.

The upside of Audible is you might get more people than normal ‘buying’ your book, because they’re just using a monthly credit they’re already paying for.

What’s the result of all this?

Overall, my book probably earns somewhere around $4 per copy, on average.

Is that more or less than you would’ve thought?

In case you’re curious, the biggest place for sales is Amazon (paper, ebook, and Audible).  The rest is bits and pieces of each version from all over the place.

Remember, a traditional publisher would probably take like 80% of the above earnings.  Well, after you’ve paid back your ‘advance’ that is.  This means the mega-sellers you see selling books for $20-25 – think Mark Manson, James Clear, Morgan Housel – are probably making about $1 per copy.

Maybe not great if you’re selling a handful per day.  But still absolute candyland if you end up selling millions of copies.

Some people might say, “Why didn’t you just sell it on your website and make more money?”

Well, I probably could have.  But that’d mean printing (and storing) a shitload of books and manually packaging them up and taking them to the post office myself.  Then I’d need a payments system on the website and to deal with any delivery or order issues.

Lucky I didn’t, because it would’ve been a logistical nightmare!  During launch month, it would’ve meant posting out nearly 1,000 paperback books.

Yeah, no thanks!  Amazon can take their hefty commission and take care of that 😁

As sales have come down to a more normal range, it wouldn’t be as bad running things from the website.  But it’s all running smoothly with the various platforms so I’m happy to just leave it as is.

The frustrating thing is, all the stores and platforms report at different times, with many on a lag.  They also have very different payment terms, from 30 to 90 days, and some in US currency rather than AUD.

Not only can it be a very long time between selling a book and getting paid, but it’s confusing as hell to keep track of 😅

How the book publishing industry works… I think

The book industry exists on a scale, where the 80/20 rule (at a minimum) applies.

Basically, most books sell very little over their lifetime, some do reasonably well, and a smaller group are blockbuster hits.  Exactly like individual companies in the share market.

As Morgan Housel explains, long tails drive damn near everything in life.

Traditional book publishers are essentially operating like startup investors or venture capitalists.  They make a string of bets on authors and hope that one or two out of ten pays off big.  This way, they make enough to cover the losses on others and come out with a reasonable profit.

So in a roundabout way, the successful authors actually make less money because they have to cover the losses of all the books which don’t succeed.

It’s pretty interesting really.  But to be frank, a big reason I chose to self publish, is because I was lucky enough to meet someone who could help me through the process.

Without my chance meeting with Jed, I might’ve just thrown in the towel and signed up with a traditional publisher, assuming the self published path was simply too hard.

If most books aren’t s successful and don’t earn very much, why do people write books?

There are lots of reasons people write books other than royalties.

Sometimes it’s a passionate personal story they want to share in detail.  Or a life’s worth of business lessons they might like to document for others.  Or they have a new way of looking at an old problem.

In reality, many non fiction books are commonly used like a form of advertising.  A decent book can be a source of leads for people looking to grow their main business.  It makes them look more credible and trustworthy.

Often you’ll see authors parlay a book into high paid speaking gigs, selling coaching courses or expert consulting work.  By the way, I have absolutely no plans or desire to do any of those things!

The overall experience and final thoughts

After enduring the obvious time commitment, pain and struggle to get it completed, there is money to be made IF you can sell enough books.

So would I recommend writing books as a side hustle?

Not unless writing a book was something you were truly passionate about.  Because much like blogging or creating content, there’s a very high chance you’re not going to make much (if anything) from it.  So it’s far better if the purpose and what’s fuelling you is something other than money.

Overall, it’s been and interesting and worthwhile experience.  I enjoyed the process of writing and putting the book together, just as I do with these articles.

But I must admit, hitting ‘Publish’ on all the platforms and then waiting to see what people thought of it was a weird cocktail of relief and terror at the same time.

My knowledge of the book publishing industry is obviously limited to my one particular experience.  But hopefully that gives you a glimpse into the nuts and bolts of the book game and how it all works.

If you have any questions I haven’t covered, feel free to leave them in the comments below.

WANT TO BECOME FINANCIALLY STRONGER EVERY WEEK?

Join thousands of readers and subscribe to the Strong Money Newsletter below.