Apr 27, 2023·edited Apr 27, 2023Liked by Kathleen Schmidt
As a former publisher (I was at Thomas Nelson just over a decade, several years of which were over general trade) and then VP of editorial and acquisitions (over one of the religious imprints), my life was P&Ls. I left the business in 2013, so I’ve been out ten years now. Our returns were generally pretty accurate with lots of historical data to dial in the forecast. But, as you note, the forecasted sales were all elevated guesswork.
The truth is that any acquisition is a gamble, and many books will lose money. So building a list is like maintaining a portfolio of bets. You don’t need them all to win, but you do need some to surprise you.
Working with the proposal in conversation with marketing and sales, we’d build a case for what we thought the book could do. If the author was a hot acquisition (an “A” author), we’d stretch those numbers as high as we reasonably could—the higher the forecast, the higher potential advance recoupment.
When the publisher is in competition with several other houses, there can be a significant disconnect between what a book might recoup and what you’ll have to pay to get the business. In many cases, you sign the book knowing it won’t recoup but feeling confident you’re still far enough ahead to justify the risk. Sometimes that comes back to bite you.
If the author was a “B” or “C” author, we’d try to play it as conservatively as possible so we weren’t incurring too much risk. But the authors who surprise you were usually from this pool. I had one project I expected to sell about 20,000 copies that went on to sell over 500,000.
The other side of this is the negotiation. If you can pay X (best-case scenario), it’s still wise to negotiate for Y (lower than your ceiling) with the agent to hedge your bets and give yourself room if and when the agent comes back for more. I tended to be a pretty low-drama negotiator. If I felt confident in the forecast, I just offered whatever the P&L said I could afford with maybe a small percentage of leeway if I needed it. With some agents I had a great relationship with, I wouldn’t hold back the percentage unless I knew the competition for the book was serious and I needed room to play against other houses. In those cases, I usually went to sales in advance and got a “stretch” forecast to justify a bigger bid if I needed.
I really like the idea of the tier system for author advances. If you have a set level of advance for books that fall meet certain criteria and your production costs are predictable, then I'd guess that as a business, you would have more clarity on how many of those book you can afford to buy.
For authors, I think it would be good, too, because it would give some sense of what's likely to happen financially, and thus tamp down some of the lottery thinking that goes on. So if you know that a Tier C book is going to net you £10k and you know that you and your book fit those criteria, it's going to be easier to manage your own expectations. It would be easier for agents to manage their new authors' expectations too.
Mind you, I think the advance system is largely broken when you get to the point of some authors only getting £1500 or whatever derisory sum is on offer. If a publisher hasn't put some skin in the game with their advance, are they even going to bother marketing it?
Thank you for this! What goes into a P&L and how these decisions are made is something I've sort of put together over the years, but I really appreciate having it all laid out like this. This really helps take some of the mystery out of the process.
As a former publisher (I was at Thomas Nelson just over a decade, several years of which were over general trade) and then VP of editorial and acquisitions (over one of the religious imprints), my life was P&Ls. I left the business in 2013, so I’ve been out ten years now. Our returns were generally pretty accurate with lots of historical data to dial in the forecast. But, as you note, the forecasted sales were all elevated guesswork.
The truth is that any acquisition is a gamble, and many books will lose money. So building a list is like maintaining a portfolio of bets. You don’t need them all to win, but you do need some to surprise you.
Working with the proposal in conversation with marketing and sales, we’d build a case for what we thought the book could do. If the author was a hot acquisition (an “A” author), we’d stretch those numbers as high as we reasonably could—the higher the forecast, the higher potential advance recoupment.
When the publisher is in competition with several other houses, there can be a significant disconnect between what a book might recoup and what you’ll have to pay to get the business. In many cases, you sign the book knowing it won’t recoup but feeling confident you’re still far enough ahead to justify the risk. Sometimes that comes back to bite you.
If the author was a “B” or “C” author, we’d try to play it as conservatively as possible so we weren’t incurring too much risk. But the authors who surprise you were usually from this pool. I had one project I expected to sell about 20,000 copies that went on to sell over 500,000.
The other side of this is the negotiation. If you can pay X (best-case scenario), it’s still wise to negotiate for Y (lower than your ceiling) with the agent to hedge your bets and give yourself room if and when the agent comes back for more. I tended to be a pretty low-drama negotiator. If I felt confident in the forecast, I just offered whatever the P&L said I could afford with maybe a small percentage of leeway if I needed it. With some agents I had a great relationship with, I wouldn’t hold back the percentage unless I knew the competition for the book was serious and I needed room to play against other houses. In those cases, I usually went to sales in advance and got a “stretch” forecast to justify a bigger bid if I needed.
This was fantastic! And I love your idea about tiers. I wish this would get implemented!
Just saw this in Counter Craft and thought you might be interested: https://when-do-i-earn-out.web.app/?utm_source=substack&utm_medium=email
I really like the idea of the tier system for author advances. If you have a set level of advance for books that fall meet certain criteria and your production costs are predictable, then I'd guess that as a business, you would have more clarity on how many of those book you can afford to buy.
For authors, I think it would be good, too, because it would give some sense of what's likely to happen financially, and thus tamp down some of the lottery thinking that goes on. So if you know that a Tier C book is going to net you £10k and you know that you and your book fit those criteria, it's going to be easier to manage your own expectations. It would be easier for agents to manage their new authors' expectations too.
Mind you, I think the advance system is largely broken when you get to the point of some authors only getting £1500 or whatever derisory sum is on offer. If a publisher hasn't put some skin in the game with their advance, are they even going to bother marketing it?
Thank you for this! What goes into a P&L and how these decisions are made is something I've sort of put together over the years, but I really appreciate having it all laid out like this. This really helps take some of the mystery out of the process.