As you prepare to publish a book, estimating production costs will go a long way toward helping you determine price and project revenue. Some authorities recommend including only the costs of printing, copyediting, cover and interior design, and shipping. Others recommend tracking every penny. I did both calculations, but I didn’t stop there.

Using production costs as a basis for setting price may be helpful, but you should also visit local bookstores to see how competing books are priced. If you price a trade paperback memoir or novel at $35 in accordance with a five-times-production-costs formula, and the usual price for such books is between $13 and $15, you might not sell too many. This is true even if your book is longer than comparable titles because consumers don’t usually buy books on the basis of length. They just buy a book. If you can otherwise justify a slightly higher price, however, try it.

Another drawback of relying on production costs to set price is that the formula may give you a false sense of your book’s potential profitability and set you up for big surprises later on.

Imagine, for example, that you have an offset print run of 5,000 books and a digital print run of 500 ARCs. You expect to spend $18,000 on combined production costs. You’ve priced the book at $14 and expect to sell your print run for a total of $45,430 to various retailers and distributors. Assuming you sell all the books, here’s a rough view of the sale prices for various quantities at different discounts:

Expense	Cost		Sold Quantity	Price (discount)	Revenue (qty. × price)
500 ARCs/tax/shipping	$3,000		600 (incl. 500 ARCs)	Free/given away	0
Cover design/photos	$2,000		600	$14 (full price)	$8,400
Printing 5,000 books	$11,000		600	$12.60 (10% discount)	$7,560
Shipping	$1,000		700	$11.20 (20% discount)	$7,840
Copyediting	$1,000		1,300	$8.40 (40% discount)	$10,920
			1,700	$6.30 (55% discount)	$10,710
Totals	$18,000		5,500		$45,430

But you won’t really have $27,430—the difference between production costs and projected revenue—left over to spend on marketing. A start-up might burn through as much as $20,000 for an ISBN block, corporate filings, public notices, mailing ARCs to reviewers and bookstores, Web site/blog hosting, membership dues and subscriptions, utilities, warehousing or fulfillment, legal and accounting fees, letterhead and business cards, simple promotional materials such as flyers or postcards, and basic marketing expenses—a few signings, catalog advertising, target mailings.

This doesn’t include major advertising in national publications, co-op payments to retailers, print overruns, the lost revenue associated with higher quantities of books you give away, or unsalable returns. It doesn’t include anything unexpected, like legal consultations that don’t result in a retainer, or changing your mind about cover stock or paper, or having to change suppliers or vendors midstream.

Finally, it doesn’t anticipate that a portion of your print run won’t sell at all.

Build a Better Forecast

Here’s another breakdown, adding start-up costs of $20,000 and an unsold quantity of 1,500, before returns.

Expense	Cost		Sold Quantity	Price (discount)	Revenue (qty. × price)
500 ARCs/tax/shipping	$3,000		600 (incl. 500 ARCs)	Free/given away	0
Cover design/photos	$2,000		1,500	Unsold	0
Printing 5,000 books	$11,000		400	$14 (full price)	$5,600
Shipping	$1,000		300	$12.60 (10% discount)	$3,780
Copyediting	$1,000		500	$11.20 (20% discount)	$5,600
Start-up costs/ basic marketing	$20,000		1,000	$8.40 (40% discount)	$8,400
			1,200	$6.30 (55% discount)	$7,560
Totals	$38,000		5,500		$30,940

This example looks very different, and a lot more depressing. You’re operating at a $7,060 loss without any major marketing or co-op expense.

These are very basic illustrations, but they give you an idea of how the numbers can vary under different scenarios. If you’re planning to sell your books through major retail channels, try to apply your own figures and expenses to the calculation, and see how you do anticipating different unsold quantities and different quantity discounts. Bear in mind that production costs will be different if you use print-on-demand digital technology instead of offset and/or if you’re printing in smaller or greater quantities.

Whatever you do, it’s always a good idea to prepare a formal statement outlining all projected revenues from book sales and paid engagements (e.g., seminars, talks, or courses you give) versus all projected expenses, such as those outlined above, including corporate filings and public notices.

Prepare calculations using print runs of different sizes, different shipping methods, and less-expensive cover design to see how your totals are affected. You will soon get an idea of the range of numbers that is reasonable for your own book and your own company.

Looking Ahead

While your first print run may not be profitable, or only marginally so, prepublication reviews and advance orders from retailers and distributors will give you some indication of how many books to print, how to direct your marketing efforts, where to host events, and how much to spend.

Remember—if you go into subsequent print runs, most of your start-up expenses won’t be incurred again, and your production costs will be limited to printing and shipping/warehousing. For subsequent runs, this increases the likelihood that modest book sales will cover production expenses.

The first project is the hardest, but also the best teacher. Expect to stumble here and there, but don’t let setbacks throw you. As an entrepreneur, you never stop learning, but as you build your own storehouse of business experience, you’ll find that the next project is always easier than the last.

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