P&L Rejections

Today I was working on a P&L for a new book, to determine whether to accept it or not. Did you know that we have to do that for every book that makes it through the first read? If the P&L doesn't come out right, I can't accept a title even if I LOVE it.

Here's a brief description of how the P&L works:

First I have to estimate production costs, which include editing, typesetting, design, custom artwork, printing, galleys, marketing covers, promos (business cards, bookmarks, postcards, posters, etc.), advertising and a launch party or book signing tour.

Then I guess how many books I can sell and how fast I can sell them. I come up with an initial print run amount minus comp copies used for marketing. I take that number and times it by the wholesale price of the book. From that amount, I subtract the author's royalty and/or advance and the production costs to get my profit.

I figure profit based on selling all the books, 80% of the books and 60% of the books. Then I look at the 60% number and determine if I can survive if that's all I sell.

Theoretically, if I publish a book a month, and I can sell 60% of the print run in a year, and that number will cover one month of my company's overhead, plus a little, then I can take the risk and publish the book.

Larger companies that are publishing 10+ books a month can handle a little more risk; their faster sellers will offset the slower sellers. Smaller companies that publish less than a book a month cannot afford as much risk. They have to be fairly certain that every book they publish is going to sell, and sell enough to cover several months of overhead--unless they're independently wealthy and publishing is a hobby and not their personal bread and butter.

So if you get a rejection that says something along the lines of "We LOVED your book, but...," chances are it didn't make it past the P&L analysis.


Anonymous said...

Forgive my ignorance, but what does P&L stand for?

Melanie Goldmund

LDS Publisher said...

I'm sorry. I meant to go back and clarify that and just forgot.

A P&L is a profit & loss statement. You add up your income and subtract your expenses to see if you're going to make a profit or have a loss.

Tristi Pinkston said...

Thanks for the explanation, LDSP. I sometimes wonder what some of the politics and financial hoops are that our manuscripts have to go through before they are accepted or rejected.

Sariah S. Wilson said...

I wonder how a publisher can know whether or not a book will sell and how well it will sell. I know that books can badly under sell or wildly exceed expectations. How can anyone know one way or the other? Is it just based on experience with similar novels? How do you predict what the market will do?