writing as a business – M.L. Humphrey

Writing Is Weird

Before I decided to focus exclusively on my writing, I had a number of jobs. Some were just those jobs you get when you’re in school and then I had a series of professional jobs.

I started my career in one location with a company and then transferred to another location and position with that same company. I then left that company for a new role related to the same industry. And then left that company with the idea I’d start my own completely unrelated business. Until I fell in love with New Zealand at which point starting my own business in the same field was the better choice. I did that for a while but then added the writing during my downtime between projects until I finally decided to just do the writing.

Each of those pivots was just a normal part of the process of having a career. You work in a role for a while and then move on (hopefully upward) to a new role.

Never once when I was thinking of changing to a new position did I think that I had failed at the prior position, even when I was thinking of going into a completely different field.

Maybe because I hadn’t. Each time I moved in my professional career it was my choice to do so. I was giving notice to that employer or client that it was time for me to move on to the next opportunity.

For the most part I enjoyed what I did, but I always wanted growth and new challenges. I’m not a person who settles into a good-enough job for forty years. (Bless those who do, they’re smarter than I am in many ways.)

But with writing, every time I think of moving on from it, it feels like doing so would be a failure. I think maybe because writing can be anything you want to make it. There is no outgrowing being a writer. It’s always going to have unexplored directions to take.

And so not finding a direction to take that’s financially rewarding enough to stick with it, feels like failure. At this point in time I have accomplished a tremendous amount with my writing. I have a six-foot bookcase with all of my books on it and have written more books than most people who aspire to be writers will write in a lifetime.

Setting aside money and profitability, all the ebooks, print books, video courses, and audiobooks that I’ve created is something to be proud of.

But because writing (at least when you decide to publish) is also entrepreneurship, there’s always also that profitability side to it.

Is this business a going concern? Does it pay its bills? And if the answer to that is “no” then it feels like failure. Because other people pay their bills with it, why aren’t you?

And to be fair, I have chosen to live somewhere more expensive than necessary in order to be near family. If I had chosen two years ago when I sold my house to move to Omaha, something I considered, I’d easily be earning enough from my writing right now to pay all my bills.

But I didn’t.

Also, I don’t know that I’d be happy with my writing right now even if I’d done that. Because the other big difference between a career and entrepreneurship is that–in general, assuming you don’t have a setback–in a corporate-type career you steadily increase your income over time. You either get raises or promotions or move to newer jobs that pay more.

But with most entrepreneurship, including writing, you have up years and down years. It is not a steady progression.

Jim C. Hines has been sharing his annual writing income for years. And you can see that it’s not some nice, steady thing.

Here’s mine:

For a while there it was a steady upward progression. Which let me pretend that this isn’t a highly uncertain business with unforeseen pitfalls.

And if that plateau that you see there were high enough, I’d say, well, that’s okay. You have good years and bad years. As long as it stays above the support level you need, it’s fine.

I have a writer friend, for example, who had a 25% drop in revenues last year. But I’m pretty sure that friend was dropping from somewhere in the $300K range of revenue, so had plenty of remaining income.

Yeah, it sucks to lose $75K in revenue in a year, but when you still have $225K to live on, you can probably make that work, you know.

But when you are still trying to build to a good support level and you level out…And you look at trends in the market and they aren’t favorable…

If it were a simple job, you’d walk away. Hey, my employer is probably going to start cutting staff soon, good time to jump somewhere new. Yeah, sure, you miss the work or the co-workers. Or you regret that the company didn’t succeed. But you make the smart choice.

Writing, though…Even though the very large majority of writers never make much money from it, there’s still this relentless message that you need to stick with it. Even when you can’t think of new ideas, like another writer friend of mine. It’s like it becomes an identity that you can only claim if you’re actively pursuing it.

Skydiving is that way, too. Get past a fun tandem or two and you’re not just someone who occasionally likes to jump out of planes, you’re a skydiver. And if you stop jumping, you sacrifice that identity. And that community.

I don’t know. It’s weird. And something I probably should stop thinking so much about because I’d be better off writing. Or, in the case of what I need to do today, creating six paperbacks that will release sometime in the next week to accompany the two I hit publish on yesterday. But more on that in a day or two when all the sites shake out.

Until then. Enjoy your weekend.

A Brilliant Business Presentation for Creatives

DesignCuts is having a free online conference this week which has some fantastic deals on font and design bundles as well as some really interesting presentations. A lot of them are design-oriented, but there was one I watched today that I think is a must-watch for anyone trying to launch any sort of business quite frankly.

It’s basic business principle in the context of earning money as a creative. I’d highly recommend watching at least the first thirty minutes. The video is available here and it’s called Making Money as a Creative by Tom Ross.

Some Random Advertising Thoughts

Once a month I load all my sales reports into an Access database and then proceed to generate a bunch of different reports and graphs to see where I am. For me that’s as fun as the writing so it’s never something I have to force myself to do, but I do think some sort of analysis is important to anyone working to run a writing business. (As opposed to just writing books and seeing what happens.)

So a few thoughts from the most recent analysis.

One of the metrics I was looking at this time around was the percent of revenues that was spent on ads for each series.

So let’s say I have a series that earned $10,000. And I spent $3,000 to make that amount. Then my ad spend would be 30%. That to me is an acceptable cost of doing business.

But I had a few that were higher than that. When that happens I think it’s important to dig in deeper and ask why, because understanding that why is going to drive what needs to happen to fix it.

In one case, it’s increased competition which means I can either hang in there and take the additional costs and know I’ll earn less on each sale of that series or I can step back and let the big spenders take part of my share of that market. Which way I choose to go will depend on how committed I am to that series and how committed I think those competitors are to entering that market.

In another case though, it’s because the series simply isn’t developed enough yet. The more books that readers can go to after an initial purchase, the more effective the ad spend.

For example, if I spend 75 cents to make $1 on the sale of a book and that book is all I have then my ad cost is 75% of the money I receive, which is higher than I ideally want. (If I could scale that sufficiently it’s doable, but the question is how much you can scale.)

But if I spend that same 75 cents and make $1 on that book sale plus $2 on two other book sales then my ad cost for the same ad spend and same initial transaction is only 15%. Much better.

Which means that often what seems like “I should abandon this and move on because I can’t make money at this” is actually “I need to write more books in this series so I can properly recoup my ad costs.”

Of course, there’s another option which is that something is off about the book that needs to be fixed to make it sell better.

Let me give a concrete example. I published a cookbook a while back and being too clever for my own good I called it “You Can’t Eat the Pretty” because it wasn’t about fancy cooking it was about cooking for yourself without burning down your kitchen.

But advertising that book was like pulling teeth. Every sale was a struggle. I thought the cover was good. I thought the content was good. But it barely broke even. Ad cost was probably 90% of money received.

So I changed the title. It’s now called “Quick & Easy Cooking for One”. I made one edit to one line of text in the introduction and changed the title but kept everything else the same. This year ad cost is 26% of money received.

That’s not the only time I’ve retitled a book and seen significant improvement in sales.

It isn’t always going to be the title. It could be price. It could be the cover. It could be the blurb. It could be the category. It could be who you’re advertising to. All of those deserve a hard look if you’re spending too much to sell your book.

And then you have to decide if you’re willing to make that change. Sometimes you won’t be. My YA fantasy books are currently at $7.99 each in ebook. I could probably sell more at a lower price point, but I’m okay with where they are at the moment. I can drop those prices when I finally release a new book under that name.

The key I think is to make these choices deliberately instead of just letting things ride and hoping for the best. Especially as we enter a maturing market.

I saw a flare up recently of “oh Amazon hates us and pits us against each other” when in reality it’s just that this is a maturing industry. Ironically we are trending back towards publishing houses even on the indie side. Because that’s an effective model for running a publishing business. And people are going to be less open about what works because there’s enough supply now to meet demand and we are in fact competing with one another for customer attention and customer funds.

Which leads me to another discussion that recently happened on one of the author forums that I wanted to address here.

Someone shared AMS numbers where their ad dashboard showed let’s say $90K in sales and $45K in ad spend. And someone else on that board somehow extrapolated that spend to the person running their business with a 90% ad cost, which was horribly inaccurate.

I wanted to walk through why that is. So let’s talk about what happens when you advertise.

One, your product is seen by new people. Someone becomes aware of your product even if they don’t buy it right then. That means an ad today results in a purchase a year from now.

Two, there’s direct sales. So in the case of AMS and how those are reported a $5 ebook sale means $3.50 received and $5 in sales showing on the ad dashboard.

Three, there’s follow-on sales. So if you run an ad on book 1 then (hopefully) a certain number of people will either immediately or eventually go on to buy other books from you. The more other books you have that are related to that first book and the more people like that first book, the more you will earn in follow-on sales. This is key. It’s what determines the winners from the losers probably 95% of the time.

Four, there’s another form of increased visibility if as a result of your ads your books do well enough to make a top 100 list somewhere or to be recommended by Amazon in one of their emails. These aren’t direct sales that will be reported on your AMS dashboard nor are they likely to be seen during a promotional period, but they are sales that resulted from that ad.

Five, specific to books advertised via AMS that are in KU, there’s the fact that the dashboard doesn’t show KU borrow revenue so each sale that’s seen on the dashboard can represent much more revenue. For example, my romance books tend to be 75% borrow revenue when they’re in KU.

So let’s work through this a little.

Say I pay $2.50 to get that first sale that’s worth $3.50 to me. That looks on the surface like I spent 71% of the money I received on advertising.

But if that book is in KU and 75% of its revenue comes from borrows then that $3.50 on the dashboard may represent $14 in revenue. In that case, then only 18% of money received was spent on ads.

What if the book isn’t in KU but is part of a five book series? And what if one purchase of book 1 means an additional $7.50 earned on sales of the other books in the series? Then in that case the ad spend is only 23% of money received.

Someone who looks at AMS dashboard numbers and doesn’t understand the impact of KU borrow revenue or follow-on sales is going to significantly overestimate the cost of those AMS ads to the user. Not to mention the visibility-driven sales which are almost impossible to quantify.

Which brings me back to the need to look at your numbers on a regular basis.

I look at total money received (which I call revenue for my purposes but technically isn’t since all the platforms take their cut before they send me a check) versus ad costs for each period for each title. I also do that by series and author because sometimes a loss leader first-in-series title can look horrible on its own even though it’s driving great sales for a series.

I also look at total profit and loss for each title, series, and author which incorporates cover cost, editing, etc. And I take that profit and loss number and calculate per hour and per word rates as well. (And when I get really bored I do a per hour or per word rate per day since the book was released since the longer a title is out the higher the total per hour and per word rate should be so you have to find a way to account for that difference between a title released this year and one released five years ago.)

But you can’t stop there. You have to put business knowledge on top of all of that. You have to ask why the difference between different titles. What can look bad today may actually be trending well. And what looks good today may not continue to look so good long-term. So you have to interpret the numbers properly.

You do all that and then you hope for the best.

There are no certain answers in this business (or in any business really.). All you can do is reassess after a bit, adjust, move forward again, and hope for improvement each time. If that happens, eventually you’ll get there.

Too Much Focus on Earnings, Too Little on Expenses

Self-publishing is a business. You’re selling a product to people for money. And, unless you have some independent source of wealth, at some point you need to make more than you spend to keep doing it. And yet…

What do self-publishers focus on 90% of the time? (I think the exception would be some of the promotions threads I’ve seen where people break down what they spent and what they earned from a promo.) They focus on earnings. Or how many books they’ve sold.

We talk about six-figure authors and how impressive they are without ever asking how much they spent to earn those six figures. And we take their advice over the advice of others even if it’s possible that they’re worse business owners than someone who makes fifty thousand a year. If someone spends $90,000 to make $100,000 they’re actually doing worse than someone who spends $10,000 to make $50,000. At least from a long-term sustainable business point of view.

(Now, we could argue about whether that person making $100,000 will be better off in the long run because they’re building a bigger customer base for all their subsequent books, but if you’re not in fast-build mode that 90/100 ratio is not going to be sustainable unless you can scale the hell out of it. And if the only way you’re bringing in those readers is with heavy advertising and they aren’t staying once you get them…Well…That’s not good either.)

So why am I talking about this? I’m not at either level.

Well, because I needed a reality check on this myself. I was so proud in June to have my first $1,000+ month. And to repeat that in July and now August. I thought, finally, I’m getting some traction with this. I envisioned a $30,000 year maybe. And that was exciting to me.

And then I added advertising costs into the mix.

Revenue-wise, year four was more than four times year two. But when you account for advertising? Year four was only 1.25 times better.

I made thousands more, but I also spent thousands more to get there. And even though I’m still net ahead year four vs. year two, it’s not by near as much as I thought it was. And my best month when you account for advertising expenses? The month I released my written to market billionaire romance short story. My second best month? When I completed the other stories in that series and ran a free promo on the first in series.

Good news is that since I started running AMS heavily in July of last year my months have been more profitable than before. But that sure shows me the power of writing to market, because when you do that customers are looking for you. You don’t have to pay to find them.