Cashing in: How Do Authors Get Paid?

If you are a new author, who has been used to working for a regular paycheck, how an author makes their income might seem odd. A writer clearly earns their living from writing, but they don’t get paid while producing the work. So how do authors get paid?

There are several ways to make money from a book, with most authors paid based on the number of books sold. You will be paid a percentage of each book’s sale price, with some authors receiving an advance payment. We will also discuss the profit-sharing arrangement, fixed fee and additional sources.

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Royalties

For many years, until the internet allowed new income opportunities for authors, publishing companies have agreed to pay authors royalties for every copy of a book sold. They do this by taking a fixed percentage of the cover price of each sale.

Typical royalty rates have been in the 5% to 15% range for most authors, with hardcovers getting the higher rates and paperback on the lower end of the scale.

  • Hardbacks: Range 10-15% Typical average 12.5%
  • Paperbacks: Range 5-10% Typical average 7.5%

Some publishers and authors have agreed on a scale for hardbacks with rates rising from 10 to 15 percent in steps as sales reach specific figures.

For example, an author might agree to 10 percent on the first 5,000 copies sold, 12.5 percent on the following 5,000 copies sold and 15 percent on further sales.

Paperbacks, typically sold at much lower prices, generally do not get rising-rate agreements and just get a fixed royalty rate. On average, this is 7.5% but can be as low as 5% or as high as 10% depending on book genre, author sales history or other factors.

Percentage Retail vs. Net Receipts

Royalties have traditionally been paid based on a book’s retail sales price. So a book priced at $10 will get you $1 at a 10% royalty rate.

It is becoming more common for publishers to try to get agreements based on net receipts. But what does net receipts mean?

Net receipts are the actual income generated by the publisher. For example, a book retailing for $10 may actually be sold for $5 to the bookseller, generating $5 revenue to the publisher. In a net receipt arrangement, you now get a royalty payment calculated against the $5 rate.

This sounds like a bad deal for you as an author, so if you decide on net receipts, you should agree on a higher percentage; otherwise, you are simply giving the publisher more of the revenue at a loss to you.

Carefully work out the financial impact of different options, if you have them, before agreeing to anything, as this can be a considerable loss for seemingly minor differences in an agreement.

Author Advance

You may have heard of an author advance, usually in news articles discussing a significant advance was agreed for an exciting new book by someone famous.

This can give new authors dreams of a big payday when the reality is very different for most.

First, let’s dispense with one myth many seem to have: an advance is a payment in additional to royalties.

This is incorrect. An advance is essentially a minimum royalty payment you agree with the publisher. They are showing confidence by agreeing to pay you an agreed amount in advance against future royalties.

This is the crucial bit. This amount is against your future royalties, meaning you need to earn that much against your royalty calculations before any more royalties are paid.

So an advance of $10,000 with an agreed royalty that earns you $1 per book would mean you need to sell at least 10,000 copies before you are paid anything more.

The benefit for you is that even if your book sells less than 10,000 copies, you will make at least your advance payment amount, but nothing more. The publisher would need to take the loss in this case.

Profit-Sharing

So far, the profit-sharing type of agreement is generally used by smaller and independent publishers but if it is successful, be ready for larger publishers to come on board. In this deal, the publisher pays the author only after recouping the costs, which can be very hard to do.

The benefit of this option is that the split is more even, generally around 50% being typical, but it can be a little higher or lower.

The downside is that as most books have relatively low sales, it can mean you need to sell quite a few books before the author is paid anything. As a result, it is more challenging to break even, so you might have to wait a while to see any payback.

If you are presented with this option, negotiate with care and make sure any costs included in the calculation are clearly detailed in the agreement.

Writer for hire

There are many people who want to publish a book about themselves but do not have the time or the expertise to do it themselves. In this case, the publisher can hire a ghostwriter for them.

You can take this on as the writer behind the name on the cover under an agreement called “Writer for hire.”

Payment for this task is usually a fixed fee with no entitlement to any royalties for any sales.

The benefit is that you get paid no matter if the book sales are bad. The negative is evident, as it takes away any royalty income you should have earned.

If you are in a position to take on one of these writing jobs, consider negotiating a provision that provides a bonus payment or a share of the royalty payments if the sales go over a particular figure.

This will allow the publisher and person named on the cover to get a good return and share if the book is a big hit.

Other Income Sources

It is worth taking a minute to mention some other income sources that authors tend to have. Many authors cannot make enough income to be full-time authors, so supplement it in different ways to generate more income. Most of these are related to writing, so not much of a stretch.

Blogging

There are a couple of ways blogging can help.

Blogging is a great way to promote yourself and your books to help increase interest in your published books. Many authors write and publish short stories or essays about their work, including book ideas, which can be posted on your blog.

Fans of writers like getting more information about the creative process, so there are many blog article ideas you can come up with to keep your current fanbase and prospective readers interested in your work.

Teaching

Once you have some experience as an author, you might be able to make some money by teaching classes or workshops on writing techniques and techniques. While this might not be as lucrative as publishing a successful book, it can be an excellent supplement to your income and can be a rewarding feeling helping people develop their writing skills.

Many of us have improved our writing skills immensely thanks to more experienced writers providing both free and paid resources and courses to help us develop. You can offer the same for aspiring writers.

Speaking Fees

You can also make some money from being a guest speaker at events. Many different events take place that have a guest speakers and with some effort, you can reach out to them about speaking at their event and make some extra money.

You may do free events just for exposure, but there are paid events available. You may just need to work a little at finding the paid opportunities.

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