Monday, January 21, 2008

Part 3: Sample P&L

This is just a sample, mind you, to give you an overall view of what a publisher takes into account when coming up with an advance amount. There are actually various ways for both editors and agents to come up with this number and other factors I consider (royalty amount, sub-rights split, etc.) This sample is based on one provided in How to be your own Literary Agent by Martin P. Levin (a must have book if you're going it alone).



Sample P&L--

Price point*........................................................................................ $20.00

Average discount .............................................................................. 45% (the average amount the price point is reduced when sold to a retailer or wholesaler)

Average net per book........................................................................ $11.00

Estimated initial print run* ............................................................. 120,000

Returns .............................................................................................. 40,000 (this figure represents the number of returned books. Usually estimated as one-third of the initial print run)

Net Unit Sales ................................................................................... 80,000 (print run minus returns)

Net receipts ....................................................................................... $880,000 (net unit sales multiplied by average net per book)

Manufacturing cost .......................................................................... $420,000 (this rate can differ. I used $3.50 per unit(book) multiplied by initial print run)

Overhead .......................................................................................... $308,000 (35% of net receipts)

Total manufacturing and overhead............................................... $728,000

Net before Royalty and profit ....................................................... $152,000 (net receipts minus total manufacturing and overhead)

Target profit .................................................................................... $88,000 (10% of net receipts)

Advance available ........................................................................... $64,000 (net before royalty and profit minus target profit)


Like I said, this is just an example. Manufacturing cost can be different, discounts could be more or less, price point will change (this is hardcover, whereas paperback would be much less), etc.

Confused? Go find yourself an agent:)

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