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Friday, January 24, 2014

Lessons Learned: Return on Investment - Part I

In all the hubbaloo over The Passive Voice, Steven Zacharius of Kensington, Barry Eisler, Robert Gottlieb of Trident Media Group and the infamous Writers Digest poll, people are trying to frame the issue as traditional publishing versus indie publishing.

People are asking the wrong damn question. If you are writer who wants to be published, you should be asking, "What's the return on my investment?"

The return on an investment is when you divide the gain of the investment minus the cost of the investment by the cost of the investment. Or

ROI = (GOI - COI)/COI

I'm going to walk through two examples: one to show my ignorance as a indie publisher in the beginning and one to show how I did it right. I'm going to simplify a few numbers for math clarity.

Example 1
Seasons of Magick: Spring was the first book I put up as an indie author.

It's approximately 20K words. At the time, I wrote about 500 words per hour, so it took me 40 hours to write the story. Let's say I, the publisher, paid me, the writer, $10 an hour.

I paid a friend's teen daughter $25 to create a Photoshop file for my cover.

A friend and I edited each other's novellas over coffee, so throw in $10 for my Starbucks card.

I know just enough HTML to be dangerous so I formatted this myself using freeware.

My costs of investment? $400 + $25 + $10 + $0 = $435.

I priced the book at $0.99. 99 copies sold the first year it was on the market. Again, for simplicity's sake, let's say I made Amazon's rate of $0.35 for all the copies (which really isn't far from the truth). My gain on investment in Year 1? 99 X $0.35 = $34.65

Therefore, my ROI for this book is ($34.65 - $435)/$435 = - $0.92

Now the nice thing is this book will be available (hopefully) for the rest of my life plus seventy years. Odds are it will eventually earn a positive ROI.

Example 2
A year after I started indie publishing I wrote a BDSM erotic romance. Since I'm not ready to reveal Alter Ego, we'll call it Sluts in the City #1.

Again, this novella was 20K words so my costs as a writer remained the same. So did my editing costs.

By now, I'd learned my lesson about having a decent cover. I'd bought the picture to the left for $8 with the intention of using it for the cover until I saw how many covers, both indie and trad, used it. So I bought a different cover at Romance Novel Covers for $15.

I used freeware to tweak the picture and add the title and author's name by myself. (I had a lot of fun experimenting, too!) Again, I did my own formatting.

My costs of investment? $400 + $10 + $23 + $0 = $433

I priced the book at $2.99. My income per copy ranges from $1.05 to $2.68, so once again, let's use $2.00 for ease of math. The first year I sold 1,481 copies so my gain on investment was 1481 X $2.00 = $2962.00.

Therefore, my ROI for Sluts in the City #1 is ($2962 - $433)/$433 = $5.84

$5.84 versus -$0.92. See the difference?

Two erotica novellas. Same length. Same amount of time they were on sale. Little to no marketing.

The two big differences were the covers and the price. Both had a significant impact on my income.

On Monday, I'll talk about determining ROI for an indie published project, an assisted publishing project, and a trad published project.

On Wednesday, I'll talk about why using a picture like the Handcuffed Girl above will hurt more than help you thanks to the Kernel Pornocalypse.

Until then, stay toasty this weekend!

2 comments:

  1. I like the breakdown. Very cool. I do the same thing with my products. Although mine has never had that good looking of a butt on the cover. I may need to rethink my cover strategy.

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    1. Thanks, Tim. As much as some of us want to avoid the subject of business, writers need to be educated on that side of publishing. The world's changing to fast for us not to be.

      Sorry, but I don't have any data concerning troll butts as cover material. Maybe switch to sleestacks? :wink:

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