Episode 138 - ROI for Authors with DeAnna Hart
June 14, 2022
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DeAnna Hart, co-author along with Mark Leslie Lefebvre of “Accounting for Authors: Financial Analysis, Budgeting, Costs, and Margin Made Simple,” discusses ROI FOR AUTHORS. She discusses the importance of not glossing over the costs of doing business as an indy author, allocating overhead costs to your titles, risk tolerance and risk capacity, valuing your time, looking for opportunities to free up your time for value-added work, and the best accounting tools for authors.
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D.F. (DeAnna) Hart holds an MBA with Accounting concentration and has been working in accounting for over twenty-five years. When she’s not planning out how best to use her ‘day career’ background to help her fellow authors, she’s happily penning mysteries and thrillers as D.F. Hart, and contemporary and suspenseful romance as Faith Hart. DeAnna lives in Texas.
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"I think a lot of people, when they get started, they just say, I want to publish a book, and they don't think about the business aspects. But the moment you put a price tag on that book, your book baby, you become a self-published author, but you also become a business owner." —DeAnna Hart
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Links
DeAnna Hart's Links:
The universal book link: https://books2read.com/accountingforauthors
www.2ofharts.com
https://2ofharts.com/welcome-to-accounting-for-authors/
https://www.facebook.com/D.F.HartTx
https://www.bookbub.com/authors/d-f-hart
https://www.bookbub.com/authors/faith-hart
https://www.goodreads.com/author/show/18999540.D_F_Hart
https://www.goodreads.com/author/show/20000631.D_Faith_Hart
Mark Lefebvre's Accounting for Authors Page:
https://starkpublishing.ca/accounting/
Referenced in episode:
Episode 014 - Collaborating on "Taking the Short Tack" with Mark Leslie Lefebvre
Episode 128 - Lessons from Filmmaking for the Indy Author with John Gaspard
Episode 117 - Tracking Sales Data and How ScribeCount Can Help with Philippa Werner
Matty's Links:
Affiliate links
Events
The universal book link: https://books2read.com/accountingforauthors
www.2ofharts.com
https://2ofharts.com/welcome-to-accounting-for-authors/
https://www.facebook.com/D.F.HartTx
https://www.bookbub.com/authors/d-f-hart
https://www.bookbub.com/authors/faith-hart
https://www.goodreads.com/author/show/18999540.D_F_Hart
https://www.goodreads.com/author/show/20000631.D_Faith_Hart
Mark Lefebvre's Accounting for Authors Page:
https://starkpublishing.ca/accounting/
Referenced in episode:
Episode 014 - Collaborating on "Taking the Short Tack" with Mark Leslie Lefebvre
Episode 128 - Lessons from Filmmaking for the Indy Author with John Gaspard
Episode 117 - Tracking Sales Data and How ScribeCount Can Help with Philippa Werner
Matty's Links:
Affiliate links
Events
Transcript
[00:00:00] Matty: Hello and welcome to The Indy Author Podcast. Today, my guest is DeAnna Hart. Hey DeAnna, how are you doing?
[00:00:06] DeAnna: Good morning, I'm doing well. How are you? Thanks for having me on.
It is my pleasure. To give our listeners and viewers a little bit of background on you, DF Hart holds an MBA with accounting concentration and has been working in accounting for over 25 years. When she's not planning on how best to use her day career background to help her fellow authors, she's happily penning mysteries and thrillers as DF Hart, and contemporary and suspenseful romance as Faith Hart. And DeAnna lives in Texas.
[00:00:30] Matty: And I asked DeAnna to come on the podcast to talk about accounting for authors, which is also the title of a book she just coauthored with Mark Leslie Lefebvre.
And I wanted to start out, before we dive into the details of accounting for authors, I also coauthored a book with Mark, "Taking the Short Tack," about short fiction. And if anybody wants to hear about that, that's way back in episode 14, Collaborating on Taking the Short Tack.
DeAnna's Collaboration with Mark Lefebvre
[00:00:54] Matty: And so I was curious, DeAnna, because I think people's collaboration approaches differ a lot from person to person, but even when there's a common theme, a common element, like Mark, I think that the process can be different.
So I'm very curious about, first of all, how did you come to write the book with Mark? And then what process did you use for your collaboration?
I am a member of a couple of Facebook groups, among them is Wide for the Win, which is a wide-focused Facebook group for authors. And as I carried a little bit further down my author career and met more and interacted with more and more people, I realized that I think a lot of people, when they get started, they just say, I want to publish a book and they don't think about the business aspects.
[00:01:38] DeAnna: And you have to, but the moment you put a price tag on that book, your book baby, you become a self-published author, but you also become a business owner. And so I thought, maybe I can leverage some of the knowledge and experience that it's taken me 20, 25, 26 years now to obtain, and share that with people and to help them grow their author businesses and help them be smart and efficient with their resources.
And the first person I thought of to be honest was Mark to collaborate with, because he does have several strong titles out already, as far as help and guidance for authors. He's already got an established voice and presence in the indy author community. And I thought, well, you know, I’ll just reach out to him and see if he's even interested in this idea and what he thinks about this idea, because I trust and value his opinion.
And he was like, oh yes, let's do this. And I was like, yay. So, he said, I'm basically going to get out of your way and let you write down all the accounting facets, and then I will go back in and add either personal anecdotes or examples or tying them into maybe some non-accounting facets of our author world. And that's how we did it. I think it turned out pretty well.
[00:02:47] Matty: Yeah, I think that approach, especially with a topic like accounting, and I think this is something that I'm sure we're going to hit this, that people who are in the creative world, writing fiction or nonfiction, may find alarming. And one thing I really like about Accounting for Authors is that idea that Mark is sort of acting as the Greek chorus. He's the every man, he's representing us, as he's saying, I know that might've sounded a little alarming, it's really not, and bear with us and it's all going to become clearer. So I thought that was a really nice pairing there.
And the other thing I really like is the fact that you were both bringing something to the table and both making it attractive for the other person. So you're tapping into Mark's reach and reputation and community-building. And then in return, you were doing a lot of the work. I think that's a perfectly great trade off, that you were going to him with an offer, not an ask and he brought something as well. So I think that's very cool.
So it sounds like you wrote everything, more or less. I know you probably went back and forth, and then he responded to it, right? It wasn't like you were working together on the same content.
[00:03:52] DeAnna: Right, right. I had a certain blueprint, a certain road that I wanted to go down as far as order of presentation, things that I thought people really need to know, even on a basic level, to get them more comfortable.
And then Mark basically captured his thoughts and reactions to that data. And so it is a little bit of a back and forth. But I think it flows and moves really well.
A lot of times with collaborations, and Mark and I talked about this, you try to combine the two different author voices into one voice, but we opted in this book to keep them separated. And I think it worked out really well. It almost becomes like I'm sitting down having dinner with a colleague and I'm explaining concepts to them over dinner and getting their reactions and their thoughts and their feedback.
[00:04:38] Matty: I really liked that too. And you even labelled various chapters with your initials, so it's clear who's speaking at each point, and that was different than what Mark and I did. Mark and I combined the material. He gave me the parts, the information that he was the expert on, and I was largely the person who tried to do that melding to make it sound like one voice, but it is a lot of work. And I think the approach that you took was both effective and efficient, you know, efficient for you and Mark and also effective for the reader. I just love hearing about how different people approach that kind of effort.
[00:05:09] DeAnna: That's my first ever collaboration as well.
[00:05:12] Matty: Yeah, well, you started with a good one.
[00:05:14] DeAnna: I did, I really did, yeah. Mark is a delight. I would work with him anytime.
[00:05:19] Matty: Yes, I think that whenever I hear anyone mention Mark, it's always "the lovely Mark Leslie Lefebvre." So I feel like lovely, it's almost like his unofficial first name.
[00:05:27] DeAnna: Right.
[00:05:29] Matty: So let's dive into Accounting for Authors. And I wanted to start out asking you, when you talk to authors about accounting topics, what is the biggest aha that you see them, the biggest insight that you see them having as maybe you demystify some things for them?
Don't Gloss Over Costs of Doing Business
[00:05:46] DeAnna: I think the biggest insight in the reactions that we've received so far are, people get so focused on, I've got to track my costs to publish the book, that they don't stop and consider that you've got costs that go on, whether you publish one book or 5,000, and you really need to account for those, you really need to track those and include those in your calculations when you're tracking your income and expenses.
A glaring example is cost per click ads. If you do marketing and you do cost per click ads, those can get out of hand very quickly. But there are other things that people just might not think about. Their monthly subscription to BookFunnel or to Story Origin. We have money that goes out that's not directly tied to production of any one book that people kind of gloss over and a lot of people just don't think about them, but they definitely impact your bottom line. And so they need to be grouped into your mindset when you're doing this. It's not just, I'm going to put out five books this year. I've also got any subscription costs, the cost to maintain my website, I'm a member of ALLi, so I've got that cost every year. You need to really account for what are considered overhead or administrative or costs of doing business costs when you're looking at your financials, because those things go straight to your bottom line, and they help make it better or they help make it worse.
Allocate Overhead Costs into Your Titles
[00:07:09] Matty: What do you recommend people treat things that are things they would be doing anyway even if they weren't trying to make a business of indy authorship? So for example, let's say I'm a member of Sisters in Crime because I love to read crime thrillers and I like being part of that community as a reader, but it's also benefiting me as an author for my business. Any thought about those things that are kind of in a gray area?
[00:07:35] DeAnna: What I like to do is something called cost allocation. And what that means is that I take those costs that are not directly tied to production of a title, and I split them out across all my titles. So if I have an ALLi membership for $120 a year, and I have 12 titles, then I would assign $10 worth of that cost across my titles.
And that becomes handy later when I'm trying to figure out what is called break-even point. And that's basically where you're trying to get to how many units of a title do I need to sell for that title to not only pay for itself but help cover some of my overhead costs. And if you bake that overhead stuff in through cost allocation, then you've got one calculation and you're done.
You can actually even go further in. For example, my first in series in my mystery thriller set, I've got an ebook, I've got a large print, I've got a paperback, and I've got an audio book. And so if I have $100 worth of overhead costs that I've allocated to that title, I can split it down even further and I can assign $25 of that $100 to the ebook and to the paperback and to the large print and to the audio book. So you can actually drill down to a pretty granular level. So then when you run break-even point between the different formats, you're more easily able to see, oh, my large print's doing better than I thought. Not only is it paying for itself, but it's carrying its fair share of the overhead costs.
[00:09:19] Matty: I feel like part of my role as the interviewer on The Indy Author is to be the person who's the bad representative of whatever I'm talking about. So for example, in episode 129, I just spoke with Mike Kuczala about the importance of movement for creativity and how a sedentary lifestyle undermines not only our health but our creativity. And I spent the whole time fessing up about how basically sedentary my life is.
And the exact same thing is true on the finance side. I did my best for many years to keep on top of the finances of my indy author business. And I'm just not good at it. Like I sort of wished that in high school or college, I had taken an accounting course because I think there are basic principles that I just haven't completely internalized.
And when I finally was able to hire an assistant, I hired an assistant to take care of the finances for me. But even now that I have that person, who's more of a financial expert, I haven't even been thinking about understanding the profitability or lack thereof of an individual book. In fact, the approach I'm taking so far is that I'm looking at three big profit centers or expense centers, depending: my fiction work, my non-fiction work, and merchandising.
Any Benefit on Starting at a Macro Accounting Level?
[00:10:30] Matty: So is there a benefit to at least starting out at that very, very mega level or do you really not get the benefit that you should from good accounting practices unless you drill down to an individual product or book?
[00:10:43] DeAnna: No, no, no. You can do it at an overarching level by product type. And here's where I'm coming from, most of my 25, 26 years doing this has been in manufacturing backgrounds where people are actually producing tangible goods for resale, for sale. So I'm taking that manufacturing accounting methodology and applying it to the author world, because although we don't make tangible products, as in the case of e-books, we are still producing something. And when you get into that mindset, it becomes a lot easier to apply some things, apply some concepts.
The methodology will not change, whether we're talking about an ebook or a paperback or a large print or an audio book or a translation, whether we're talking about fiction or nonfiction, whether we're talking about services or merchandising, the basic concept is still going to apply. And if you can take a concept and you can apply it across all facets of your business, your data results are going to be more consistent. And what that does, is that enables you to look for patterns.
[00:11:49] DeAnna: Like for me, in my first year being an indy author, everybody was, oh, you need an audio book, you need an audio book. At that point in my career, I really didn't, but I jumped on that bandwagon anyway.
But by doing my breakeven calculations across all my formats, I was pleasantly surprised that large print is actually the second-best mover for me on book one of my thriller series. Audio is dead last. So looking at that data, I'm able to go, yeah, I think audio, maybe I need to not do audio anymore for a while. And so I can figure out how to make it more profitable for me. So that was a $2,000 investment, a chunk upfront that I'm just not seeing the return on yet.
Single-product or Bundle-level Thinking?
[00:12:28] Matty: Yeah, I'm starting to think that I'm going to end up re-titling this, ROI for Authors because what you're talking about, I think it's fascinating and I think that a lot of authors, I won't even generalize, I'll just say for myself, that there are things that I do because I'm thinking of it as a package of offerings, not as very distinct offerings.
So if I have a book, I'm thinking of it as there's the ebook, there's the regular print, there's a large print, I might do hard cover at some point, I haven't delved into that. Some of those things are relatively inexpensive to add on. Like if you've done a regular print book, it's not expensive to add on a large print, you just need to pay your cover designer a little bit extra to make the large print cover and hit the large print button on Vellum if you're using that.
But then audio, it's a great point that I'm still getting to the point in my own financial reporting that I'm going to understand how I'm doing against the money I invested in getting that done, but it is a completely different mindset.
So I'm gathering that you're recommending that people look more granularly at individual products, not chunking it together the way I am, as this is Ann Kinnear Book Five and I'm offering all these different platforms.
[00:13:40] DeAnna: Well, if you stay at the bundle level, the problem that you have is that each piece that makes up that bundle is going to have its own price point and it's going to have its own profit margin. Your ebook may be $2.99, you wouldn't put your paper book, your paperback, or your hard cover, your large print or your audio out at $2.99, right?
So within each bundle, it's important to know what the break-even point is for each of those formats, because you may have one format that you are clearing $3 a unit when you sell one paperback, but for your ebook, you may only be clearing $2. So that paperback's carrying more of the weight, carrying more of the load to cover your costs.
The Profitability of Audio
[00:14:24] DeAnna: And audio is just, yeah. Audio's...
[00:14:29] Matty: So what would have to happen for you to get back into audio? Is it something you think you would ever get back into?
I didn't do myself any favors putting that first audio book out because back then, the first in my series was a historical thriller and the rest of that series is set in modern day. So I did the audio book and then I wound up revamping that series. And so now that audio book is out of sync. But based on the initial reaction to that book, I spent $2,000 in the first year of sales, I think I made $150. And at that point, it's going to take over 13 years for me to earn my money back. That's the payback period for that. And I went, oh my goodness. So I don't know necessarily that right now I want to spend another $2000 or whatever it's going to be to get that book back in line with the rest of the series.
What is a Good Timeframe for Earning Your Money Back?
Let me explore an example there. So let's say I make the investment of $2,000 to get the audio book, and I'm making, let's say $200 a year. So obviously, it's going to take a long time to earn it back, but it's just sitting out there earning money for you. So if you feel confident that you're going to keep getting that $200 a year, then in year 11, you're finally going to be making a profit, and waiting until year 11 isn't fun, but it's out there.
[00:16:19] Matty: Unless the landscape changes, for whatever reason, you have to take that off the market. When you're calculating a product that's going to be out there and continuing to earn you money long after you've made that initial investment, is there a timeframe that you feel like, I really have to earn it back within this time, or it's not a smart business decision?
[00:16:41] DeAnna: In any other industry, I would say, yeah, you'd want to cap that at maybe a year to 18 months, but in the author industry, it's a little bit different. We've got so many dynamics that kind of skew our approach to things. Perma-frees, for example. You can put your first book up for free and you sometimes have to wait a while to be able to see any sell-through.
So it's not that first book that's earning you money, it's the subsequent in series that are earning you money. But a lot of readers, they don't read that first book right away, they don't go buy the next one right away. So the very nature of our business tends to stretch our expected return on investment period.
It'd be nice to be able to say, I can earn this back in six months. A lot of it depends on the genre you're writing in, it depends on the size of your fan base, it depends on the voracity of the readers in that genre. Romance readers in particular are the first group I can think of that tend to devour a series quickly, whereas urban fantasy or sci-fi, maybe not so much.
Merch is Driven by Genre
[00:17:43] DeAnna: Things like that are another reason why I have not actually dipped the toe into the merch pool yet. The merch thing is a whole different animal, and I feel like it's very genre-driven. Scented candles are maybe fabulous for romance readers, but again, urban fantasy, probably not going to be interested in that. So when you get into the merch side of the world, then it becomes, okay, if I spend $500, and I actually did the math on this, I'm so proud of me, I did some stuff ahead of time, so let me just work this example.
So let's say that I'm going to do a custom design pen and it costs me $500 to get a hundred of those things made. If I can sell each pen for seven bucks, that's a $2 profit per pen, which is good. But the other thing I need to look at is, how many of those pens would I actually have to sell to get my initial investment of 500 back?
[00:18:33] DeAnna: And the answer is 72. Once I sell the first 72, the remaining 28 are pure profit. Or if I say, my crowd's going to be more interested in the cool little custom mouse pads, I can get a hundred of those for 600 bucks, but I can sell them for 10. So I've got a certain profit per unit, but it's only going to take me 60 of those, a hundred sold to get my money back, so now the other 40 become pure profit. So it's things like that, that you've got to consider. And again, every bit of that is typically going to be driven by genre.
[00:19:09] Matty: Yeah, I'm realizing that there's kind of an intrinsic difference in perspective of the perspective I've been bringing, and I think probably many other indy authors are, is I'm making the initial investment, I'm putting it out there. I'm, let's just say in general, not touching it again for the entire life of the time that it's making me money. So let's just say I write a book when I'm 20, I put it out there, I never feel the need to redo the cover or get it re-edited or anything. I just put it out there, and for the next 70 years it's earning me money. And so at some point during that 70 years one hopes, I've earned back my initial investment, but it's just out there chugging along.
A similar really kind of thing for merch for me, the approach I was taking, I got the materials I needed to start selling merchandise, and then another thing came up. So it's still out there on Redbubble, but I haven't been doing anything.
But my approach is that I'm making this initial investment of getting the designs and I'm investing my time in loading them to Redbubble and choosing what products I want to feature them on, and so on. And then I'm just letting it run. I'm not doing any distribution; I'm probably limiting the sales I'm going to make because it is more expensive. It's more expensive for a customer to buy from Redbubble, I could probably sell it more cheaply to them and still make a profit if I wanted to take on the distribution.
But it is a completely different mindset that I just hadn't ever thought of.
Risk Tolerance and Risk Capacity
[00:20:33] Matty: I think in some cases, the mindset I described makes sense, but I'm realizing that it's almost like you have to have two visions of this. You have to have that mindset I just described, and then you have to have the mindset you described, which is it's like selling units of a gizmo.
[00:20:48] DeAnna: Yeah, and you've also got to think short-term and long-term. There are things that you can do in the short-term that will give you that temporary boost or that temporary spike, but what's it do for your long term? And a lot of it comes back, there are two phrases or terms in the finance industry that I think are super applicable here. The first one is risk tolerance, which is how much risk that you as an author are comfortable taking on in your business? And the other one is risk capacity, which is this when you're looking at a project or building a possible revenue stream, do I have to take this leap right now to accomplish the goals that I have set for myself?
And if the answer is, I'm not comfortable with this concept, or I really don't have to take this risk right now, then people really need to step back and rethink it. If you can answer no to either one of those questions, then maybe it's not the optimal time to bring that particular facet of being an author into your business.
A hands-on example, I'm going to go back to my audio book. Was I comfortable at the time spending two grand, my very first year as an indy to get that book made? Yeah. At the time I thought that was within my risk tolerance level. Did I absolutely have to do that my first year? Absolutely not. I way overestimated my risk capacity.
[00:22:10] Matty: Yeah, but you were in a position where again, I think that a lot of indy authors are in, where you have a day job. I'm assuming you had a day job at the time you did that. So you had this money, and another episode that I think might be interesting for people to look at is Lessons from Filmmaking for the Indy Author with John Gaspard, which was episode 128, and he was talking about the fact that he's made a number of indy films and that it was always money it didn't matter if he lost. Like he was basically making the movies for the love of making movies. If he lost the money, that kind of sucked, but he was still going to be able to pay the bills. And his friend had used his "bass boat fund." Like otherwise he'd buy a bass boat, but no, he was going to do an indy film anyway. So the calculation is also different if you have that money to play with, and if you lose it, you're kind of like, oh, you know, that was an interesting experiment, versus you're paying the bills with it.
[00:23:02] DeAnna: Yeah, similarly to, I'm going to take a hundred dollars out of my wallet and I'm going to go to the casino. If I'm going to be upset about losing that hundred dollars, I probably don't need to go to the casino. And it's the same mindset.
So for me personally, and of course, obviously, hindsight's 20/20, but for me personally, if I had that to do over again, I would've taken that $2,000 and I would have invested it in different directions than audio. I would have gotten more books edited and formatted because back then, I was on such a shoestring budget that I was doing the editing and the formatting myself.
Now, I will never ever do my own covers. I cannot draw my way out of a paper bag. My spatial orientation is such that I'm just like, no. So that was always in my budget calculations because I'm not capable of doing that justice myself.
But for a lot of authors starting out, we don't have this whole separate pile of money outside of our household budget that we can just throw into the tornado and see where it lands. And so at that point it becomes, you've got to be very picky and choosy about what you choose to spend those dollars to fund.
So looking back, going back, and maybe the audio, maybe I don't have the right narrator, maybe it's just something as simple as, I chose a narrator that whose voice was pleasing to me, but maybe he's not the best audio representation of my work. But to go down that rabbit hole and try to figure out what's wrong and fix it, I got to throw more money down that rabbit hole. And right now, I'm just not prepared to. The numbers don't support me taking another step out on that particular ledge, if that makes sense.
Breakeven Point Calculation
[00:24:37] Matty: Yeah, so what if an author is listening and they're in that scenario where they've had an audio book done, it hasn't earned back the money that they invested in it, and they're trying to make that decision about, they're a big believer in audio and maybe they're reading their reviews of the audio book and people love the story, but they don't like the narrator, and now they're thinking, do they want to get it redone by another narrator? How do they make that decision on a firm accounting basis?
I'm going to circle back to breakeven point calculation, because I think it's super important. And once people start implementing that, it's going to help. If you're going to look at it just from a dollars and cents standpoint, then breakeven calculation is super handy.
[00:25:16] DeAnna: And basically what that is, is you take the total amount that you've spent, and you divide it by your net profit per unit when that thing sells. So for me for audio, I spent $2000 and my average net royalty, and of course, you got to take the average because you're in different marketplaces and different percentages for different storefronts, and blah, blah, blah. But you find what your average rate of return is, your net royalty for that product. Then you divide it into the amount you've spent to make that product, and that'll give you a number.
So in my case, I don't actually know if I ever did the calculation for mine. I spent $2000 and I want to say that each audio book netted me like $3.25. So if I take $2000 and I divide it by $3.25, I would need to sell 616 copies of my audio book to break even on that product. And I said previously that I made about 150 bucks. So if I take my $3.50 and I multiply that by it's my 616, I'd have to make $2,156 in royalty on that. That would be that number of units, 616, times my royalty rate. So I'm a ways off. So if I did 150 already, and I subtract $3.50 yeah, I have another hundred, I have a ways to go.
Cost Per Unit and Various Marketplaces
[00:26:50] Matty: I think that that exercise illustrated a really important thing, and this will illustrate how very, very basic I am in this, is that just understanding how much you're earning from each unit that you sell is an important piece of business information to have.
And I know that friends would get in touch with me when I had a new book come out, they would get in touch with me and say, what's the most profitable platform for you for me to buy this book on? And I never pointed them one way or the other, because I thought, if they buy it at all, I don't want to force them onto a platform that they're not comfortable with just because I'll make an extra 17 cents.
But now I do point people to PayHip because I'm making more, I'm selling the product for the same amount of money, but I'm cutting out the middleman, so I'm making 90, 95%, royalties on each book I sell.
But I also just implemented a magnet for people to sign up for my email newsletters. I'll use this as a little plug that if you sign up for my email newsletter, you get a coupon code for 20% off PayHip, and I have to say, I didn't calculate what that would then do to the profit that I was making beyond just generally thinking about it. But it's a pretty basic piece of business knowledge that I should have about my own products.
[00:28:06] DeAnna: Right. I personally have got a storefront set up on my website, mine is through WooCommerce, and I've got my e-books out there and my paperbacks out there. I've got everything set; I've just not really leveraged it. And for me it's mainly been, do I have a spare Saturday to sit around and get all this stuff lined out and figure out coupon codes and things like that? I need to invest the time.
Assigning a Value to Your Time
That's another thing I want to point out to authors, especially those just getting started on the path. Remember that everything costs you something. It's going to cost you time, it's going to cost you money, or it's going to cost you both. So just as you should have a monetary budget, you also need to have a time budget and you need to assign a value to your time. It can be whatever number you want, just keep it consistent.
So for example, going back to my audio book, that really probably needs to be revamped. Do I have the time in my budget right now to listen to different narrators? Do I have the depth of experience in audio itself? I am not an audio book listener. I prefer to read. So I don't even have a whole lot of exposure on that side of the camera, as it were, as a consumer of audio books.
[00:29:24] DeAnna: So I don't know. I know what voice might sound pleasing to me, and that may be part of the problem with my audio book. I may have chosen a narrator that is running people off. And I think the single best flag that you would get thrown up for something like that is to read the reviews on the book, on the audio book.
Sadly, mine don't have very many, and none of them mentioned the problems with the narrator. So that puts me back in the dark where I'm going to have to dig by hand and try to figure out what's wrong with that audio book.
And that's money I really don't have. I really would rather spend money on other things right now, and I really don't have the time right now. I'd love to clone myself and give them one entire side of myself. It's like you do the business side. I'm going to be over here, making wonderful new content. Unfortunately, my clone machine, the parts are on global back order. I think that that is a great point, the idea of valuing your time. And we talk about this a lot on the podcast, but we've never come up with a number. So I've been thinking about this, because I now have two assistants that help me. I have the person who became the CFO of my publishing company and is taking care of all the financial stuff, basically because it had to be done to consider myself a professional small business owner. And then I'm also paying someone to help me with the production and marketing of my podcast.
[00:30:55] Matty: And there are two considerations. One is that I can't do it myself, so I need to hire somebody. One is I could do it myself, but it's better if I spend my time elsewhere.
And the first one is just, I don't know if that's a financial calculation, but the second is definitely a financial calculation, because if it takes me two hours to edit a podcast transcript, but this person I hire can do it in one and I'm paying them for that hour, how do I assign that number to the value of my time so that I can do that calculation?
[00:31:23] DeAnna: Like I said, there's no hard, fast number. In my view, there are very few drawbacks to being an author. One of them though, is that we do not have a standardized salary guide for this industry.
[00:31:35] Matty: Yeah.
[00:31:36] DeAnna: In my day job as an accountant, I can go out to any number of platforms out on the internet and I can see what the average salary was for an accounting manager in North Texas with an MBA and 20 years’ experience, and I can get those numbers and I can see what the average market rate is. We don't have that for authors, unfortunately.
And the authors that we do hear about, the six and seven-figure authors, that is one sliver of the total author population. For every one of those authors, there's I would venture to guess, tens of thousands of us who are not making six and seven figures. And the people who are open and actually talking about making six and seven figures, a lot of them actually don't fully disclose how much they're spending to make that six and seven figures. So it's a lopsided conversation and there's just not that many of them.
I would say a good rule of thumb is, okay, so as an accounting manager in my industry, I make on average $40 to $45 an hour doing accounting stuff. So if I just say, I'm going to take my $40 an hour that I make in my day job, and I'm just going to parse that over and I'm going to plug that in as that's my rate per hour for everything I do on the author business side. Because I really don't have anything else I can go on.
Obviously, we don't want to devalue ourselves, the idea of paying yourself $5 an hour to do this is quite frankly ridiculous, because when you add up all the hats you're wearing and all the different things you're doing, because you've got to account for all your time, not just the, I'm putting words on paper. You're running a business, and so it becomes not just writing the book, marketing the book, talking back and forth with your editor or your formatter about the book, checking your numbers, logging onto ScribeCount, pulling down your numbers for the week or for the month, for the year. You need to do right by yourself as far as assigning a value, but beyond that, it becomes subjective. I hate to tell people that there's not one magic number you need to plug in, but unfortunately, somebody who spends 10 hours a week doing this is going to be a lot different from somebody that's spending 50 hours a week to do this.
[00:33:37] Matty: And I think that when I'm valuing my time, when I do that calculation about, do I want to do it myself or do I want to pay someone else to do it? I'm not doing it on a strictly numerical basis because the person who helps me, for example, create the daily clips for the podcast, could also create graphics for me for Facebook ads, for example. But I don't know how to, nor do I want to learn how to do the detailed clip creation technical work that he does, but I like doing the Facebook ad images. And so I'm like, yeah, I could pay someone to do that, but I actually enjoy doing it. So even if it would be more efficient, I guess at some point you get to factor in the enjoyable nature of it, that you
shouldn't give up something that you enjoy doing merely because you can get somebody to do it for a lower number than the number that you're assigning yourself as your value of your time.
[00:34:30] DeAnna: Yeah. For example, a lot of people swear by being on Twitter or TikTok or Pinterest. I have no interest in doing any of that. Social media, except for a very select few Facebook groups, quite frankly, makes me want to break out in hives. I just don't do well.
And so if I were to bring a PA into my world, that is the first piece that I would say, you know what, I need you to go play on Twitter and TikTok for me, just make me look good. Because I don't have the time to deal with it, I also don't have the mental capacity to deal with it as far as from a patience standpoint.
There are other things, cost per click ads. I don't do them. I got fed up with them, not just from a, you can't really control your cost standpoint, but they are so much of a time suck.
[00:35:14] DeAnna: Because you can't just set those ads and forget them. You've got to constantly review the results. How many clicks, how many impressions? Or maybe I run A/B testing, I don't have time to do any of that. I don't have the patience to do any of that. And so for me, if I were to put a toe back into the cost per click world, I would find somebody who's really good and enjoys doing that stuff, because that drives me crazy. Above and beyond the whole, oh, my God, I spent 300 bucks this month and I didn't mean to, because that ad got out of control. Above and beyond the monetary point, it's psychically draining for me to try to deal with that. So if I can shove that off and save myself that stress, that's worth its weight in gold, not to mention, that's time I can spend plotting out my next scene or self-editing my next chapter, or reaching out to my cover designer and saying, hey, I really like this, can we make the font just a little bit bigger? Anything else besides dealing with TikTok and Twitter and cost per click ads. No, thank you. I'm good.
Do What Frees You Up
[00:36:14] Matty: Yeah, I think that it comes down to, what are the things that only you can do and writing your books is probably that. And so I'm always trying to readjust my priorities and readjust my assessment of value based on what's going to give me more time to write.
And also what frees you up. Because at the end of it, we're all trying to be profitable, right? We're putting out stories that we enjoy writing for people who enjoy reading them. But at the end of the day, it is a business. And so if you can maximize your time budget and your money budget into getting more revenue streams actively working for you, the better off you're going to be.
[00:36:50] DeAnna: So for me, going back to cost per click ads, does it help bring attention to my books? Yes. Is it the best use of my time personally? Not really. What's best for me is getting another book in series out because I've got readers, they've already pre-ordered and they're waiting for book seven in my series. So my time is better spent focusing on getting that seventh book out and then starting work on book eight, rather than messing with cost per click ads and seeing how well they are or aren't doing. Better off shoving that to somebody else.
[00:37:20] Matty: Well, we did take this way down the return on investment, more so than strictly accounting for authors, but I just had to go there because I think that's so interesting.
Accounting Tools & Apps for Authors
[00:37:29] Matty: But I did want to wrap up by asking you if you think there are tools, that if someone is listening to this and they're, they like me are saying like, oh, per unit profit, that would be a good thing to know. If there were basic tools or basic apps that you would recommend an author use in order to try to get their hands around this, what would be one or two that you would recommend people look into?
I get asked a lot of times, what kind of accounting software should I use? And the answer is, unless you're doing high four figures a month, I would say that you really don't need accounting software. You can track what you need to track in Excel, or in Numbers if you're a Mac user. But if you really want to be able to get into the drill-down stuff, past what we've talked about, because you can do everything that we've talked about today, you can actually do in Excel. You can build a formula; you plug in your numbers, and it tells you what you need to know.
[00:38:26] DeAnna: But if you decide that you just have to have accounting software, I've used 15 different accounting softwares in my day job career, and so I can tell you that comparatively, across those 15 that I've used, the best bang for your buck, for somebody who does not know accounting, is QuickBooks. It's got the least amount of learning curve and it tends to be the most cost-effective, not just monetarily, but from a time standpoint. There are a lot of other accounting softwares out there, but you need to really be pretty steeped in accounting concepts to be able to get the best use out of them. And that is a learning curve that can take some time, time that could be spent writing or marketing.
[00:39:07] Matty: I think the other plug I'll put in for QuickBooks or any sort of commonly used platform like that is, it'll be easier to find help. That's a rule I apply to any tool I get is, I'm willing to pay a little bit more to get one that has a wide variety of resources that I can tap into. So Facebook groups or if people on Reedsy or Upwork, can I go on there and find people with expertise in that particular thing? I use QuickBooks and it's been good for me because the person that was doing my finances as something that she wanted to learn and my tax guy, I can just give him access and then he can pull everything through QuickBooks. But just something for people to factor in, like how easy will it be to get help with the platform you're picking.
And QuickBooks tends to be very forgiving. In a lot of softwares, once you close a financial period, it's done, you cannot go back and fix things. Within QuickBooks, as long as you're careful, you can make adjustments, if you need to.
ScribeCount
[00:40:08] DeAnna: The other tool that I would really, really recommend whether somebody is wide or exclusive to one retailer, is ScribeCount, because past a certain point, it just becomes more time-effective to be able to go onto ScribeCount and have them reach out to your storefronts and pull all your sales and all your sales data in for you.
ScribeCount is also making more and more strides every day. They're in the process, I think, or just launched ad tracking, which helps you see your spend. They have a window in which you can actually put in your expenses for a year as you go. And all of their reporting and stuff that they do, you can actually download into Excel or as a CSV file. So that also becomes very handy. But bang for buck, I would recommend ScribeCount, even if you're exclusive to KU.
[00:40:57] Matty: Yeah, I just, I was looking up, episode 117 was Tracking Sales Data and How ScribeCount Can Help with Phillipa Werner, so you can check that out.
Well, we hardly hit on the actual accounting nuts and bolts at all, but I still had a great time, and I would tell people that they should just go buy "Accounting for Authors" by you and Mark Leslie Lefebvre if they want to learn some of these detail that we've been referencing but haven't really gotten into.
So DeAnna, this was so helpful and has really made me rethink how I'm approaching some of the finances for my own business. Thank you so much, and please let people know where they can go to find out more about you and all you do online.
[00:41:34] DeAnna: Oh, the best place is my website. That's 2ofHarts.com. I've got my fiction stuff out there. My "Accounting for Authors" stuff is actually a private wall or page on that website. If you get the "Accounting for Authors" book, if memory serves, we have a link to my Welcome to Accounting for Authors page. I think the other place people could go where I know there's been some talk is the Wide for the Win Facebook group, which is a great resource. And so if you're just looking for an entree to find out more about "Accounting for Authors," and then finding your way to, not only just going to the retail sites and purchasing it there, but some more background information, I can recommend Wide for the Win as a great resource.
Yeah, and the "Accounting for Authors" book is, we did publish that wide, so it's across all retailers. It is available in paperback and ebook. We've talked about audio, but with him being in Canada and me being in Texas, that might get a little interesting trying to keep the two voices that it's two distinct voices. But we're mulling that over as we speak.
I'll be curious to hear what the profitability calculation is when you decide to do that or not.
You know I'm going to. That'll be one of the first things that I do after we figure out, you're here and I'm there, and how do we get a cohesive audio file built?
[00:42:59] Matty: Yeah. Great. Well, DeAnna, thank you so much.
[00:43:02] DeAnna: You're welcome. It was fun, thanks.
[00:00:06] DeAnna: Good morning, I'm doing well. How are you? Thanks for having me on.
It is my pleasure. To give our listeners and viewers a little bit of background on you, DF Hart holds an MBA with accounting concentration and has been working in accounting for over 25 years. When she's not planning on how best to use her day career background to help her fellow authors, she's happily penning mysteries and thrillers as DF Hart, and contemporary and suspenseful romance as Faith Hart. And DeAnna lives in Texas.
[00:00:30] Matty: And I asked DeAnna to come on the podcast to talk about accounting for authors, which is also the title of a book she just coauthored with Mark Leslie Lefebvre.
And I wanted to start out, before we dive into the details of accounting for authors, I also coauthored a book with Mark, "Taking the Short Tack," about short fiction. And if anybody wants to hear about that, that's way back in episode 14, Collaborating on Taking the Short Tack.
DeAnna's Collaboration with Mark Lefebvre
[00:00:54] Matty: And so I was curious, DeAnna, because I think people's collaboration approaches differ a lot from person to person, but even when there's a common theme, a common element, like Mark, I think that the process can be different.
So I'm very curious about, first of all, how did you come to write the book with Mark? And then what process did you use for your collaboration?
I am a member of a couple of Facebook groups, among them is Wide for the Win, which is a wide-focused Facebook group for authors. And as I carried a little bit further down my author career and met more and interacted with more and more people, I realized that I think a lot of people, when they get started, they just say, I want to publish a book and they don't think about the business aspects.
[00:01:38] DeAnna: And you have to, but the moment you put a price tag on that book, your book baby, you become a self-published author, but you also become a business owner. And so I thought, maybe I can leverage some of the knowledge and experience that it's taken me 20, 25, 26 years now to obtain, and share that with people and to help them grow their author businesses and help them be smart and efficient with their resources.
And the first person I thought of to be honest was Mark to collaborate with, because he does have several strong titles out already, as far as help and guidance for authors. He's already got an established voice and presence in the indy author community. And I thought, well, you know, I’ll just reach out to him and see if he's even interested in this idea and what he thinks about this idea, because I trust and value his opinion.
And he was like, oh yes, let's do this. And I was like, yay. So, he said, I'm basically going to get out of your way and let you write down all the accounting facets, and then I will go back in and add either personal anecdotes or examples or tying them into maybe some non-accounting facets of our author world. And that's how we did it. I think it turned out pretty well.
[00:02:47] Matty: Yeah, I think that approach, especially with a topic like accounting, and I think this is something that I'm sure we're going to hit this, that people who are in the creative world, writing fiction or nonfiction, may find alarming. And one thing I really like about Accounting for Authors is that idea that Mark is sort of acting as the Greek chorus. He's the every man, he's representing us, as he's saying, I know that might've sounded a little alarming, it's really not, and bear with us and it's all going to become clearer. So I thought that was a really nice pairing there.
And the other thing I really like is the fact that you were both bringing something to the table and both making it attractive for the other person. So you're tapping into Mark's reach and reputation and community-building. And then in return, you were doing a lot of the work. I think that's a perfectly great trade off, that you were going to him with an offer, not an ask and he brought something as well. So I think that's very cool.
So it sounds like you wrote everything, more or less. I know you probably went back and forth, and then he responded to it, right? It wasn't like you were working together on the same content.
[00:03:52] DeAnna: Right, right. I had a certain blueprint, a certain road that I wanted to go down as far as order of presentation, things that I thought people really need to know, even on a basic level, to get them more comfortable.
And then Mark basically captured his thoughts and reactions to that data. And so it is a little bit of a back and forth. But I think it flows and moves really well.
A lot of times with collaborations, and Mark and I talked about this, you try to combine the two different author voices into one voice, but we opted in this book to keep them separated. And I think it worked out really well. It almost becomes like I'm sitting down having dinner with a colleague and I'm explaining concepts to them over dinner and getting their reactions and their thoughts and their feedback.
[00:04:38] Matty: I really liked that too. And you even labelled various chapters with your initials, so it's clear who's speaking at each point, and that was different than what Mark and I did. Mark and I combined the material. He gave me the parts, the information that he was the expert on, and I was largely the person who tried to do that melding to make it sound like one voice, but it is a lot of work. And I think the approach that you took was both effective and efficient, you know, efficient for you and Mark and also effective for the reader. I just love hearing about how different people approach that kind of effort.
[00:05:09] DeAnna: That's my first ever collaboration as well.
[00:05:12] Matty: Yeah, well, you started with a good one.
[00:05:14] DeAnna: I did, I really did, yeah. Mark is a delight. I would work with him anytime.
[00:05:19] Matty: Yes, I think that whenever I hear anyone mention Mark, it's always "the lovely Mark Leslie Lefebvre." So I feel like lovely, it's almost like his unofficial first name.
[00:05:27] DeAnna: Right.
[00:05:29] Matty: So let's dive into Accounting for Authors. And I wanted to start out asking you, when you talk to authors about accounting topics, what is the biggest aha that you see them, the biggest insight that you see them having as maybe you demystify some things for them?
Don't Gloss Over Costs of Doing Business
[00:05:46] DeAnna: I think the biggest insight in the reactions that we've received so far are, people get so focused on, I've got to track my costs to publish the book, that they don't stop and consider that you've got costs that go on, whether you publish one book or 5,000, and you really need to account for those, you really need to track those and include those in your calculations when you're tracking your income and expenses.
A glaring example is cost per click ads. If you do marketing and you do cost per click ads, those can get out of hand very quickly. But there are other things that people just might not think about. Their monthly subscription to BookFunnel or to Story Origin. We have money that goes out that's not directly tied to production of any one book that people kind of gloss over and a lot of people just don't think about them, but they definitely impact your bottom line. And so they need to be grouped into your mindset when you're doing this. It's not just, I'm going to put out five books this year. I've also got any subscription costs, the cost to maintain my website, I'm a member of ALLi, so I've got that cost every year. You need to really account for what are considered overhead or administrative or costs of doing business costs when you're looking at your financials, because those things go straight to your bottom line, and they help make it better or they help make it worse.
Allocate Overhead Costs into Your Titles
[00:07:09] Matty: What do you recommend people treat things that are things they would be doing anyway even if they weren't trying to make a business of indy authorship? So for example, let's say I'm a member of Sisters in Crime because I love to read crime thrillers and I like being part of that community as a reader, but it's also benefiting me as an author for my business. Any thought about those things that are kind of in a gray area?
[00:07:35] DeAnna: What I like to do is something called cost allocation. And what that means is that I take those costs that are not directly tied to production of a title, and I split them out across all my titles. So if I have an ALLi membership for $120 a year, and I have 12 titles, then I would assign $10 worth of that cost across my titles.
And that becomes handy later when I'm trying to figure out what is called break-even point. And that's basically where you're trying to get to how many units of a title do I need to sell for that title to not only pay for itself but help cover some of my overhead costs. And if you bake that overhead stuff in through cost allocation, then you've got one calculation and you're done.
You can actually even go further in. For example, my first in series in my mystery thriller set, I've got an ebook, I've got a large print, I've got a paperback, and I've got an audio book. And so if I have $100 worth of overhead costs that I've allocated to that title, I can split it down even further and I can assign $25 of that $100 to the ebook and to the paperback and to the large print and to the audio book. So you can actually drill down to a pretty granular level. So then when you run break-even point between the different formats, you're more easily able to see, oh, my large print's doing better than I thought. Not only is it paying for itself, but it's carrying its fair share of the overhead costs.
[00:09:19] Matty: I feel like part of my role as the interviewer on The Indy Author is to be the person who's the bad representative of whatever I'm talking about. So for example, in episode 129, I just spoke with Mike Kuczala about the importance of movement for creativity and how a sedentary lifestyle undermines not only our health but our creativity. And I spent the whole time fessing up about how basically sedentary my life is.
And the exact same thing is true on the finance side. I did my best for many years to keep on top of the finances of my indy author business. And I'm just not good at it. Like I sort of wished that in high school or college, I had taken an accounting course because I think there are basic principles that I just haven't completely internalized.
And when I finally was able to hire an assistant, I hired an assistant to take care of the finances for me. But even now that I have that person, who's more of a financial expert, I haven't even been thinking about understanding the profitability or lack thereof of an individual book. In fact, the approach I'm taking so far is that I'm looking at three big profit centers or expense centers, depending: my fiction work, my non-fiction work, and merchandising.
Any Benefit on Starting at a Macro Accounting Level?
[00:10:30] Matty: So is there a benefit to at least starting out at that very, very mega level or do you really not get the benefit that you should from good accounting practices unless you drill down to an individual product or book?
[00:10:43] DeAnna: No, no, no. You can do it at an overarching level by product type. And here's where I'm coming from, most of my 25, 26 years doing this has been in manufacturing backgrounds where people are actually producing tangible goods for resale, for sale. So I'm taking that manufacturing accounting methodology and applying it to the author world, because although we don't make tangible products, as in the case of e-books, we are still producing something. And when you get into that mindset, it becomes a lot easier to apply some things, apply some concepts.
The methodology will not change, whether we're talking about an ebook or a paperback or a large print or an audio book or a translation, whether we're talking about fiction or nonfiction, whether we're talking about services or merchandising, the basic concept is still going to apply. And if you can take a concept and you can apply it across all facets of your business, your data results are going to be more consistent. And what that does, is that enables you to look for patterns.
[00:11:49] DeAnna: Like for me, in my first year being an indy author, everybody was, oh, you need an audio book, you need an audio book. At that point in my career, I really didn't, but I jumped on that bandwagon anyway.
But by doing my breakeven calculations across all my formats, I was pleasantly surprised that large print is actually the second-best mover for me on book one of my thriller series. Audio is dead last. So looking at that data, I'm able to go, yeah, I think audio, maybe I need to not do audio anymore for a while. And so I can figure out how to make it more profitable for me. So that was a $2,000 investment, a chunk upfront that I'm just not seeing the return on yet.
Single-product or Bundle-level Thinking?
[00:12:28] Matty: Yeah, I'm starting to think that I'm going to end up re-titling this, ROI for Authors because what you're talking about, I think it's fascinating and I think that a lot of authors, I won't even generalize, I'll just say for myself, that there are things that I do because I'm thinking of it as a package of offerings, not as very distinct offerings.
So if I have a book, I'm thinking of it as there's the ebook, there's the regular print, there's a large print, I might do hard cover at some point, I haven't delved into that. Some of those things are relatively inexpensive to add on. Like if you've done a regular print book, it's not expensive to add on a large print, you just need to pay your cover designer a little bit extra to make the large print cover and hit the large print button on Vellum if you're using that.
But then audio, it's a great point that I'm still getting to the point in my own financial reporting that I'm going to understand how I'm doing against the money I invested in getting that done, but it is a completely different mindset.
So I'm gathering that you're recommending that people look more granularly at individual products, not chunking it together the way I am, as this is Ann Kinnear Book Five and I'm offering all these different platforms.
[00:13:40] DeAnna: Well, if you stay at the bundle level, the problem that you have is that each piece that makes up that bundle is going to have its own price point and it's going to have its own profit margin. Your ebook may be $2.99, you wouldn't put your paper book, your paperback, or your hard cover, your large print or your audio out at $2.99, right?
So within each bundle, it's important to know what the break-even point is for each of those formats, because you may have one format that you are clearing $3 a unit when you sell one paperback, but for your ebook, you may only be clearing $2. So that paperback's carrying more of the weight, carrying more of the load to cover your costs.
The Profitability of Audio
[00:14:24] DeAnna: And audio is just, yeah. Audio's...
[00:14:29] Matty: So what would have to happen for you to get back into audio? Is it something you think you would ever get back into?
I didn't do myself any favors putting that first audio book out because back then, the first in my series was a historical thriller and the rest of that series is set in modern day. So I did the audio book and then I wound up revamping that series. And so now that audio book is out of sync. But based on the initial reaction to that book, I spent $2,000 in the first year of sales, I think I made $150. And at that point, it's going to take over 13 years for me to earn my money back. That's the payback period for that. And I went, oh my goodness. So I don't know necessarily that right now I want to spend another $2000 or whatever it's going to be to get that book back in line with the rest of the series.
What is a Good Timeframe for Earning Your Money Back?
Let me explore an example there. So let's say I make the investment of $2,000 to get the audio book, and I'm making, let's say $200 a year. So obviously, it's going to take a long time to earn it back, but it's just sitting out there earning money for you. So if you feel confident that you're going to keep getting that $200 a year, then in year 11, you're finally going to be making a profit, and waiting until year 11 isn't fun, but it's out there.
[00:16:19] Matty: Unless the landscape changes, for whatever reason, you have to take that off the market. When you're calculating a product that's going to be out there and continuing to earn you money long after you've made that initial investment, is there a timeframe that you feel like, I really have to earn it back within this time, or it's not a smart business decision?
[00:16:41] DeAnna: In any other industry, I would say, yeah, you'd want to cap that at maybe a year to 18 months, but in the author industry, it's a little bit different. We've got so many dynamics that kind of skew our approach to things. Perma-frees, for example. You can put your first book up for free and you sometimes have to wait a while to be able to see any sell-through.
So it's not that first book that's earning you money, it's the subsequent in series that are earning you money. But a lot of readers, they don't read that first book right away, they don't go buy the next one right away. So the very nature of our business tends to stretch our expected return on investment period.
It'd be nice to be able to say, I can earn this back in six months. A lot of it depends on the genre you're writing in, it depends on the size of your fan base, it depends on the voracity of the readers in that genre. Romance readers in particular are the first group I can think of that tend to devour a series quickly, whereas urban fantasy or sci-fi, maybe not so much.
Merch is Driven by Genre
[00:17:43] DeAnna: Things like that are another reason why I have not actually dipped the toe into the merch pool yet. The merch thing is a whole different animal, and I feel like it's very genre-driven. Scented candles are maybe fabulous for romance readers, but again, urban fantasy, probably not going to be interested in that. So when you get into the merch side of the world, then it becomes, okay, if I spend $500, and I actually did the math on this, I'm so proud of me, I did some stuff ahead of time, so let me just work this example.
So let's say that I'm going to do a custom design pen and it costs me $500 to get a hundred of those things made. If I can sell each pen for seven bucks, that's a $2 profit per pen, which is good. But the other thing I need to look at is, how many of those pens would I actually have to sell to get my initial investment of 500 back?
[00:18:33] DeAnna: And the answer is 72. Once I sell the first 72, the remaining 28 are pure profit. Or if I say, my crowd's going to be more interested in the cool little custom mouse pads, I can get a hundred of those for 600 bucks, but I can sell them for 10. So I've got a certain profit per unit, but it's only going to take me 60 of those, a hundred sold to get my money back, so now the other 40 become pure profit. So it's things like that, that you've got to consider. And again, every bit of that is typically going to be driven by genre.
[00:19:09] Matty: Yeah, I'm realizing that there's kind of an intrinsic difference in perspective of the perspective I've been bringing, and I think probably many other indy authors are, is I'm making the initial investment, I'm putting it out there. I'm, let's just say in general, not touching it again for the entire life of the time that it's making me money. So let's just say I write a book when I'm 20, I put it out there, I never feel the need to redo the cover or get it re-edited or anything. I just put it out there, and for the next 70 years it's earning me money. And so at some point during that 70 years one hopes, I've earned back my initial investment, but it's just out there chugging along.
A similar really kind of thing for merch for me, the approach I was taking, I got the materials I needed to start selling merchandise, and then another thing came up. So it's still out there on Redbubble, but I haven't been doing anything.
But my approach is that I'm making this initial investment of getting the designs and I'm investing my time in loading them to Redbubble and choosing what products I want to feature them on, and so on. And then I'm just letting it run. I'm not doing any distribution; I'm probably limiting the sales I'm going to make because it is more expensive. It's more expensive for a customer to buy from Redbubble, I could probably sell it more cheaply to them and still make a profit if I wanted to take on the distribution.
But it is a completely different mindset that I just hadn't ever thought of.
Risk Tolerance and Risk Capacity
[00:20:33] Matty: I think in some cases, the mindset I described makes sense, but I'm realizing that it's almost like you have to have two visions of this. You have to have that mindset I just described, and then you have to have the mindset you described, which is it's like selling units of a gizmo.
[00:20:48] DeAnna: Yeah, and you've also got to think short-term and long-term. There are things that you can do in the short-term that will give you that temporary boost or that temporary spike, but what's it do for your long term? And a lot of it comes back, there are two phrases or terms in the finance industry that I think are super applicable here. The first one is risk tolerance, which is how much risk that you as an author are comfortable taking on in your business? And the other one is risk capacity, which is this when you're looking at a project or building a possible revenue stream, do I have to take this leap right now to accomplish the goals that I have set for myself?
And if the answer is, I'm not comfortable with this concept, or I really don't have to take this risk right now, then people really need to step back and rethink it. If you can answer no to either one of those questions, then maybe it's not the optimal time to bring that particular facet of being an author into your business.
A hands-on example, I'm going to go back to my audio book. Was I comfortable at the time spending two grand, my very first year as an indy to get that book made? Yeah. At the time I thought that was within my risk tolerance level. Did I absolutely have to do that my first year? Absolutely not. I way overestimated my risk capacity.
[00:22:10] Matty: Yeah, but you were in a position where again, I think that a lot of indy authors are in, where you have a day job. I'm assuming you had a day job at the time you did that. So you had this money, and another episode that I think might be interesting for people to look at is Lessons from Filmmaking for the Indy Author with John Gaspard, which was episode 128, and he was talking about the fact that he's made a number of indy films and that it was always money it didn't matter if he lost. Like he was basically making the movies for the love of making movies. If he lost the money, that kind of sucked, but he was still going to be able to pay the bills. And his friend had used his "bass boat fund." Like otherwise he'd buy a bass boat, but no, he was going to do an indy film anyway. So the calculation is also different if you have that money to play with, and if you lose it, you're kind of like, oh, you know, that was an interesting experiment, versus you're paying the bills with it.
[00:23:02] DeAnna: Yeah, similarly to, I'm going to take a hundred dollars out of my wallet and I'm going to go to the casino. If I'm going to be upset about losing that hundred dollars, I probably don't need to go to the casino. And it's the same mindset.
So for me personally, and of course, obviously, hindsight's 20/20, but for me personally, if I had that to do over again, I would've taken that $2,000 and I would have invested it in different directions than audio. I would have gotten more books edited and formatted because back then, I was on such a shoestring budget that I was doing the editing and the formatting myself.
Now, I will never ever do my own covers. I cannot draw my way out of a paper bag. My spatial orientation is such that I'm just like, no. So that was always in my budget calculations because I'm not capable of doing that justice myself.
But for a lot of authors starting out, we don't have this whole separate pile of money outside of our household budget that we can just throw into the tornado and see where it lands. And so at that point it becomes, you've got to be very picky and choosy about what you choose to spend those dollars to fund.
So looking back, going back, and maybe the audio, maybe I don't have the right narrator, maybe it's just something as simple as, I chose a narrator that whose voice was pleasing to me, but maybe he's not the best audio representation of my work. But to go down that rabbit hole and try to figure out what's wrong and fix it, I got to throw more money down that rabbit hole. And right now, I'm just not prepared to. The numbers don't support me taking another step out on that particular ledge, if that makes sense.
Breakeven Point Calculation
[00:24:37] Matty: Yeah, so what if an author is listening and they're in that scenario where they've had an audio book done, it hasn't earned back the money that they invested in it, and they're trying to make that decision about, they're a big believer in audio and maybe they're reading their reviews of the audio book and people love the story, but they don't like the narrator, and now they're thinking, do they want to get it redone by another narrator? How do they make that decision on a firm accounting basis?
I'm going to circle back to breakeven point calculation, because I think it's super important. And once people start implementing that, it's going to help. If you're going to look at it just from a dollars and cents standpoint, then breakeven calculation is super handy.
[00:25:16] DeAnna: And basically what that is, is you take the total amount that you've spent, and you divide it by your net profit per unit when that thing sells. So for me for audio, I spent $2000 and my average net royalty, and of course, you got to take the average because you're in different marketplaces and different percentages for different storefronts, and blah, blah, blah. But you find what your average rate of return is, your net royalty for that product. Then you divide it into the amount you've spent to make that product, and that'll give you a number.
So in my case, I don't actually know if I ever did the calculation for mine. I spent $2000 and I want to say that each audio book netted me like $3.25. So if I take $2000 and I divide it by $3.25, I would need to sell 616 copies of my audio book to break even on that product. And I said previously that I made about 150 bucks. So if I take my $3.50 and I multiply that by it's my 616, I'd have to make $2,156 in royalty on that. That would be that number of units, 616, times my royalty rate. So I'm a ways off. So if I did 150 already, and I subtract $3.50 yeah, I have another hundred, I have a ways to go.
Cost Per Unit and Various Marketplaces
[00:26:50] Matty: I think that that exercise illustrated a really important thing, and this will illustrate how very, very basic I am in this, is that just understanding how much you're earning from each unit that you sell is an important piece of business information to have.
And I know that friends would get in touch with me when I had a new book come out, they would get in touch with me and say, what's the most profitable platform for you for me to buy this book on? And I never pointed them one way or the other, because I thought, if they buy it at all, I don't want to force them onto a platform that they're not comfortable with just because I'll make an extra 17 cents.
But now I do point people to PayHip because I'm making more, I'm selling the product for the same amount of money, but I'm cutting out the middleman, so I'm making 90, 95%, royalties on each book I sell.
But I also just implemented a magnet for people to sign up for my email newsletters. I'll use this as a little plug that if you sign up for my email newsletter, you get a coupon code for 20% off PayHip, and I have to say, I didn't calculate what that would then do to the profit that I was making beyond just generally thinking about it. But it's a pretty basic piece of business knowledge that I should have about my own products.
[00:28:06] DeAnna: Right. I personally have got a storefront set up on my website, mine is through WooCommerce, and I've got my e-books out there and my paperbacks out there. I've got everything set; I've just not really leveraged it. And for me it's mainly been, do I have a spare Saturday to sit around and get all this stuff lined out and figure out coupon codes and things like that? I need to invest the time.
Assigning a Value to Your Time
That's another thing I want to point out to authors, especially those just getting started on the path. Remember that everything costs you something. It's going to cost you time, it's going to cost you money, or it's going to cost you both. So just as you should have a monetary budget, you also need to have a time budget and you need to assign a value to your time. It can be whatever number you want, just keep it consistent.
So for example, going back to my audio book, that really probably needs to be revamped. Do I have the time in my budget right now to listen to different narrators? Do I have the depth of experience in audio itself? I am not an audio book listener. I prefer to read. So I don't even have a whole lot of exposure on that side of the camera, as it were, as a consumer of audio books.
[00:29:24] DeAnna: So I don't know. I know what voice might sound pleasing to me, and that may be part of the problem with my audio book. I may have chosen a narrator that is running people off. And I think the single best flag that you would get thrown up for something like that is to read the reviews on the book, on the audio book.
Sadly, mine don't have very many, and none of them mentioned the problems with the narrator. So that puts me back in the dark where I'm going to have to dig by hand and try to figure out what's wrong with that audio book.
And that's money I really don't have. I really would rather spend money on other things right now, and I really don't have the time right now. I'd love to clone myself and give them one entire side of myself. It's like you do the business side. I'm going to be over here, making wonderful new content. Unfortunately, my clone machine, the parts are on global back order. I think that that is a great point, the idea of valuing your time. And we talk about this a lot on the podcast, but we've never come up with a number. So I've been thinking about this, because I now have two assistants that help me. I have the person who became the CFO of my publishing company and is taking care of all the financial stuff, basically because it had to be done to consider myself a professional small business owner. And then I'm also paying someone to help me with the production and marketing of my podcast.
[00:30:55] Matty: And there are two considerations. One is that I can't do it myself, so I need to hire somebody. One is I could do it myself, but it's better if I spend my time elsewhere.
And the first one is just, I don't know if that's a financial calculation, but the second is definitely a financial calculation, because if it takes me two hours to edit a podcast transcript, but this person I hire can do it in one and I'm paying them for that hour, how do I assign that number to the value of my time so that I can do that calculation?
[00:31:23] DeAnna: Like I said, there's no hard, fast number. In my view, there are very few drawbacks to being an author. One of them though, is that we do not have a standardized salary guide for this industry.
[00:31:35] Matty: Yeah.
[00:31:36] DeAnna: In my day job as an accountant, I can go out to any number of platforms out on the internet and I can see what the average salary was for an accounting manager in North Texas with an MBA and 20 years’ experience, and I can get those numbers and I can see what the average market rate is. We don't have that for authors, unfortunately.
And the authors that we do hear about, the six and seven-figure authors, that is one sliver of the total author population. For every one of those authors, there's I would venture to guess, tens of thousands of us who are not making six and seven figures. And the people who are open and actually talking about making six and seven figures, a lot of them actually don't fully disclose how much they're spending to make that six and seven figures. So it's a lopsided conversation and there's just not that many of them.
I would say a good rule of thumb is, okay, so as an accounting manager in my industry, I make on average $40 to $45 an hour doing accounting stuff. So if I just say, I'm going to take my $40 an hour that I make in my day job, and I'm just going to parse that over and I'm going to plug that in as that's my rate per hour for everything I do on the author business side. Because I really don't have anything else I can go on.
Obviously, we don't want to devalue ourselves, the idea of paying yourself $5 an hour to do this is quite frankly ridiculous, because when you add up all the hats you're wearing and all the different things you're doing, because you've got to account for all your time, not just the, I'm putting words on paper. You're running a business, and so it becomes not just writing the book, marketing the book, talking back and forth with your editor or your formatter about the book, checking your numbers, logging onto ScribeCount, pulling down your numbers for the week or for the month, for the year. You need to do right by yourself as far as assigning a value, but beyond that, it becomes subjective. I hate to tell people that there's not one magic number you need to plug in, but unfortunately, somebody who spends 10 hours a week doing this is going to be a lot different from somebody that's spending 50 hours a week to do this.
[00:33:37] Matty: And I think that when I'm valuing my time, when I do that calculation about, do I want to do it myself or do I want to pay someone else to do it? I'm not doing it on a strictly numerical basis because the person who helps me, for example, create the daily clips for the podcast, could also create graphics for me for Facebook ads, for example. But I don't know how to, nor do I want to learn how to do the detailed clip creation technical work that he does, but I like doing the Facebook ad images. And so I'm like, yeah, I could pay someone to do that, but I actually enjoy doing it. So even if it would be more efficient, I guess at some point you get to factor in the enjoyable nature of it, that you
shouldn't give up something that you enjoy doing merely because you can get somebody to do it for a lower number than the number that you're assigning yourself as your value of your time.
[00:34:30] DeAnna: Yeah. For example, a lot of people swear by being on Twitter or TikTok or Pinterest. I have no interest in doing any of that. Social media, except for a very select few Facebook groups, quite frankly, makes me want to break out in hives. I just don't do well.
And so if I were to bring a PA into my world, that is the first piece that I would say, you know what, I need you to go play on Twitter and TikTok for me, just make me look good. Because I don't have the time to deal with it, I also don't have the mental capacity to deal with it as far as from a patience standpoint.
There are other things, cost per click ads. I don't do them. I got fed up with them, not just from a, you can't really control your cost standpoint, but they are so much of a time suck.
[00:35:14] DeAnna: Because you can't just set those ads and forget them. You've got to constantly review the results. How many clicks, how many impressions? Or maybe I run A/B testing, I don't have time to do any of that. I don't have the patience to do any of that. And so for me, if I were to put a toe back into the cost per click world, I would find somebody who's really good and enjoys doing that stuff, because that drives me crazy. Above and beyond the whole, oh, my God, I spent 300 bucks this month and I didn't mean to, because that ad got out of control. Above and beyond the monetary point, it's psychically draining for me to try to deal with that. So if I can shove that off and save myself that stress, that's worth its weight in gold, not to mention, that's time I can spend plotting out my next scene or self-editing my next chapter, or reaching out to my cover designer and saying, hey, I really like this, can we make the font just a little bit bigger? Anything else besides dealing with TikTok and Twitter and cost per click ads. No, thank you. I'm good.
Do What Frees You Up
[00:36:14] Matty: Yeah, I think that it comes down to, what are the things that only you can do and writing your books is probably that. And so I'm always trying to readjust my priorities and readjust my assessment of value based on what's going to give me more time to write.
And also what frees you up. Because at the end of it, we're all trying to be profitable, right? We're putting out stories that we enjoy writing for people who enjoy reading them. But at the end of the day, it is a business. And so if you can maximize your time budget and your money budget into getting more revenue streams actively working for you, the better off you're going to be.
[00:36:50] DeAnna: So for me, going back to cost per click ads, does it help bring attention to my books? Yes. Is it the best use of my time personally? Not really. What's best for me is getting another book in series out because I've got readers, they've already pre-ordered and they're waiting for book seven in my series. So my time is better spent focusing on getting that seventh book out and then starting work on book eight, rather than messing with cost per click ads and seeing how well they are or aren't doing. Better off shoving that to somebody else.
[00:37:20] Matty: Well, we did take this way down the return on investment, more so than strictly accounting for authors, but I just had to go there because I think that's so interesting.
Accounting Tools & Apps for Authors
[00:37:29] Matty: But I did want to wrap up by asking you if you think there are tools, that if someone is listening to this and they're, they like me are saying like, oh, per unit profit, that would be a good thing to know. If there were basic tools or basic apps that you would recommend an author use in order to try to get their hands around this, what would be one or two that you would recommend people look into?
I get asked a lot of times, what kind of accounting software should I use? And the answer is, unless you're doing high four figures a month, I would say that you really don't need accounting software. You can track what you need to track in Excel, or in Numbers if you're a Mac user. But if you really want to be able to get into the drill-down stuff, past what we've talked about, because you can do everything that we've talked about today, you can actually do in Excel. You can build a formula; you plug in your numbers, and it tells you what you need to know.
[00:38:26] DeAnna: But if you decide that you just have to have accounting software, I've used 15 different accounting softwares in my day job career, and so I can tell you that comparatively, across those 15 that I've used, the best bang for your buck, for somebody who does not know accounting, is QuickBooks. It's got the least amount of learning curve and it tends to be the most cost-effective, not just monetarily, but from a time standpoint. There are a lot of other accounting softwares out there, but you need to really be pretty steeped in accounting concepts to be able to get the best use out of them. And that is a learning curve that can take some time, time that could be spent writing or marketing.
[00:39:07] Matty: I think the other plug I'll put in for QuickBooks or any sort of commonly used platform like that is, it'll be easier to find help. That's a rule I apply to any tool I get is, I'm willing to pay a little bit more to get one that has a wide variety of resources that I can tap into. So Facebook groups or if people on Reedsy or Upwork, can I go on there and find people with expertise in that particular thing? I use QuickBooks and it's been good for me because the person that was doing my finances as something that she wanted to learn and my tax guy, I can just give him access and then he can pull everything through QuickBooks. But just something for people to factor in, like how easy will it be to get help with the platform you're picking.
And QuickBooks tends to be very forgiving. In a lot of softwares, once you close a financial period, it's done, you cannot go back and fix things. Within QuickBooks, as long as you're careful, you can make adjustments, if you need to.
ScribeCount
[00:40:08] DeAnna: The other tool that I would really, really recommend whether somebody is wide or exclusive to one retailer, is ScribeCount, because past a certain point, it just becomes more time-effective to be able to go onto ScribeCount and have them reach out to your storefronts and pull all your sales and all your sales data in for you.
ScribeCount is also making more and more strides every day. They're in the process, I think, or just launched ad tracking, which helps you see your spend. They have a window in which you can actually put in your expenses for a year as you go. And all of their reporting and stuff that they do, you can actually download into Excel or as a CSV file. So that also becomes very handy. But bang for buck, I would recommend ScribeCount, even if you're exclusive to KU.
[00:40:57] Matty: Yeah, I just, I was looking up, episode 117 was Tracking Sales Data and How ScribeCount Can Help with Phillipa Werner, so you can check that out.
Well, we hardly hit on the actual accounting nuts and bolts at all, but I still had a great time, and I would tell people that they should just go buy "Accounting for Authors" by you and Mark Leslie Lefebvre if they want to learn some of these detail that we've been referencing but haven't really gotten into.
So DeAnna, this was so helpful and has really made me rethink how I'm approaching some of the finances for my own business. Thank you so much, and please let people know where they can go to find out more about you and all you do online.
[00:41:34] DeAnna: Oh, the best place is my website. That's 2ofHarts.com. I've got my fiction stuff out there. My "Accounting for Authors" stuff is actually a private wall or page on that website. If you get the "Accounting for Authors" book, if memory serves, we have a link to my Welcome to Accounting for Authors page. I think the other place people could go where I know there's been some talk is the Wide for the Win Facebook group, which is a great resource. And so if you're just looking for an entree to find out more about "Accounting for Authors," and then finding your way to, not only just going to the retail sites and purchasing it there, but some more background information, I can recommend Wide for the Win as a great resource.
Yeah, and the "Accounting for Authors" book is, we did publish that wide, so it's across all retailers. It is available in paperback and ebook. We've talked about audio, but with him being in Canada and me being in Texas, that might get a little interesting trying to keep the two voices that it's two distinct voices. But we're mulling that over as we speak.
I'll be curious to hear what the profitability calculation is when you decide to do that or not.
You know I'm going to. That'll be one of the first things that I do after we figure out, you're here and I'm there, and how do we get a cohesive audio file built?
[00:42:59] Matty: Yeah. Great. Well, DeAnna, thank you so much.
[00:43:02] DeAnna: You're welcome. It was fun, thanks.
A question for you ...
Do you, or are you more likely to, assess ROI on a product-by-product basis--for example, assessing the ebook edition separately from the audio edition of a book--as DeAnna does, or assess them as a package--for example, all the formats of a particular book or even a particular series--as I have been doing?
I’d love to hear your thoughts!
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