Profit and Loss Statements…

People who visit our website know that we do not publish children’s books, yet every now and then we get one submitted. Recently, we received one my middle grade reviewer (and 11-year-old daughter) really liked. But calculating the production costs made it clear that we were not the right publisher because we could not produce the book at a profit. In publishing, this type of analysis is called creating a profit and loss statement. I want to walk everyone through this analysis, in that whether you are a publisher or about to self-publish your first book this is a useful tool. I will use a children’s book as my example.

Step 1 – What format should be used? Cookbooks are usually hardcover books for a reason; they stay open easier when on a countertop. Similarly, children’s books are usually hardcover books because they will withstand more “gentle reading” than a paperback. Figuring out what format your book should be in is the first step, because your printing costs will be determined by the format. Also consider how large the book should be: 6 by 9 inches is a standard format, but books in your genre may require a special size.

Step 2 – What will the book cost to print? A children’s book with color illustrations will need to be printed in full color, and an 80-page full color book will cost $11.88 per book if produced using POD technology on 70# paper (which is what most self-publishers have access to).

Step 3 – What can you sell the book for? The research I did suggested that on average an 80-page hardcover full-color children’s book will retail for about $14-$15, unless it’s a large (8 1/2 by 11 or larger) format.

Step 4 – Taking the discount into account, can you cover the printing costs? The discount to a retailer is usually 40%, meaning you get 60% of the list price. Thus, to figure out what the list price needs to be to cover your printing costs, divide the printing costs by 60% (0.60). For a book that costs $11.88 to print, the list price would need to be $19.80 to break even on the printing.

If the list price needed to cover the printing costs from step 4 is greater than what you can sell the book for STOP. You cannot produce the book at a profit. I know most people are thinking “Just charge $22.00 for the book.” Over-pricing a book for a given market (charging more than similar books) is a common mistake, and will result in very few sales.

If the above analysis shows you can cover the printing costs, the next step is to determine if you can cover your fixed costs (editing, illustrations, and cover art). I’ll cover computing these costs in my next blog.