To wrap up the section on traditional publishing, I want to talk a little bit about money. I touched on this earlier, but it's worth a chapter of its own.

Traditional publishing pays royalties, a percentage of revenue the book earns. The royalty percentage varies depending on the format of the book (hardcover, trade paperback, etc.).

Some publishers give an "advance on royalties," more commonly called just an advance. They estimate how much in royalties they expect the book to earn over its lifetime and pay you that money up front. If your book earns more in royalties than you were paid as an advance ("earns out"), you'll receive the extra as regular royalty payments. If your book does not earn out, you do NOT have to return any of the advance.

The contract will specify whether you get an advance, how much it is, and your royalty percentage for each format. The contract will also specify WHEN you are paid.

The Advance

The advance is generally NOT paid in a single lump sum. Instead, it's paid in parts. It could be two parts (1/2 on signing, 1/2 on delivery [or 1/2 on publication]), three parts (1/3 on signing, 1/3 on delivery, and 1/3 on publication), or even four parts!

The larger the advance, the more parts the payment is likely to be broken into.

Most advances these days are between $2,000 and $10,000. There are definitely higher advances being paid. And more and more publishers are paying no advance at all.

Your advance will be paid to your agent. Your agent will take her 15%, and then write you a check for the balance. You will be responsible for paying taxes on the money you receive.

Let's look at an example of how this actually plays out.

Writer A gets a $5000 advance on her book. It is paid in two parts: on signing and on publication.

When the contract is signed, the publisher pays $2500. The agent takes 15%, and the author receives $2125. Depending on the writer's other income, she will pay 10-30% in taxes, netting between $1450 and $1900.

When the book is published -- 12 to 18 months later -- the publisher will pay the remaining $2500, and the author will net the same amount.

Most books do not earn out, so this is likely all the money this author will earn from this book.

Royalties

Royalties are paid quarterly, twice a year, or annually, depending on the publishing house. Unfortunately, figuring out royalties isn't as simple as multiplying your royalty rate by the number of books sold in that time period.

Most contracts allow publishers to retain a "reserve against returns." Printed books are actually sold on consignment, which means that retailers can return books that don't sell. All of the books that were sent to a retailer were counted as "sold," so those books returned have to be subtracted from your sales.

The reserve against returns clause allows the retailer to hold back some of your royalties to cover returns. As returns come in, the actual number of sales and correct royalty amount is computed.

All of this information is on your royalty statement. One of an agent's most important jobs is making sense of the royalty statement and making sure you -- and she -- are getting all the money due.

If you didn't receive an advance, your first royalty period begins after the book's publication. Say, for example, the publishing company pays royalties quarterly. Your book launches on Feb 15, and the first quarter ends March 30. Your first check will cover the period from Feb 15 to March 30 and will likely arrive in April or May. If they paid annually (Jan-Dec), your book would launch on Feb 15, and you probably wouldn't receive your first check until the following February!

If you received an advance, you won't receive a royalty check until your royalties earned exceeds the amount paid to you as your advance (if that happens).

Next up: Self Publishing!

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Did this chapter answer a question you had? It would be great if you would press that little star graphic in the top right corner. If not, just carry on reading and vote for one you find more helpful. Oh, I'd be happy to answer your questions in the comments below, as well. --XG