We all know that publishing is getting more competitive. We all have seen that we need to make the most of every opportunity and advantage. With that in mind, I am going to explain how to create and use single-title profit and loss spreadsheets (title P&Ls), because the title P&L tends to be the tool with the most impact on your operations.

For example, I find it helpful when:

• signing a new title (especially when debating whether the terms proposed will work)
• looking at a manuscript that has finally come in, and at the design and artwork required to make it marketable, as well as the marketing campaign required to reach a reasonable portion of its audience
• deciding on a print run
• deciding which deals to accept, including deals involving special sales, foreign rights, book clubs, etc.
• designing a marketing campaign

Building a basic title P&L is simple. You start with sales and discount figures and subtract variable and fixed expenses until you can calculate a title's contribution margin. (Because the title P&L doesn't include company-wide expenses, such as overhead, its bottom line is the book's contribution to overhead and profit, rather than pure profit or loss.) You will need formulas for calculating relationships between variable expenses and change in revenues in as much detail as possible. A little bit of programming at the beginning ensures fewer mistakes later, when you will be comparing many different possibilities. Templates are available for purchase (including the template you'll see here), but you may want to design your own.

Input

First, gather all the data you might need. The examples below show large numbers of inputs. When you start a project, most of these numbers will necessarily be estimates based on your experience and/or research. You will need values for sales, rights sales, royalties, production costs, and other costs.

Inputs are as follows:

For sales:

• List price
• Average discount given
• Copies printed
• Copies sold, gross (before returns)
• Copies returned

"Average discount given" can be a volume-weighted rate. Alternatively, you can have separate sections for distribution channels that have different discounts.

For rights sales:

• Rights revenue expected
• Percentage due author

Sub-rights revenue can account for a large portion of a publisher's profit margin, so plan to try to reap these rewards. Otherwise, you are selling yourself short (or, in this case, not selling).

For royalties:

• Paid (use a toggle here, entering 1 for "on list" and 0 for "on net")
• Royalty advance
• Royalty splits

First level is 0 to X

Second level is from first to X

Third level is from second up

Royalty rates as a % of base value, net of returns

First level

Second level

Third level

Contract terms with translators, illustrators, and the like, as well as with authors, go here.

For other costs of goods sold:

• PPB per copy printed
• Plant (enter total here or itemize on a separate Plant spreadsheet)

PPB covers not only paper, printing, and binding, but also anything else that's on the printer's bill. Plant costs are the fixed costs of bringing any book to market, such as cover design, editorial work, proofreading, and art.

For other costs:

• Marketing budget
• Sales commissions (as a % of net revenue)
• Fulfillment cost per copy sold, net of returns
• Additional costs (as a % of net revenue)
• Additional costs per copy sold, net of returns

Sales commissions include any cost of getting the book out the door that is a percentage of sales. Fulfillment expense is similarly broad. The "additional costs" lines are for those oddball expenses that occur every so often. An example might be the cost of doing a special point-of-purchase display.

A Special Sale Makes a Difference

This sample spreadsheet shows how a title P&L can help you optimize your profits. It separates the incremental costs and revenues from the basic operation. Looking at only the portions that change can help reveal the most essential elements.

The special sale reflected here does not change the core operation and involves only a few items on the P&L. Although premium sales and other special sales usually increase regular sales—because the company advertises your book to a population that seems likely to want it—I am not taking that echo effect into account in this first pass.

Title P&L Analysis Example: Special Sales
			Data Input
Book Title:			The Profitable Publisher
				Special sale at 80% discount
							What You're Doing Anyway		Incr. Changes
Sales
List Price						$15.00		$15.00
Average Discount Given						50.00%		80.00%
Copies Printed						5,000		1,500
Copies Sold, Gross						4,500		2,000
Copies Returned						1,500		0
Royalty Information
Paid on list (enter 1) or net (enter 0)						0		0
Royalty Advance						$1,000		$0
Royalty Splits, Levels by number of copies
		First Level is 0 to				5,000		5,000
		Second Level is from 1st to				10,000		10,000
		Third Level is from 2nd up
Royalty Rates
	Rate as a % of Base Value, Net Returns
		First Level				7.00%		7.00%
		Second Level				8.50%		8.50%
		Third Level				10.00%		10.00%

Excerpted from a DIY package, with permission of Gropen Associates.

As you can tell from the list price, this is a trade paperback. Despite the fact that this special sale involves 2,000 copies at 80 percent off, the extra print run will be only 1,500, since the original print order projected overprinting by 500.

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