Reasons why writers need to understand finances

Break-Even PointShrewd writers, like industry leaders, understand the importance of finances. When making decisions, they look at the impact the options will have on the bottom line. They trust the numbers more than their guts.

To be a successful author, you must see yourself as the CEO of your writing business. Whether you are a published author or just starting off, combining your creativity with entrepreneurial discipline (becoming an “authorpreneur”) will help you focus your time, energy, and money on getting the most for your efforts.

As a writer you cannot assume that agents and publishers have your best interest in mind. They are in the business of making money, and the more the better. If you just don’t have an aptitude for reading contracts and understanding financial negotiations, hire a lawyer. As Jerry Maquire said in the movie, “Show me the the money.” Insist on the best deal for yourself.

Before signing, crunch the numbers to evaluate if signing is better than indie publishing. CreateSpace has a royalty calculator to help you determine what you would receive from the price of your book minus their cut and the cost to fabricate the book. Just don’t be fooled into thinking that the remains is profit.

Profit is total revenue minus total expenses.

Even with digital books there are publication costs to consider. Did you hire an editor or a book cover designer? Did you travel to do research? What is the cost of the time you spent writing the book? How much will you spend on marketing and will you have enough money to replace your old computer.? How many books will you have to sell to recoup the costs? And at what price will you sell them?

These are they type of financial questions you need to ask yourself to determine your break-even point. The BEP is the point at which the total cost of your book equals the revenue from the book. Before the BEP there is loss, after there is profit. Once you determine this, you can better decide if the deal your agent is offering you is better for you in the long run than going indie is. You can also use the information to negotiate a better deal. But you can’t do this without understanding the finances.

In addition to understanding your book’s finances, you need to know basic accounting practices. If you are not skilled in this, get an accountant, but learn what is needed to comply with taxes and record keeping, and how to read profit and loss sheets. An accountant may make recommendations, but you make the decisions. Learn what you need to make wise ones.

To help you get started in recording your spending, inventory, and revenues. here is an Author Ledger Template similar to the one I use. From this, it is easy to determine your balance sheet and see if your are making more than you are spending or vice-versa.

 9 Reasons why writers need to understand finances

  • To make sure the contract terms are in your favor:
  • To determine whether to be indie published or not
  • To better negotiate with vendors and suppliers.
  • To comply with accounting practices
  • To accurately report taxes and comply with government regulations
  • To know whether it is better to write more or market more
  • To know if you can afford marketing expenses
  • To determine when you can quit your day job
  • To know if you are making money



About The Author

Jane V. Blanchard

Adventurer and Author, I was born in Hartford Connecticut and now live in Sarasota, Florida.