How Book Advances Work

The other title to this list could be: Don't Quit Your Day Job.
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    When your agent sells your book to a publisher, the publisher will assess how lucrative they expect your book to be and offer you an advance
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    Advances are yours to keep. Forever. No matter how well or how poorly your book does.
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    Before you get too excited, please know that advances are not particularly jaw-dropping. (No rolling around on the bed in a million bucks for you.)
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    They can be!
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    But those days of six-figure and higher advances have dwindled, and though they still occur, I am guessing an average advance is probably about 25k
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    A quick google search tells me this may be a generous guess, but it's not outrageous, so play along.
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    When I first entered the publishing world, advances were much more lucrative. And a big advance ("big" generally meant north of 100k) meant that the publisher was going to put its weight behind you.
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    With shrinking advances, it's increasingly hard to tell what, if anything, is going to hit big.
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    But back to advances. Let's be positive and say that you get a 60k offer on your book. 🍾
    Yay! Congrats!
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    That 60k will be divvied out over time: at three different pay dates: upon signing the contract; upon submitting the finished manuscript; upon publication.
    If your advance is very large, it may be four pay dates: for my biggest advance on my fourth book, they also added in a paperback pay date too. This may vary from publisher to publisher.
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    That's three 20k checks over probably 18 months to 2 years.
    A 2-year cycle from sale to bookshelf is probably pretty standard.
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    Don't forget to deduct your agent's 15%.
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    And Uncle Sam's taxes. πŸ‡ΊπŸ‡Έ
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    So now, based on your tax bracket, you're looking at, maybe 13k-ish per check? Three times over a couple of years.
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    But, you ask: is that all the money I can ever earn from my masterpiece debut?
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    No! Of course you can earn more money...after you've earned back your advance.
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    Which, astonishingly, most books do not do.
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    Huh? πŸ™„
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    Yeah, this part of publishing drives my finance-husband crazy, and to be honest, it doesn't make a whole lot of sense to me either. (But more on that later.)
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    Google informs me that 7 out of 10 books don't earn back their advances. Let's not hold google to that stat, but it's a high number for sure.
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    I've traditionally published four books: two have earned out. So actually, that stat isn't so wrong, at least from this tiny, self-focused example.
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    Your advance is paid to you against your royalties, so to earn it back, you have to earn enough royalties to surpass the $$ paid out.
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    Royalty rates vary based on book type: for example, e-books typically earn a 25% royalty, paperback start at 10% and go up from there (capping around 15%, I believe, but have to check a contract) after you hit sales milestones
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    So let's say your e-book is priced at $10. You'll earn $2.50 per sale. So, let's pretend that there are no physical copies of your book out there, you'll need to sell 24,000 copies to earn out.
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    (Confession: I am a little murky on how the royalty rate works with discounted books, ie, a hardcover on Amazon that retails for $25, but is sold for $16. I BELIEVE, but don't kill me if I'm wrong, that you earn your royalty off of the $25.)
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    If you DO earn out (hurrah!), all of your accrued royalties from here on out forever, get paid to you.
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    Which means that twice a year, you'll get a surprise check in the mail from your agent (remember, they take their 15% before paying you) for whatever books you've sold over the past six months.
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    It can take YEARS to earn out. My debut earned out, like, five years after pubbing. My second book earned out before it even launched, thanks to strong foreign sales. You never know.
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    These days, I am a big fan of the "lower advance/higher royalty rate" model of publishing. Which is why I moved over to Lake Union, one of the publishing imprints at Amazon.
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    To use this model, you have to trust that your publisher is going to put its weight behind you and market the hell of your book.
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    If they DO, you'll earn out your (lower) advance asap, and then gain (higher) royalties much quicker.
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    It's a gamble for the author, so you have to really know and believe in your value for the publisher, but if you do (and you semi-trust them), this seems like a much more equitable way for an author to earn money.
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    (IMO)
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    So I think those are the general ins and outs. Any questions?