Monday, February 26, 2007

The Budgeting Writer

Yes, the “B” word. It strikes fear into the heart of every Visa Card carrying American. However, for the small business owner, it had better be an integral part of your Business Plan.

“Ron!” you protest, “you’re in the wrong blog! We’re writers, not business owners.”

Wrong. Here’s rule…um…#212: If you’re taking yourself seriously as a writer, you have to convince yourself that this is your business. Otherwise, it’s a hobby. And a business must have a budget. Even if you have no income from your business yet, you must plan. If you’re not taking yourself seriously enough to do that, how do you expect an agent or publisher to do so?

Don’t know how to make a business plan or budget? Sure you do. A business plan is nothing more than a statement on what you intend to accomplish and the steps you’ll take to get there. So write down those lovely little steps. Need help? Okay, here’s a general outline for a novelist:

Goal: to write and publish 1 novel per year with sales of 5,000 copies the first year and a 10% increase in sales for every year following. (Yes, I realize this is simplistic, but rule #16 said to keep the blog entries short. Expand as necessary.).

Assumption: $3000 advance for the first novel with no royalties (Income).

Budget (Expenditures):
Materials: $300
Books: $200
Training: $1000 (conferences, air-fare, lodging, seminars, etc.)
Marketing: $1500

There! Wasn’t that easy? What’s that? I used up all of your advance? Darn right I did. Remember: you are a small business. I challenge anyone to find a small business owner who actually made a profit his or her first year. In fact, most take a loss. Most of you are currently taking a loss. Notice there is no line item that says “Run out and buy a new laptop.” If you must, it goes under Materials. But unless you’re down to writing with sharpened chunks of coal, I suggest you hold off on that.

I’m going to continue on this topic Friday. Your homework is to come up with a budget for this year and your first year as a published author. I don’t care if you think you’re five years from publication. Get it down on paper. Take my abridged budget and expand. Add topics and put in details for each heading. Break down the materials into paper, envelopes, whatever. Marketing, of course, can be broken down into a long list of sub-categories. Guess at those numbers for now, but, as you can see, you’re biggest expenses will always be marketing and training. Good thing you don’t have to worry about production (unless you go the self-pubbed route).

Get budgeting. I’ll see you Friday.


Mark said...

Your marketing budget is too low.

Trust me on this.

A number of writers affiliated with my publisher recently put together a listserv just for us and the first thing I did was run a poll asking what percentage of their advances was spent on marketing. The answer? Almost unanimously:

100% and more. Easily up to double or triple your advance.

Welcome to the wonderful world of publishing.

Ron Estrada said...

Good point, Mark. That's the way it is in "real world" business, too. You go deep in the red for the first few years of any business, even a new product for an existing business. Hopefull, I've driven home the point that all initial income must be used as seed for future sales. If done correctly, and we keep up with our "self improvement," profits will come.

Mark said...

We hope, anyway.

Interestingly, Channel 7 news had a spot with Joe Saul-Sehy (I think that's the name) talking about all those Chrysler et al. folks who might want to take their buyouts and open a business. And I found, not surprisingly, that he said save the money because opening your own business eats it up. (I didn't go full-time as a writer until the money was coming in in a significant fashion). He also noted that his brother opened a business and after a year-and-a-half is only beginning to make money. By "make money" I'm assuming he means profit.

I've talked to many, many self-employed folks and business owners and that is very typical. And in the case of novelists, I suspect it's worse because by and large you're stuck with one product per year, rather than by releasing numberous items (like my freelancing or like a pizza franchise) generating income in a faster fashion.

Most businesses would probably argue that you have to put a lot of money into marketing upfront (although please note that Coca Cola spends more money on marketing every year than many countries are worth), and it's doubtful if marketing expenses go down, they just become (hopefully) a smaller percentage of your overall income.

:-)Ronie said...

Great points Ron & Mark! I have determined this year to be focused and serious about writing! Great points, y'all.