Advances, royalties, and contracts

Suppose the acquisitions editor likes your proposal and offers you a contract. The biggest question to ask is “How much will I get paid and how often?” There are two types of payment you’ll be seeing: royalties and advances.

First-time non-fiction authors usually get royalties of 10-12% on the publisher’s net receipts–the income the publisher gets when they sell a copy of your book, which averages out to around half the cover price of the book. You’ll probably get about half your standard royalty rates for foreign sales, and there may be other types of sales that pay less than the full royalty. For a classic printed book (as opposed to print-on-demand or an ebook of some kind), most publishers expect to sell 10,000 to 20,000 copies over several years, so if the book sells well, you can make $25,000 or more in royalties.

Note: The profit margins on print-on-demand (POD) and ebooks are much better than for classic printed books, but there are a lot of factors that go into this. I’ll be talking about POD and ebooks in a future post, but just take it on faith that you’re probably going to make at least as much money selling a book these ways. I want to focus right now on getting you up to speed on the general concepts and inspire you to go write books of any kind. We’ll talk more about the specifics later.

An advance is a sum paid to you in advance to subsidize your expenses while you write the book. Advances are levied against your future royalties. Publishers generally pay between a quarter and a a half of the advance when you start writing, with the balance spaced out over the book. In other words, if you negotiate a $5000 advance, you’ll likely see something like $1000 up front on signing, another $1500 after the first two chapters are vetted, $1500 at the midpoint, and the remaining $1000 when you get done. The advance is yours to keep, even if the book doesn’t sell well enough to “earn out the advance”–that is, to generate enough royalties to pay for the advance you’ve received.

Publishers aren’t required to pay your royalties for a royalty period for 90 days after the end of the royalty period, and they don’t. Acquisitions editors may be sympathetic, but they don’t write the checks. Advances by themselves usually aren’t enough to live on. Plan on having other sources of income until your royalties start arriving, and always keep some cash in reserve in case they don’t. Don’t quit your day job right away.

Look out for clauses in the contract that let the publisher pay you a reduced royalty on discounted sales. These clauses usually work out so that the publisher can use your royalty to subsidize discounts to wholesalers. Remember that everything in a contract is negotiable, even if the contract is preprinted on pretty bond paper.

Find out what production costs you are liable for. For example, you may need to pay for an indexer to create the index on your book. Costs like this are levied against future royalties, not against your advance. Make sure there are no unpleasant surprises.

As a first-time author, you won’t have a lot of bargaining power. Don’t be afraid to ask for what you want, but don’t expect to get it. If you can get the publisher to increase your advance or the royalty rate a little and get 15 extra copies of your book, call it a victory.

Publishing contracts are a complex and fascinating subject. Buy a copy of How to Be Your Own Literary Agent by Richard Curtis and read it before signing your contract. If you want outside help deciphering the contract, consult a lawyer specializing in publishing, entertainment, or intellectual property law. Some literary agents will also review a contract for you for an hourly rate. You probably won’t need more than an hour, and you’ll learn a lot about what you are agreeing to.

One list piece of advice on contracts: never sign a contract with a publisher (or anyone else, for that matter) that you don’t trust. It doesn’t matter how much money you’re being offered, how good the deal looks, and how much opportunity the contract may give you; if you don’t trust the other party, you’ll sleep poorly every time you think of it. There isn’t anything worth that.

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