Matt: Thanks for joining us for another episode of Publish & Prosper. Yeah, I do like saying that better.

Lauren: Yeah?

Matt: Yeah.

Lauren: Yeah. You wanna, you wanna run again, just in case?

Matt: No.

Lauren: Okay.

Matt: We'll just go with that.

Lauren: Alright. I'm okay with that.

Matt: I just felt like saying welcome back every time was just... Even I, if I would listen to like our... I'd be like, ugh, say something else.

Lauren: Yeah?

Matt: Even though I knew that's what I was going to say.

Lauren: Yeah.

[0:43] – Episode Topic Intro

Matt: Today we are talking about measuring your ROI.

Lauren: Yes we are.

Matt: On your publishing efforts. At a per title and overall level.

Lauren: Yeah. And I think that that's an important distinction right away, right off the bat, is that we are... you know, for some people that are listening to this, they are - we are talking to them and their fifteen, twenty books that they're publishing. Some people are listening that have published zero books and are maybe thinking about one, or one or two.

Matt: Preparing, yeah.

Lauren: Yeah. You know, there's, there's a wide range of different ways that you can, can kind of approach this and say, you know, am I investing in something that is going to serve me for a long time?

Matt: Yeah.

Lauren: Like something like the different pieces of software or developmental tools, whatever. That you can say, I'm going to use this twenty times in the next five years. Great. Versus something that you're like, I'm going to use this once ever and ever again. So the, you know.

Matt: Yeah.

Lauren: There's, there's a lot of variables in here.

Matt: Yup.

Lauren: But we're going to try to cover all the bases.

Matt: Yeah. I mean that's the only way to truly measure and know, you know... At least from a book sales standpoint and, and revenue earned standpoint, it’s the only way to truly know if you're having some success there. There are other forms of success. Right? But if you can't track the return on what you've been investing, then you're going to find yourself upside down most of the time. So yeah. I think... I don't know that we've ever really touched on this, or maybe briefly, but I think it's super important. So we're going to talk about what have you invested in your business as an author or creator or solopreneur, however you identify, but what have you invested in in the business of creating content? But we're also going to talk about, you know, on a per title level. Because there's a difference, right?

Lauren: Yeah.

Matt: And how do you measure the financial success or return of a title versus another title versus overall as your content creation or writing business?

Lauren: Yeah. Yeah. There... I think are also a lot of... there are a lot of potential pitfalls in doing something like this. Where it's really easy to go down the slippery slope of now I am calculating what each, like, what my tuition was for grad school that I put towards a writing degree, and I'm calculating how many hours... Like what, what could I spend per hour and how much do I have to make? Like, that's we're not, we're not ever suggesting that you need to get that granular. If, if that is a direction you find yourself going in, I'm going to ask you right now, what are you procrastinating on? Go back to whatever it is you should be doing, because you don't need to be digging, digging that deep into, you know, everything that went into your book, your book business, your content creation business, your brand, whatever your area of interest is. But we are going to talk about some things that I think that maybe people don't consider as a part of their investment in publishing a book.

Matt: Probably.

Lauren: So.

Matt: But also, along those lines, you know, you said earlier there are people who may have fifteen, twenty, thirty, forty books. They may have been writing for ten, fifteen, twenty years. You also don't need to go back

Lauren: Right.

Matt: fifteen, twenty years, you know? And try to calculate what you spent, you know, getting this one, your first book, edited twenty years ago. You lost all the paperwork. You never had it, you know, in any sort of filing system. The editor has long since gone. The emails are gone. If you even had emails, like, you don't have to worry about that.

Lauren: Yeah.

Matt: We'll talk about how to how to bring that current and just try to keep track of it.

Lauren: Yeah.

Matt: Currently.

Lauren: Yeah.

Matt: Alright.

Lauren: I think this is also just a good practice. I mean, we're talking about it right now in the context of this episode because we're talking about, you know, what is your actual investment? What does it look like? What are you, you know, hoping to get in return for that investment? But there are also things that this can help you with in terms of like pricing your book. This is how you figure out how much

Matt: Sure.

Lauren: do I need to price each of my books at in order to make the profit that I want to make, in order to recoup my losses? And then.

Matt: Well, yeah.

Lauren: You know, earn on top of that.

Matt: If you're somebody that operates off target ROI. Like if you, if you, along what you're saying. Like if you say, okay, it cost me $700 to get this book made. Between editing and everything else, $700 is the round number. And you'd like to, to - there's a target ROI you want to make there. Let's say you want to make $1,400. You want to make your 700 back and you want to make 700 on it. Now you have a target number. And if you'd like to do that in the first year, it's very easy to just reverse calculate back from that. And so again, if you know what your expenses are, it's very easy to figure out if I want to make X dollars in the next twelve months and recoup this $700. I need to price my book at this, because I think I can sell 100 copies. Or if I price my book at this, I'll need to sell 200 copies in the next twelve months to hit my target ROI, or at least recoup my expenses. So yeah, it's really helpful to understand. Like if you want to price your book to make a certain amount of money or ROI, then you absolutely have to know these numbers.

Lauren: Yeah.

Matt: Yeah.

Lauren: I am sitting in this chair in just a state of sudden onset panic because I just realized how much potential off the cuff math is going to happen in this episode. And I am regretting this episode topic.

Matt: I got you.

Lauren: Yeah, you're gonna, you're gonna handle all the hypothetical math that happens here. And I will put up the scenarios in which we will be calculating that math.

Matt: Maybe I should’ve had Mountain Dew here instead of water, but that's alright. We'll be alright.

Lauren: Fair enough.

[7:00] – Establishing the Parameters

Lauren: So we're going to kind of break this down into a couple of different parts. And then obviously different, different things within that. So at first we're going to talk right now about like, the actual like, figuring out what your investment into this has been. And there's a few different pieces of that that we're going to need to talk through, because there are a lot of different things. Like, you know, Matt just said a few examples already in there of like, you know, how much does it cost to actually publish a book? The...

Matt: Editing, cover design.

Lauren: Exactly.

Matt: All that stuff.

Lauren: The services and stuff that go into that. But then there are also other costs that go in there too. There are operational costs, there’re promotional costs. There are different things there. So we're going to break those down a little bit and talk through those.

Matt: Yeah, I think understanding what should count and what should not count is probably where a lot of the value lies.

Lauren: Yes.

Matt: But yeah. Alright. So.

Lauren: I also this was your suggestion. So I'm not gonna take

Matt: That’s a lot of pointing you just did

Lauren: credit.

Matt: So hopefully this is a good thing.

Lauren: It is

Matt: And not a bad thing.

Lauren: No no no, it is, it is a good thing.

Matt: Okay.

Lauren: Because this was good context that you added when we were originally talking about this episode.

Matt: I like that.

Lauren: And, and you said this initially in the beginning of like, you know, if you've been doing this for ten, fifteen years, you do not need to go all the way back in time and add up every, everything ever. A good way to kind of give yourself specific parameters for this is to choose a set frame of time.

Matt: Yeah.

Lauren: Or a set, like, something. So, you know, maybe say one year. This is... like we're calculating all of my costs that go into one year.

Matt: Yeah.

Lauren: Or all of my costs like, per title. So every time I publish a new book, this is what it costs me to, to do so. From ideation to publication and promotion.

Matt: Yeah, you can you can arrive at some averages or things like that.

Lauren: Yeah.

Matt: So yeah, being able to project that, you know, each book I create, publish, produce is going to cost me an average of X amount of dollars and time spent, you know, hours spent doing it. That is somewhat helpful. Yeah. There's a number of different things that you're going to be able to calculate from this. Some people will find, you know, certain numbers helpful, others won't find those numbers helpful. They don't care. They just want to know, like, am I making money off my book?

Lauren: Yeah.

Matt: I think a lot of people's biggest fears is that they're not making any money off their book. And I think while some of this is probably obvious or common sense to a lot of people when you start thinking about it, like how to calculate ROI, I think a lot of people just don't want to do it, or don't want to approach it. Like, but we talked to authors all the time that they're not sure if they're making money off of their

Lauren: Yeah.

Matt: books, but you, you have the ability to calculate that fairly easy. You just need to know, you know, what goes in this column, what goes in this column. And like you said, I mean, you're going to come up with a couple of different numbers. You're going to have per title number. Right? An accurate per title number. And then you can project, if you need to. But you're also going to come up with, you know, essentially what amounts to a yearly cost to run your, your, your author business.

Lauren: Yeah.

Matt: Right? Like so, again, you don't have to go back fifteen, twenty, thirty years. But for most of us, or at least those who create content regularly. And either it is their job, that's how they make money, or they hope it is their job one day, like. Understanding what you spend in a year on your author or content creator business versus what you're bringing in per year is also extremely helpful. Like

Lauren: Right.

Matt: that’s general business math. So.

Lauren: Yeah. I think that there's also... a lot of authors or creators will default to just calculating that. Like did I am I making a profit off of my book sales? And there are a lot of ways you can profit off of your book that are not related to book sales. So if you find yourself in a position where you're like, oh, you know, is it, I've been given the opportunity to provide free gift copies of my book to every attendee at an event that's happening. It's going to cost me $5,000 to do that. Am I giving away $5,000? Maybe. But if you realize that every time that you've been to an event, you've signed one new client that signed on for $10,000 of a business deal with you, then that 5,000 is worth it.

Matt: Yes. We're not

Lauren: You know?

Matt: gonna go there, because

Lauren: Okay.

Matt: you can't calculate the - let's stick with

Lauren: Well.

Matt: things you can calculate. However

Lauren: Yes.

Matt: what you did just point out is a business expense.

Lauren: Yes.

Matt: If you say, I'm going to take a thousand of these copies and I'm going to split them amongst these two events that I know are happening. They've said I can send them copies, they'll give them out for free and the swag bags or whatever. Which is a great thing, by the way. Right? That's a really great tactic

Lauren: Absolutely.

Matt: that you just outlined. And you're right, there's no way to truly know, potentially, what business you may have gained from that. Like you can put all the lead magnets you want in the back. And unless every single QR code is individualized and different, like you're just - But nonetheless, it's a great sales tactic for, for bringing in extra work. However, you can calculate that as an expense into your overall author business or creator business. That's one of those where it's a gray area. Some people would say, well, do I factor that into the cost of marketing this title? Right. Because you could argue that if I gave a bunch of them out for free, and then people read them, and then they tell their friends about it, who then go and buy the book, that was a marketing tactic.

Lauren: Right.

Matt: And I spent money to have those books produced and shipped. So that should fall under a marketing tactic. And you're not wrong there. Overall, I would put that in the column of like my annual author creator business expenses versus a title expense. But nonetheless. I don't want to get into the, the, the, the, the, the, the ROI that you can't necessarily calculate, like you just outlined. I think that's a whole ‘nother episode. And we, we’ve talked about stuff like that. But I want to stick to, today, the black and white that people can pencil into the columns and

Lauren: Yeah.

Matt: really get a true number. Outside of that, you're right. There are rings and rings and rings of value that just stack up.

Lauren: Yes.

Matt: That may or may not be calculated immediately.

Lauren: Which is the value of the work that we're talking about in this episode. Because this is work. Like this is absolutely

Matt: Yeah. Well yeah.

Lauren: We are

Matt: Yeah.

Lauren: not discounting the fact that like - This is not some like, I'm drinking coffee this morning and while I'm watching cartoons, I'm also casually calculating

Matt: Cartoons?

Lauren: my book expenses. Well, I'm not watching the news. So.

Matt: Do you watch cartoons?

Lauren: No, I don't really watch cartoons either.

Matt: Oh, okay. So what do you watch? What do you have on in the background?

Lauren: I actually these days I have a lot of, like, YouTube videos playing in the background.

Matt: I knew you'd say something millennial and boring like that.

Lauren: Yeah.

Matt: Okay.

Lauren: It’s fine.

Matt: Well anyways let's, let's move forward.

Lauren: But yes, this is

Matt: Alright.

Lauren: this is work. We acknowledge it's work, but it's worth it.

Matt: A hundred percent.

Lauren: For all of the reasons that we've just outlined and more that we're going to continue to talk about.

[14:21] – Calculating Your Book Production Costs

Lauren: But the, the first and easiest to just get into the basic barebones of calculating your investment right now, is figuring out what it actually costs to produce a book.

Matt: Yeah.

Lauren: And so, you know, what we mean by that is all of the things that go into actually getting the book from your brain into a physical print copy of it.

Matt: And these should be specific to this book.

Lauren: Yes.

Matt: This title. If, if you're trying to include the cost of ChatGPT or Claude because it helps you edit or it helps you... Like, that gets a little too complicated if you use that for other things too. So I would pretty much leave that out.

Lauren: Yeah.

Matt: The only way you can really take software and divide it per title, is if you did ten titles that year. The cost of your software was a hundred bucks. Divide it by ten for your ten titles, and you paid $10 per title for software.

Lauren: Yeah.

Matt: I don't recommend that. I would attribute that to your author business. So keep this very specific. What did it cost to produce that title?

Lauren: Yeah. Yeah. And especially with when it comes to software and stuff like that, the only time that I would even consider going through that effort to see, to see that is if it is something that you only use for creating a book. So like if you have... formatting software that you're using to format your ebook. What’s - it's Vellum? Or

Matt: There's Vellum, there's Atticus.

Lauren: Yeah. There’s a bunch of them, yeah. But one of those that you're not, like, you're not using this for anything else. You are only using it for the creation of a book. Then yes, factor or consider factoring that into your, your overall expense.

Matt: But yeah.

Lauren: But something.

Matt: It’s easy.

Lauren: Yeah.

Matt: You would just divide the yearly payment

Lauren: Right.

Matt: for the software by the number of books you created with

Matt: it. So.

Lauren: Right.

Matt: Yeah.

Lauren: Right. Yeah. You're also going to want to look at things like the professional services that go in there, especially if you're not using your existing software or whatever else you have available to you. I mean, in that same example, if you are somebody who is publishing or has published or is planning to publish a whole bunch of books, then it might be worth it to invest in formatting software. In the, you know, Adobe suite so you can do your page layout, or whatever. If you're thinking about just a one off book, it's probably, in the long run, more cost effective for you to just outsource the

Matt: Yeah.

Lauren: the formatting. Like hire somebody to do the formatting for you, hire somebody to do the page design for you, editing services, copy editing, all of those things. All of those things are going to go into the expense for that individual book.

Matt: That's right, yeah. Did you mention ISBNs and stuff?

Lauren: No.

Matt: Yeah.

Lauren: Nope.

Matt: So ISBNs

Lauren: Yup.

Matt: some of these external things that you're going to need to purchase or acquire to go along with the sale of your book. If you're going to put your book in distribution, you have to have an ISBN number. You should get one anyway, so that you can then register with Library of Congress

Lauren: Yeah.

Matt: and stuff like that for copyright purposes. But yeah, they're not free.

Lauren: Right.

Matt: I mean, you could get em free if you're going to publish through... But you should own your own ISBNs, and they should be in your name or your, your publishing company name, or whatever you're doing. So.

Lauren: Yeah.

Matt: You'll want to factor those things in. If you are doing print, then you absolutely should be purchasing proof copies.

Matt: Galley copies. You need to factor that in. Whatever the overall print costs are going to be. If there's any, you know, upload fees or things like that, you need to factor that in as a per title expense as well.

Lauren: Yeah. I do want to point out for the ISBNs that is, this is another area where it's good for you to know your long term overall investment, because if you are only publishing one book ever in your lifetime... You're still going to need probably between two and four ISBNs, depending on how many different format. Because you're going to need one for the print copy, one for the ebook, one for the audiobook. If you do

Matt: And if you do

Lauren: Yes.

Matt: paperback or hardcover, you'll need one for each of those.

Lauren: Yes.

Matt: Yeah.

Lauren: If you do different formats within the

Matt: So up to four.

Lauren: Yes.

Matt: Yeah.

Lauren: And if you're going to publish more than that, you're definitely, you know, think between two and four for every single title that you're going to publish. And at least in the US, this is not the same everywhere, but in the US, at Bowker, I'm pretty sure you can buy one, ten, or one hundred. Like I, like the increments go up

Matt: I forgot what the bundles are, but yeah.

Lauren: But it does wind up being infinitely more cost effective to buy them.

Matt: Oh yeah.

Lauren: at higher number -

Matt: Yeah.

Lauren: It's, it's something like $150 for one. And then like $250 for ten or whatever

Matt: Something like that, yeah.

Lauren: it winds up being. So that is something that, you know, you want to think about.

Matt: Yeah.

Lauren: You want to be prepared for that for sure.

Matt: For sure.

Lauren: But you know, all of those, all those things, all those expenses that get folded into how you're actually bringing your book to life. That is important. At the bare minimum, if you don't do anything else that we talk about in this episode, do that part. For sure.

Matt: Yeah. And you can bucket all of those under the category of production.

Lauren: Yes.

Matt: Yeah.

[19:43] – Calculating Your Book Marketing Costs

Matt: The next one we'll talk about is marketing. This can be a relatively small bucket and it can balloon out very fast

Lauren: Yes.

Matt: very quickly. So you have to be very careful with this, but there's a number of different things that you're going to want to include. We're not going to talk about all of them. But clearly, you know, anything that you have spent money on to get your book in front of people or to generate more sales, or to garner more publicity, or things like that, every dime that you've spent on that should be included in this.

Lauren: Now, I would argue, and I'm curious if you disagree with me on this.

Matt: Probably do.

Lauren: Maybe, if you are again trying to, to put some kind of guardrails up for yourself so that you're not going all the way down the rabbit hole on this one, I would say that there is a difference between marketing efforts to promote your book and marketing efforts to promote your your general brand.

Matt: Of course.

Lauren: So if this is something that you are doing a per book calculation, just focus on the marketing efforts that you are using to promote your book. Right?

Matt: Yeah.

Lauren: Okay. So we do agree. Excellent.

Matt: Yeah.

Lauren: Okay. So what does that include?

Matt: Again, everything specific to this title 100%.

Lauren: Yes.

Matt: If you bought ads on Amazon or Facebook or any other places for the title itself, of course, include that. That's probably an ongoing process. If you paid for any, you know, sponsorships or if you paid for a pre-roll ad on a podcast where they were going to shout out your book at the beginning of the podcast. You know, it includes all of that stuff. If you need to purchase, you know, like we said, 300 copies to, to send to an event because they agree to put it in the swag bags

Lauren: Yeah.

Matt: for all the attendees. Like, that's a marketing cost. That's promotional materials, things you're giving away. If you had bookmarks created with the title of the book and you were handing those out somewhere, again, that's a, that's a per title cost, right?

Lauren: Yep.

Matt: It's a marketing cost. If you're going to pay people to help you, like designers, to help you design Instagram ads or, you know, anything else for social media, copy, or whatever that is, all of that stuff is included. So every dime you paid to have that book marketed, promoted, you know, put it in front of people and whatever way you want to describe it. That should be included in that per title.

Lauren: Yeah.

Matt: The, the per, the author brand stuff. Again, that's... Yeah.

Lauren: Yeah that, that is separate. I would also include in there, you know, some people are going to outsource different types of creative efforts for those things. Whether you wanna do a video pre-roll ad for my new book that's coming out, I want to do a book trailer for it. I'm going to hire somebody on Fiverr to design a ten, fifteen second book trailer for me.

Matt: Right.

Lauren: That's a marketing expense. That's a promotional expense. If you are hiring... yes, you're hiring a cover designer to make your cover for you, and that's a production expense. But then you're taking that cover art to somebody else and saying, can you create graphics for me that are using this cover art

Matt: Yeah.

Lauren: that's a marketing expense. That's not unless you're, you know, folding all that in together with one designer is making promotional graphics for you as part of the cover art package. That, you know, might get a little gray area, how you're calculating that there. But in general, there are kind of differences in there. And then I would also include as a marketing expense, not just promotional like collateral or promotional copies of your book, but in general, any expenses that you're making towards a book launch

Matt: Yeah.

Lauren: or attending author events where you are selling books. Not attending events where you are an attendee, we'll talk about that. That's a separate - I would put that in a separate category. But if you are going to, like if you're an author that has bought space at an event like Author Nation. The, the effort that you put into going to Author Nation, buying the, the table space, decorating the space, the, the advance that you put out on the books, the print copies that you're going to be there. Even your, your travel and your registration fees and stuff like that. That is all marketing expense. But in the condition of are we doing this as author brand, an overall author brand promotion, or you're going there with one lead title that you're

Matt: Well, it doesn't have to be one leads title, where I would potentially argue with you is that if it was me and let's say I had five titles

Lauren: Yes.

Matt: to my name. And I was gonna go

Lauren: Yes.

Matt: to Author Nation, I could easily say yeah, okay, I'm just going to blanket this under my author business. And all these fees and expenses and everything, that's all going to go to my author business. But if I had a new release and that's what I was highlighting and yeah, I have my other four titles too, but I was highlighting that new release. I might actually attribute that spend, me personally, to that title.

Lauren: Yeah?

Matt: If I was highlighting that new release, like, this is my latest release and it was very clear I was pushing that. And, you know, the other four were just kind of there in the background. Maybe they were part of a series, maybe they weren't. I may actually attribute that spend to that, that new release. Like. Otherwise I agree with you. Like, if you're just at an author event, or a reader event, I should say. You know, and selling copies of multiple titles, or whatever that might be. Yeah, that's a general business expense for your author business.

Lauren: I actually agree with that. And I, because I was thinking about this in a different context, where I was thinking about in the past when we've recommended like, if you have a new book coming out, take one or two of your older titles, especially if it's the first in the series or something that is related, but it's a little bit of an older title. And you're going to mark that one down significantly, or you're going to offer it to people for free, or you're gonna

Matt: Yeah.

Lauren: do like a BookBub deal and try to get like a good promo for that. However you're going to wind up doing that. That is, there is an expense in that promotion. You might be losing some money on that because you're pricing your book down, or maybe you're, you're making it free for a little while, or you're paying a subscription fee to use a promotional tool or something like that. But odds are in your favor that that will turn out making a profit for you in the long run. And that's difficult to calculate. That is where we're getting into that gray area of you don't really know how to calculate that, but I personally would, I would attribute that to an expense built into the new book.

Matt: Yeah.

Lauren: Like

Matt: I would too.

Lauren: I think this is the same - yeah.

Matt: And some people probably won't care, but.

Lauren: No.

Matt: I think for, for people like us, like who would want to know down to the most minute details possible, like that's how, that's how I would do it.

Lauren: Yeah.

Matt: Yeah.

[26:59] – Recognizing the General ROI of Your Efforts

Lauren: This episode is obviously for the, the spreadsheet fans.

Matt: I mean, it is and it's not. It is, you're right. Like, because you can go pretty deep with this. But I do think you can stay at a high level and still understand what

Lauren: Yes.

Matt: what your general ROI is on each title. As well as your business overall. Like, if you just want to know, am I making money off my books in general? All of this can still apply. You're just kind of annualize it. Like at the end of the year, you're just going to it's, it's, it's a simple, you know, calculation of addition and subtraction. But understanding on a per title basis, then going deeper, like we said. Like, you'll get to a point we can start projecting costs. Like, you know, okay, I'm doing a four book series. I just finished book three. Each of these books cost me an average of whatever to produce. I'm working on this fourth one. I need to have this much money in hand to be able to produce this. You know, projecting helps. Or when you're going into things like the holidays and you really want to, you know, plan some pretty big promotions or things like that. Like, projections can be really great.

Lauren: Yeah.

Matt: Some people don't care, and that's okay. And if you just want to know, again, like a very basic like, this is what I spent all year on all my books and everything to do my author business. And this is what I made for the year on my author business. Very simple calculation.

Lauren: Yeah.

Matt: Either you made money or you didn’t.

Lauren: Yeah. This does not have to be a per book expense. It can be an annual thing. It can be. You could literally just be doing this for the sake of saying what is the cheapest? Like, what is the like, highest possible discount I could offer people to encourage Black Friday, Cyber Monday sales and not be hemorrhaging money at the same time? Like what is the most like, attractive offer that I can provide people that also won't totally screw me over for next year? If that's all you're trying to calculate right now, great.

Matt: Yeah.

Lauren: That's totally reasonable. But these are all things you're going to want to think about as you're trying to calculate that.

Matt: As an author business, or creator business, you know, you have expenses that you pretty much attribute to, to running that business throughout the year. These are the other things that we were talking about. They're not necessarily specific to one title or the other, but they help you create, promote, and sell all of your titles as well as do the other stuff that you do as a creator or an author. These are things like, you know, if you've got a Shopify store and you pay a monthly fee for that, you know, some of the other things that you might pay for on a monthly or yearly basis that are generalized towards your business. Whether it's, you know, Claude that acts as your assistant or helps you do things, it can be a number of different things, but. I think being able to calculate those, then obviously dividing by twelve will get you your monthly operating costs. But, you know, you can't truly understand the ROI on your business as a whole just by knowing the title stuff. You, you do need to know your operational costs.

Lauren: Yeah.

Matt: And that's another area where you can kind of, you know, pull some levers and push the buttons to to manipulate your expenses to bring in more profit and ROI, or vice versa. If you are doing your calculations and you see like, oh, I'm doing better than I thought I was, I'm making more money off some of these titles than I thought I was. You may have a little extra in that budget to market that next book, or go out and upgrade that ecommerce storefront that you've been using so you can get those extra features like live shipping rates or something. Right? Which in the long run is going to not only save you money, but also help you make more money. So when you know all those costs, you can make decisions like those too. Whereas if you don't know what you're making, what you're spending, you know, down to basically the nickel, it's hard to justify like, yeah, I think I will upgrade to that next Shopify plan. Cause that jump might be $150 to $200 a month.

Lauren: Yeah.

Matt: And you really need to know, can I actually afford to do that? Make that investment in my business right now? So, you know, these operational costs are extremely important.

Lauren: Yeah. Yeah they are, they're a big part of this, as much as you might not want them to be. They I think they are really important to know. Because you're right. I mean what's, like, what's better than having that realization of like, oh, I actually do have a little extra wiggle room in here. I can, like, go all out for the promotion of the last title in this series? Or I can splurge on something really cool as a, as like a end of the year thank you gift for all of my clients or all of my readers that bought a new book this year or something? Like that's, that's great and that's super helpful for you in the long run.

Matt: Yeah.

Lauren: But you can't... As much as I love to pretend that money isn't real, it is. It is, it is. And you need to know what you're spending and what you're making. Especially if you have any interest in this being a long term thing for you. And not just... this is a fun little side project, now I'm going to go back to my day job.

[32:04] – Calculating Operational and Other Costs

Matt: Things like your website, your storefront. Even retail distribution. If there are fees that you pay or one time upload fees or things like that. If there are elements of fulfillment that you're utilizing, maybe you're, you're, you're doing a warehouse pick and pack model instead of a, you know, kind of a direct sales print-on-demand model or things like that. Understanding what those costs might be are extremely important. It does include other things, though. If there are things, once again, that you use only for your author and creator business, you know certain pieces of software. Now, what you should not do is say okay, because Rose and I sit at this one particular area in my house when I'm creating stuff, I'm going to count that portion of the rent. I'm going to divide my square footage

Lauren: Right.

Matt: and I'm going to include that. Don't do that. You don't need to do that. It's unnecessary. You wouldn't do that on your taxes with the IRS, although some of you might. But it don't include stuff like that. Like is it something you use specifically for your creator or author business? A software, again, some sort of a service, things like that. That's what you include. But

Lauren: Right.

Matt: don't try to get wild, you're not doing yourself any favors if you, if you try to get wild with some of those numbers. And in fact, you're only going to hurt what the perceived ROI is. It's gonna

Lauren: Yeah.

Matt: deflate your ROI and inflate your expenses. And that's not what you want to do, so.

Lauren: Yeah.

Matt: Keep it as honest as possible.

Lauren: It’s - you're only hurting yourself, if you're, if you're not, like, if you're fudging the numbers.

Matt: And just because Rose sits next to you while you create, you can't write off any of her stuff either.

Lauren: You know, if only, if only she would put a little bit more effort into participating in any way shape or form, maybe she could be making a profit. But no. No.

Matt: We've already established your cat is lazy and

Lauren: My, my cat

Matt: does not pull her weight.

Lauren: does not pull her weight at all. And is nothing but a distraction, and also has a radar for when a camera turns on her and she will immediately stop being cute and just give you like the evil eye stare. So I can't even like, I can't even turn her into an Instagram cat. Even if I wanted to, I couldn't.

Matt: So you mentioned earlier, this also includes things like events.

Lauren: Yes.

Matt: Right? So if you're going to go and have a booth or a table at an event where you're, you know, sort of showcasing all of your titles or whatever that might be, this is part of an annual, you know, business expense. Again, unless you're highlighting a particular new release title, I would not attribute it to a single title. I would attribute that event and all the expenses associated with it, with your author business as a whole.

Lauren: Yes.

Matt: And includes things like online courses and stuff.

Lauren: Because there might also in this case where you're doing just overall annual expenses and not per title expenses. This is where I would include events that are not events that you are an author in front of readers.

Matt: That’s right.

Lauren: But an author with other authors.

Matt: Yeah.

Lauren: So if you are somebody who is attending, like IBPA, where you're hoping to learn more about the craft or learn more about the industry. Or you're attending... if you're you're not thinking of yourself as an author, but you're some kind of content creator or content entrepreneur, and you're attending an event where you are learning more about your industry, you're learning how to do more social media marketing or... You know, different, we've attended so many different types of events. You know, food blogger events and travel blogger events and stuff like that. Where you're not promoting your brand at them, but you are learning more about developing your brand or developing your expertise.

Matt: Yeah, there's a lot of stuff

Lauren: Yeah.

Matt: that you're getting out of it.

Lauren: Yes.

Matt: But the point is, if this is in any way, shape or form attached to your business, even if you go there and you're not learning a bunch, but there's a lot of networking

Lauren: Yep.

Matt: going on, you're making some connections that, you know, will or potentially pay off in the long run. If it's associated with your business, your brand, getting your name out there, learning, networking, it doesn't matter. You should include those expenses, 100%.

Lauren: Yeah.

Matt: Again, you know, to, to extend the learning, you know, online courses or things like that. Even if you take something at a local, you know, community college or a library or something.

Lauren: Yup.

Matt: And it's attributed, again, to the craft or the business of what you're doing, that should all be included. If you, if you have a subscription to one of your favorite, you know, creator educators, like, maybe you subscribe to, to Jay Clouse or Justin Moore, one of these other communities where there's a monthly fee, you know, or they have a Patreon or something you, you should include that, if you're getting business value out of that.

Lauren: Yeah. Subscriptions also memberships if you're... like the Editorial Freelancers Association.

Matt: Right.

Lauren: I do think there is an annual membership fee to be included in part of that. I think also the Nonfiction Authors Association?

Matt: I think a lot of them do.

Lauren: I think a lot of

Matt: I think even IBPA

Lauren: they might be nominal fees.

Matt: Yeah.

Lauren: But it's still, you know, that is something. Even if it's the $50 a year, if you're a member for ten years, like, that is something that adds up over time. So I would factor that into what your overall costs are for your book business.

Matt: Yeah.

Lauren: Absolutely.

Matt: So so, you know, those are the different things that you're going to want to track, monitor. You're going to use those for your calculations monthly, yearly, on a per title basis. The calculations it's not rocket science. We do this almost every day sometimes, without even thinking about it, in our heads. Others maybe not so much, but it's not, it's not hard. And for the most part, when you are tracking these, these things, it just makes everything so much easier than if you have to go back after the fact

Lauren: Yeah.

Matt: and dig and look for receipts, look for emails, try to remember, you know, was this for that, or - If you're, if you're starting from scratch or from the beginning and already have a clear sort of system in place, you know, a spreadsheet to track these things, the calculations are simple.

Lauren: Yup.

Matt: Right? What did you spend? What did you make?

Lauren: Yeah.

Matt: Period. The one thing I think people forget to do. At least, you know, sometimes when I talk to them. Is when you're adding a book sales, you 100% have to subtract the cost of those books to be printed and or digital delivery, if they were ebooks or things like that. I've talked to people where they're like, oh yeah, you know, I spent, you know, $1,200 on this book, getting it made, whatever that. But I've got, you know, $4,000 a book sales. Well, what they're calculating is gross. They're not calculating what they actually got a check for from Amazon. Or if they're selling direct, like what was actually deposited or left in that bank account once they paid the fulfillment provider and the, the print production

Lauren: Right.

Matt: and things like that. So make sure you are calculating your, your sales, your revenue on a net level.

Lauren: Yeah.

Matt: Like, after those expenses have been deducted.

Lauren: Also

Matt: That will give you a true calculation.

Lauren: Do remember to, even if it's just as a line item, factor in there the things that may potentially be pass-through costs.

Matt: Yup.

Lauren: So if you are, because again, you know, when I said earlier, this is how you decide things like what your list price of your book is or how much you can afford to discount it. If you are discounting it for even a short amount of time so low that you wind up paying out of pocket for the distribution fees where you used to have that built into, like the act- like the list price of your book, you're usually passing that cost through to the buyer.

Matt: Right.

Lauren: Where you've calculated, okay, you know, every sale of this book through a third party distributor, I need it to be one extra dollar to cover the distribution fees on this one. If you've discounted it now, so much that that dollar is coming out of your profit, that could be a problem long term. And that's something that you have to be aware of. So even those things that you might write off as this is a pass through cost. This is the shipping, the customers are paying the shipping. You're right, they are. But you still want to know the distinction between the production cost, the things that would get bundled together into the pass through costs, and then the actual profit on top of that, so that you know where the, the different layers are.

Matt: And just to be clear, that's most important when you're selling direct.

Lauren: Yeah.

Matt: So again, when you're selling the retail distribution you should be aware of what the shipping is that they're charging your customer. But at the end of the day it doesn't matter because you don't know who your customer is anyways. But if you're selling direct, which you should be, yes, shipping is a pass through. So hopefully you're mapping the shipping so that whatever you're charging your customer is pretty much equal to or, you know, roughly as close as possible to what your production facility is charging you for the actual shipping. Right. Some people like to do that free shipping model where they mark the book up a little bit, they offer free shipping, and they just know that it's padded to cover whatever the shipping is. That's fine too, but you can at the end of each month, or at the end of the year, however you want to do it. You can calculate all of the shipping that you collected from your buyers, if you're selling direct, what that total is. And you can also get a total of all the shipping that you paid your production facility. And you could look at that and go okay, I'm pretty on par. Or you might go oof, I'm actually losing money on shipping here. I need to add an extra $0.50 to every order, right? Or wow, I'm actually making money on shipping. Do I want to just pocket that extra margin or do I actually want to bring my shipping costs down on my website to give my readers a little bit of relief? So it is important in that sense, if you're selling direct, to understand those pass through costs. You want to map as closely as possible

Lauren: Yeah.

Matt: to that, you don't - making money off shipping, these days, is not cool at all. Like you don't want to lose money on shipping, but. You know, making money off somebody for shipping is just not - get it as close as you can. But to do that, you need to know what those costs are. So I think that's the biggest point.

Lauren: Yes. Exactly.

Matt: And again, you know, calculating all of these things, that's the easy part. It's the tracking them. It's the segmenting them into the right buckets for where they belong. Which title you're attributing these to which part of the business? Are you attribute to the overall business? You know.

[42:39] – Considering Incalculable Return on Expenses

Matt: I hesitate to go beyond like, this is what I made off of each title this year.

Lauren: Yeah.

Matt: Like, this is the return on my - But, you know, you touched on it a little bit. We've talked about it before. There are other, you know, ways that you are pretty much, I think making gain from some of your books. This is probably more on the nonfiction side, for sure, than the fiction side. So again, I don't want to go too far into it, but if this is something that you're doing, if your book is purposely, you know, created to drive leads for another part of your business, you should try to find ways to calculate that too.

Lauren: Yeah.

Matt: So if you've got lead magnets in your book, QR codes that are being scanned, things like that, hopefully you're asking each new client that you secure, you know, if they found you through the book, you know, where did they get the book? Or... Again, trying to calculate and rightfully attribute where that revenue came from back to what you spent to to acquire it. You don't want to, to be generating business off of your books and, and not knowing, you know, I just made $500 off this client, which dollar that I spent earlier in the year brought me that 500? You really want to know that, right? If they came to you because they saw an Instagram ad, you want to know that. But if they came to you because of your book or one of your books, you really want to know which book was it that drove them to you, that helped you secure that, that $500 transaction or client, whatever that is. So.

Lauren: This is the part of this conversation that is exactly the same as when we talk about, like, if you are doing a campaign for a new book launch or a new product launch or something like that, and you do all of this work and then you don't review the metrics at the end of it, then what was what was all of that work for? Because if you don't know what was successful and what wasn't, then you don't know what to do again next time.

Matt: That's right, yeah.

Lauren: And, and this is the same thing. If you decided this year, okay, I'm going to I'm going to step up my event attendance this year. I'm going to try to do some in-person marketing and, and, you know, go to four events this year instead of one. At the end of the year, you have to be able to sit down and look at it and say, how much did I spend on attending those events? And was it worth it? Should I do this again next year? And yes, you're right that it's impossible to exactly calculate that there there is a very especially something like an in-person event. There really is no way to calculate the exact amount of money that you made off of something like that.

Matt: Aside from book sales.

Lauren: Aside from book sales.

Matt: The obvious.

Lauren: Right.

Matt: Books and merch, right?

Lauren: Right. But, but there is still you know, if you can anecdotally say, I know for a fact that at least one person told me we met at such and such conference, and now I'm reaching out to you and they became a long term client. That, that is something that you can count. Or somebody left a review on one of your books that said, I impulse bought this at such and such event because like, the author seemed really nice and I liked their table, and I've now read every book they've ever published. You might not even know if they bought them, or borrowed them from the library, or got them from Kindle Unlimited, or whatever, but like you can tell that was a success. Attending that event was successful.

Matt: Yeah.

Lauren: So I mean, I understand your point about not wanting to to dive too far into all the incalculable or gray area.

Matt: I think that's a whole ‘nother episode.

Lauren: Return on investments, but yes.

Matt: But there was one thing that you just touched on that I think is important too. You know, in general we’re just talking about, you know, calculating return on your publishing efforts, your books, your publishing business, those types of things. And again, purposely we're staying somewhat high level, but you can get overall numbers from what we just talked about and get and understanding of whether or not you're profitable or not. If you go, you know, if you want to click into a few of these areas, events is a good one. I think a lot of people don't do a good job of calculating the return on those events. And while there are some things that are hard to calculate, there's some that are very black and white. So most authors that are going to events that are setting up tables, they're selling books and merch. You have a very black and white number there. What you spent to go to the event, what you made in book sales and merch. Once you back out the cost of what, you know, you paid to have those books printed and shipped to the event, and the cost of whatever the merch was that you were, whether it was t shirts or bookmarks or whatever, you're left with the net sales from that event. Did that at least match what you spent to be there? Or exceed it? If it didn’t match it or exceed it, you probably want to rethink that event, like you said, next year. You may not want to make that investment. I've talked to several authors in the past they, they never really - they liked the event. It seemed like they were doing okay at the event. They'd take, you know, thirty or forty books and sell out of them. But what they didn't do the math on was, was selling thirty or forty books actually covering the cost of that trip and leaving anything left over for profit?

Lauren: Yup.

Matt: I talked to another author earlier this year. She's fairly well known. She does really well. She was going to a lot of events and selling books, and then she realized after doing, you know, the math over the years, like there's basically one event that really pays off for her, that she makes a ton of money on. So she just does that one event now and that's it.

Lauren: Yeah.

Matt: She doesn't do any more. But if she hadn't been paying close attention to that, she'd pretty much be wasting some money on events every year. So.

Lauren: Yeah.

Matt: And when you're trying to make sure that you're running a profitable creator or author business, that can be a big one. Cause traveling is expensive. A lot of these events aren't cheap. Right? And just being aware of, like, if I'm going to this event and my goal is to at least break even with book sales, how many books do I need to sell? Calculate that at the net level, right? Retail cost minus what it cost to produce that book. And then factor in a few freebies that you'll probably give away too.

Lauren: Sure.

Matt: Right? So if you need to, you know, if the trip is going to cost you $6,000 and you know you need to sell, you know, 100 books to make that. Take 105 or 110. Because, you know, you're going to give a few away. And just know you need to sell that 100 to cover the cost of that trip.

Lauren: Yeah.

Matt: And if you come back with any books, you probably don't want to do that event again. Or you may want to approach that event in a different way.

[49:30] – Tips to Get Started

Lauren: I think that if you like ultimately really just it at a high level wanted to go through this. There are a lot of things that you can do that are just like, you know, I'm just doing some basic math here, like I'm not. Again, to to reiterate the point, we were framing it in this episode is doing like a per title cost. But if that's not how you want to approach this, if you want to keep it really, really simple for yourself and just say, this is what I've spent this year on, on my like, complete overall brand operation, production, marketing, everything, and this is what I've made, sure. If you want to go through it and say I'm going to strip all the operational costs about it, I don't want to think about that, but I just want to know what it cost me every time I publish a book. That's a, that's a great thing to do too. You don't have to get as granular as we did throughout the different sections of this, but there are a lot of different ways that you can, can approach this and kind of go through.

Matt: Yeah, I think again, even starting at a high level, just start at the top.

Lauren: Yup.

Matt: I think naturally you'll find areas where you want to double click into that. Right? In your own business. If you are somebody who's very event-heavy, you'll find yourself now, you know, clicking in more and more into those categories of what you're spending at events, what you're making at events. If you're somebody who's a lot more like digital marketing heavy, where you're, Facebook ads person, like, you know, really understanding those costs and what you're spending there versus what you're making off of that. And and then, you know, how does that break out overall across your, your author or creator business? So, yeah, you don't have to start as deep as some of the things that we talked about. I think the most important thing is that, if you're not already, that you start tracking and calculating these things. You know, we're... what, just started September-ish at recording this?

Lauren: Yup.

Matt: When this is airing, it's probably middle of September. I mean, so we're, we're a good chunk of the way through the year. We're almost in the last quarter of the year. It's, that's not an excuse not to start doing this.

Lauren: Yup.

Matt: Right? And in fact, I would say if you haven't been doing this yet, this is a great time to start, because we're about to go into the holiday season.

Lauren: Yeah.

Matt: And if you're going to spend any money or make any efforts at selling books or anything else during the holiday season, you really should be tracking this stuff. Because that's the one time of the year I think most people really kind of throw all this to the side and just start spending money on ads and other things and, you know, getting on sponsored lists of best of or whatever that might be. And these things aren't cheap. And then they come through the other side of the holidays. You know, middle or late January. And they're looking at their, their royalties or their sales numbers, like, oh, I did pretty good. Meanwhile, they don't realize not so much.

Lauren: Yeah.

Matt: When you calculate what they just spent on all this stuff. If they ever calculate it... Yeah, not so much. Or, yeah, you did really great. But again, the only way to know that is if you're, if you're tracking these things. So.

Lauren: I mean I do - the timing of this episode is not an accident, thanks for noticing. Because I agree, I think this is actually a really good time of year to start doing this. Because I also agree that this is absolutely something that people do. And I'm not necessarily saying that it is a bad thing if you do this. I think that a lot of people will start and just say, I'm just trying to get things off the ground. Like, I'm not gonna - I know that I have a little bit of of a cushion with capital, and I know that I can do this, and I will, I'm going to spend the first year of this business not tracking any of this stuff, because I just... Like, you know, there might be some startup costs that are not annual costs that just, you know, an initial thing that I need to get done. There are some things that are going to fall naturally one way or another. I'll figure it out. Let me just go for broke, hopefully not literally, this first year. And then if it succeeds, like if I actually do get this business up and running and off the ground, then year two I'll start tracking. And then year two really start digging into it. I think that, I think that happens a lot. I think that is something

Matt: It does.

Lauren: that people, that people do, and that's okay. But if you are in that position, if you have been in that position where you haven't historically been tracking this kind of stuff, now is absolutely the time to start doing it, because I do think that it is something that is important for maintaining your business, your brand, whatever it is, and also important for your growth. Because absolutely, this is how you know, if you're saying like, okay actually, it turns out that I’m blowing so much money on this thing that isn't giving me a lot back. So let me cut back on this. And instead of, instead of attending ten events this year, I'm going to attend the top four and funnel the rest of that budget towards digital ads.

Matt: Yeah.

Lauren: Great. Cool. Who knows? Could, could be a big change for you.

Matt: Maybe.

Lauren: Maybe. I don't know. Could be.

[54:40] – Episode Wrap Up

Matt: Alright. What do your bracelet say today?

Lauren: They say I Cry A Lot But I Am So Productive. And Let's Go To Disney.

Matt: Wait.

Lauren: I have, so it's one of them says I Cry A Lot.

Matt: Okay.

Lauren: But I Am So Productive. Which is one line of that song.

Matt: But two bracelets.

Lauren: But two bracelets. And then Let's Go To Disney.

Matt: I cry a lot, but I am so productive. Okay.

Lauren: Yep.

Matt: Interesting.

Lauren: Yep. It’s fine.

Matt: Alright.

Lauren: And then I take that, those tears and that productivity, and I go to Disney. You know, I almost made it through the whole episode without making a Disney reference. I was about to. I was about to start talking about annual pass math. But. But that's, but I didn't. I refrained. And came up with a different example instead. And now we're, we're here.

Matt: Why don't we get through the end of the year and you can give us your annual pass math? Because I know that was your goal this year was to

Lauren: It is.

Matt: to calculate if you're getting a return on that investment.

Lauren: That is exactly. I'm not kidding.

Matt: Let's wait till the end of the year and you can give us the full rundown.

Lauren: I, I will. But genuinely, it's relevant to this episode now. You gave me this, this opening,

Matt: And in fact, I'll calculate what I spent on Disney for the year

Lauren: There you go.

Matt: without a pass, and we'll compare.

Lauren: How many times have you been to Disney this year?

Matt: So far only once. Earlier in the year.

Lauren: So that's uh...

Matt: And it was Disneyland. So there's airfare involved and stuff. But.

Lauren: That's true.

Matt: Yeah. You're probably going to come out on top here

Lauren: Probably.

Matt: But we'll see.

Lauren: We'll see. We’ll see about that.

Matt: I'm definitely getting at least one more in before the end of the year.

Lauren: Me too.

Matt: Whatever.

Lauren: Already got it booked. Alright. We'll report back on that. But in the meantime if you are looking for a sign to start doing some math, this is it.

Matt: Yeah.

Lauren: But it is worth it. It is worth it. And you will know for sure at the end that it is worth it. And also whether or not it is worth it for you to be investing in publishing a book, publishing multiple books, running your business the way you are, attending different events, whatever it is. This is actually how you find out if it's worth it for real for real and not just spiritually, anecdotally, or vibes-based worth it.

Matt: Yeah. Yeah. Alright.

Lauren: Cool.

Matt: Hit the like button. Leave us a review. Do all the things.

Lauren: Send us an email.

Matt: Or don’t. Whatever.

Lauren: No, please do.

Matt: Send us an email.

Lauren: Podcast@lulu.com

Matt: Lauren will ignore it for three days before she responds to you.

Lauren: Sometimes I don't realize that they’re the podcast inbox, and I think that they're just phishing emails. I'm very good at not responding to phishing emails. IT loves me for that. Whatever it is, email us, say hi, let us know in the subject line so that I know not to ignore and or delete it.

Matt: There you go.

Lauren: And then if you, whether or not you do any of those things, please come back next week for another new episode.

Matt: And maybe another new layout.

Lauren: Oh yeah. We're still - this is, this is not the final product. Don’t you worry.

Matt: Well, it might be. Don't say that.

Lauren: Well, we still gotta figure out the new microphones.

Matt: We'll figure it out.

Lauren: Ooh, sneak peek. We got new microphones.

Matt: Well.

Lauren: Stay tuned to find out how those work.

Matt: Yup.

Lauren: And until then, see you next week.

Matt: Later.