Beyond Balancing your Check Book

All businesses have three major functioning areas: Operations/Production, Marketing/Sales, and Finance/Legal. The industry and specialization will dictate how large each department is and how it is structured. Even if an area is outsourced, it still exists. Traditional publishing carries the weight of several areas, but as self-published authors, we have to do it all or spend money to have it done.

As with many creative artists, writers typically don’t have a business background and therefore ignore some of the most basic financial business practices. Making money is only half the battle. Keeping it is the other half.

  1. Set an annual budget. The budget should include costs for research, editing, cover art, production, distribution, finance, legal, marketing, and sales.
  2. Spreadsheet the cost of goods sold, meaning, how much does it cost to produce and ship/deliver each book (title) and type of book. (Hardcover, paperback, e-book)
  3. Know your break-even point. This can be a bit of a moving target depending on your marketing costs, but not knowing puts you on a treadmill of spending.
  4. Create a profit and loss statement (P & L) at the end of each month. If you have someone prepare this for you, review it in a timely manner so you can make adjustments and business decisions from the data.
  5. Understand most businesses lose money their first year, many their first several years, but the old adage you have to spend money to make money is unfortunately true with self-publishing.
  6. Track revenue against costs of special promotions. If you attended a show that costs $500 for travel, registration, promotional material, etc…did you lose money? Did you break even? Did you make money? Did you give attendees a promotional code (usually with a discount) to order so future orders could also be tracked?

This may sound time consuming and complex, but you don’t have to do it all at once. (This is a great task to do when you are avoiding editing if you have already cleaned your entire house! It may also motivate you to finish the next book sooner.) You can hire help to set it all up, so you merely need to input the numbers, but I would suggest learning a little first so you have confidence it is being done correctly.

“Millions of business owners struggle every day in their business because they don’t realize how the financial side of their business impacts growth, borrowing ability, cash flow, ability to raise money and business value (your personal net worth).” Those are the words of Dan Lacy, Founder at Dynasty Business Building. “The root cause of most financial problems in business is due to the lack of financial knowledge.”

If you are in this group (and I was), may I recommend you read Dan’s book, Cracking the Financial Code.  In 2010 I attended a 10 week financial seminar series created and trained by Dan Lacy. This book was part of the material and it is absolutly worth reading. It is easy to read, simple to follow and will give you a foundation to understand the financial side of you business.

If you fail to plan, then plan to fail. Harsh words, but often true. While self-publishing has opened the doors to many more authors, if this is your career, congratulations, you are a business owner.

Comments

  1. Wow, so much to take in!

  2. It is…and took about a year for me to do all of it…and all of it isn’t habit yet (like brushing my teeth = ) Admittedly in the beginning things were disorganized and I was spending way too much money! One thing that has really helped is the quarterly promotion plan my publicist does. It keeps my time organized and best of all there are no financial surprises!

  3. Rachel Dorcy says

    What other things do you track besides dollars?

    • Rachel–Every Monday I am emailed my website analytics. I review all pages and compare the data to the previous three to four weeks to understand what’s working, what isn’t and what changes need to be made to drive traffic.

  4. Sarah Spangler says

    I own a small catering company and my first two years in business I was so busy catering, I didn’t have time to watch my financial (bad excuse, I know). I almost put myself out of business. This is good advice whether your a cater, author, dentist, etc.

    Your statement that “Making money is only half the battle. Keeping it is the other half.” Is so true.

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