Wednesday, April 13, 2011

The Business Side of Writing

The taxes are pretty much done in draft form. Now I just have to fill out the forms in ink while double-checking my math/numbers. And I just realized the deadline is the 18th, but I think I'm going to go ahead and get it all done. I'll feel like I'm early and have that weight off me. Besides, based on what my savings earned in interest last year (next to nothing on a very high balance), it's not like I'll earn massive amounts of interest by keeping money in the bank longer. The good news is that my estimated payments were very close to being the actual amount owed. Meanwhile, I started cleaning my desk, to the point there are expanses of actual desk surface visible. I didn't find anything particularly interesting on the desk, just the desk itself. Now I have to tackle the other leg of the L-shaped desk, and I have a lot of filing to do.

Since I haven't had any new writing questions come in, I'm coming up with my own topic, and since I've been working on my taxes, I thought I'd discuss the business side of writing. Unless you're writing purely for self-expression and personal enjoyment, you probably hope to one day make money from your work. And if you're hoping or planning to make money writing, there are some realities you need to face.

One is that this is not a get-rich-quick scheme. It can take months to sell a book to a major publisher, even with an agent. Then it can be a few more months before you get a finalized contract, and then a month or so (at least) after that before you get the first advance payment. I've heard that the average advance for a book is in the $10,000 range, and based on personal experience and the experiences of others I know, that sounds about right. Of course, there are exceptions, and those are the ones you hear about. They get reported because they're so unusual as to be newsworthy. Whether you're getting $5,000 or $5 million in an advance, you're probably not getting it all up front. You'll get a portion on the signing of the contract, a portion when the complete manuscript is accepted (even if you sell the book as a complete manuscript, the editor will often request revisions before the book is considered "accepted") and a portion on publication. What you don't often hear in reports of those huge deals is that they usually cover multiple books, so that big amount is broken up into even smaller pieces and may be spread over several years.

The "advance" is called that because it's an advance against royalties, kind of like a loan based on what they expect you to ultimately earn, except you don't have to pay it back if they miscalculated. Royalties are based on a percentage of the book's cover price, usually in the 6-15 percent range, depending on the kind of book and the contract. You don't receive any royalty payments until the book has earned more in royalties than you were paid in advance. Many books never earn out, so the advance is all you get. Some books keep earning royalties for years if they stay in print.

Foreign sales are another way you can earn money from your books, though that depends on your contract. Some publishers also buy the foreign rights, so foreign sales fall under your advance and you don't see additional money until you've earned out. But if you only sell US rights, then you can sell foreign rights separately in each country as individual deals with advances and royalties. This is where having an agent is very helpful, both to make sure your contract isn't grabbing rights and to have the contacts to sell to foreign publishers.

But all that money coming in from advances and royalties isn't free and clear. There are agent commissions, which are usually higher for foreign sales because there are other agents specializing in foreign markets involved. There are business expenses -- things like postage, web hosting, promotional expenses, etc. And there are taxes. Writing income is considered self-employment income, which means it's subject to self-employment taxes. That's essentially the money that's deducted from your paycheck for Social Security, etc., plus the amount the employer would usually pay, so it's about double what you'd have deducted from a paycheck. I pay a lot more in self-employment taxes than I do in income taxes. You have to make quarterly estimated payments since you don't have a monthly paycheck to deduct your taxes from, so you have to remember to keep money aside from any check you get so you can pay your taxes. You also have to pay for any other employee benefits, like retirement plan, health insurance, life insurance, etc.

So while the advance amounts may sound really good on the surface, that may be the total income for a year or more, and it's a pre-expenses, pre-taxes number. Which explains why writers get so riled about book pirates -- when you're not making that much money to begin with and then have to pay extra taxes and any employee benefits you want to give yourself, it is irksome to have people feel entitled to steal your work without paying for it.

However, this is still the best job I've ever had. I like the freedom and I like making a living by making up stories. If that's what you enjoy, then you can deal with the financial woes. If you think you can just dash off a book and make a ton of money, then you'll probably be disappointed.

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