Basic Royalty Calculations: Where Authors Profit Most
Authors and illustrators should understand royalty percentages before signing a publishing agreement. I'm asked the money question most frequently during publishing events, by new authors, and from publishing pessimists.
Some people believe disclosing salaries is uncouth. Pessimists and non-believers aren't afraid to ask, "How much do you really make selling books?" People in the publishing industry don't receive salaries but fluctuating incomes based on book sales. My response to the salary question is, "Tell me how much you made this week and I'll tell you how much I made." Don't expect that person to ask their question twice.
I feel it's not uncouth to understand how basic royalties are calculated. This Basic Net Sales Calculation Example shows how the Net Sale of books is distributed among authors, illustrators, and publishers. This guide shows seven areas books are sold and the profit per book sold.
Non-discounted Sale: These are direct sales through a publisher's website or store. Publishers might sell non-discounted books at speaking engagements, events, or schools.
Retail Store: Baker & Taylor, Barnes & Noble, or consignment books fall in this category.
Book Festival: An event that charges a flat vendor fee and doesn't require a percentage of sales.
Amazon: Currently the largest online book retailer.
Special Sale: Discount promotions like holiday sales, event specific sales, or flash sales.
Wholesale/Vendors: Books pricing generally based on per case pricing in bulk. Gift shops, national parks, or companies like Premium Book Company, LLC are examples.
Costco/Warehouse: Large stores have individual pricing to entice customers.
Most royalties are calculated on the Net Sales, not the Retail Sales. This Basic Net Sales Calculation Example is based on author and illustrator receiving 20% royalties. Replace the 20% royalty and retail price of your book in this example to get a general idea. Not only is this sheet good for understanding royalties but also for determining where to sell books profitably.
Example: An author who sells one book at a school visit makes around 16 times the royalty as the author selling the same book in a retail store. Authors and illustrators wanting to increase their royalties should focus their time at high profiting events. Bookstore signings are exciting, but not for $0.16 a book—even less, if royalties are below 20%.
Before signing the next publishing agreement, run the numbers. Determine the monetary rewards to publishing. This information is important for anyone considering traditional or independently publishing.
—Mark Wayne Adams, Award-winning Author, Illustrator & Publisher
