Am I making a profit?

[bardsandsages]

This post is sparked by a few conversations I have had recently with creative types that are freelancers.

The point of this exercise is to get people thinking about profitability and not just sales rank. Too many authors have great sales rank but aren’t able to pay their bills. There are a lot of reasons for this, but the big one is not having a firm understanding of their real costs or how much money they are actually making.

As a publisher, you have two sets of costs: direct costs and indirect costs. Direct costs are those expenses directly related to your book: cover art, editing, proofreading, formatting, Point-of-purchase promotions. Indirect costs are those expenses related to running your business but not associated with any specific book: web hosting, publishing software, equipment, accounting or legal services, etc.

Most indie publishers price their books based only on their direct costs and don’t think about the indirect costs…unless you have a decent accountant that reminds you about the deductions you are eligible for!

And with both the direct and indirect costs, most authors forget to include their own time in the equation. You feel you are saving money by designing the book cover yourself, but that time spent designing the book cover is time spent not doing something else. You are still “paying” for that book cover. You are simply paying in the form of your own time instead of cash out of pocket.

What I suggest is calculating an annual budget for your business, estimating all of your expenses, including the valuing of your time, so that you can accurately determine a pricing strategy to make a profit.

How do I value my time?

If you have a marketable skill, such as editing or proofreading, that you already charge for, then you already know what your time is worth. Time spend working on your publishing is time not spent performing a marketable skill.

Some authors balk at this. But in reality, as a publisher, you need to budget to pay your people…and that includes you. If you were an author working for a trade publisher, you would get a royalty on every sale. If you were an editor for a publisher, you would get paid either an hourly rate or a flat rate for editing the book. Now you are going to say that Amazon pays you royalties…but what Amazon actually pays you your gross profit from the sale of goods. But because Amazon and others call them “royalties” it screws with your ability to think through your actual expenses. All that money reflects is the retail price you set for the product minus the cost of what Amazon is paying for the product. That is NOT a royalty in the real sense of the word.

Let’s use a simple number like $10/hr to calculate your time. And let’s say you spend 5 hours a week on your publishing business. That is $50 a week, or $2600 a year.

Let’s come up with some baseline expenses for the year so we have numbers to work with. Our example assumes you are publishing four books a year.

Direct Costs (annual)
Art costs: $200 (pre-made covers)
Editing: N/A (you self-edit and work with beta readers). Calculated in your time
Formatting: N/A (you self-format). Calculated in your time
Advertising: $1000 (you are awesome and can get the occasional BookBub, plus Amazon ads and FB ads)
Your time: $3000 for 300 hours (includes writing time, editing, formatting) at $10 an hour.

Indirect Costs (annual)
Web hosting: N/A (you use a free Wordpress site)
Internet access: $200 (probably more, but we are only considering the time spend working online)
Software/subscriptions: $100 (Adobe suite subscription or a stock art website subscription)
Equipment: $100 (calculating depreciation on your computer, printer, etc based on the percentage of time used for work)
Accounting/Legal: $50 (tax software. You do your own taxes)
Your time: $3000 for 300 hours (editing, cover design, social media posting for promotion, updating your website, etc).

So your total direct costs per year are $4200 and your indirect costs are $3350.

So you need to make $7550 from sales in a year to hit your break-even point (note: this is different from your EBIT, earnings before interest and taxes. We are just talking about recovering your costs). That is $1887.50 per book if you are publishing four titles a year.

Now that you know what your real costs are, you can come up with a pricing strategy. There are a lot of different options.

If you are making your first book of the year permafree, then you need to recalculate the per book break even number (becomes $2516) Keep this in mind. In addition, don’t fall into the “ebooks are forever” trap. They aren’t. Your book that is selling 1000 copies a month today is not going to be selling 1000 copies a month three years from now. You need to focus on hitting your break even point in the year…because next year will bring new expenses that need to be covered.

At 99 cents, you earn 35 cents a sale from Amazon. If your books are only sold on Amazon, then that means you need to move over 21,500 units in a year to break even.

At $2.99, you earn between 1.50-2.00 per sale if you are wide (averaging across all channels.) If most of your sales come from Amazon, then you are closer to the $2 mark (just over, in fact). If most of your sales come from other channels, you are closer to the 1.50 number. For purposes of illustration, let’s just use an average of $1.75 per sale. You now have to sell just over 4300 units across all four titles to break even.

At $4.99, you earn between $2.49-$3.49 per sale. Using $3 as an average, you now have to sell just over 2500 units in a year to break even.

In general, indie genre fiction is not going to sell beyond that price range.

Most people are going to end up with a variety of price points depending on how long they have been publishing and the type of stuff they publish. If you are selling print, you need to determine your revenue for each sale and factor that in to your figures. For example, if I can make $4 profit per print sale and I know I will sell 100 print copies a year of a title, I need to sell fewer ebooks for that title to hit my break even point. If my book does well in Select and can generate a flat $300 revenue each month from borrows, I need to sell fewer ebooks to hit my break-even point. If I have a deep backlist and know I can get five sales a month from ten different backlist titles each month, I can use those sales to offset my indirect cost and adjust my break even point for new releases.

If you are a new publisher, I recommend being extremely conservative when estimating your sales potential to avoid either underpricing your book (the lower the price, the more volume you need to move to break even) or overextending yourself in expenses (the difference between a $50 pre-made cover and a $2000 custom painted cover). As you build your business and get a better understanding of what your sales volume is going to look like, you can adjust your budget accordingly. You might start off with a higher price point and find that you can’t move enough titles, so you adjust the price down to boost volume. Or you may find that while you are selling a lot of books at a low price, increasing the price drops sales volume but still increases profitability.

[Bill Hiatt]

All of this is particularly important because there are many great writers who don't necessarily have the business skill set. Yet anyone interested in making a living has to find some way to develop those business skills.

[Lee]

I know people that have been in business (not books) for a very long time and still don't get this. It cannot be overlooked if you need to make a living, yet it so often is.
I know all of this, have been in business for 30 odd years and still overlook things occasionally.

[bardsandsages]

Part of the disconnect I believe for a lot of authors is the fact that Amazon and all of the vendors call what they pay out "royalties." And the writer mind gets into the thought process of, "Well, trade publishers only pay royalties of 15 or 20% and Amazon is paying me 70%" But they aren't royalties in the traditional sense of the word. Amazon is paying you your profit on sales, which is the difference between the list price of your product minus what Amazon is "paying" for it. Out of that profit, you have to pay all of your expenses. Unlike true royalties, in which the bulk of the production, administrative, and marketing expenses are paid for by the publisher.

[David VanDyke]

Part of the disconnect I believe for a lot of authors is the fact that Amazon and all of the vendors call what they pay out "royalties." And the writer mind gets into the thought process of, "Well, trade publishers only pay royalties of 15 or 20% and Amazon is paying me 70%" But they aren't royalties in the traditional sense of the word. Amazon is paying you your profit on sales, which is the difference between the list price of your product minus what Amazon is "paying" for it. Out of that profit, you have to pay all of your expenses. Unlike true royalties, in which the bulk of the production, administrative, and marketing expenses are paid for by the publisher.

Depending on the definition used and what country's laws we're talking about, yes, your Amazon sales can result in royalties--at least, according to my research, which includes "payment from distributors." That's why Amazon sends you a 1099 when you make more than $10, which is the IRS trigger for "royalties," rather than the $600 trigger for other income.

https://definitions.uslegal.com/r/royalties/

https://dictionary.law.com/Default.aspx?selected=1870

Then again, I'm not a lawyer. Perhaps someone else has a better answer.

[Bill Hiatt]

Part of the disconnect I believe for a lot of authors is the fact that Amazon and all of the vendors call what they pay out "royalties." And the writer mind gets into the thought process of, "Well, trade publishers only pay royalties of 15 or 20% and Amazon is paying me 70%" But they aren't royalties in the traditional sense of the word. Amazon is paying you your profit on sales, which is the difference between the list price of your product minus what Amazon is "paying" for it. Out of that profit, you have to pay all of your expenses. Unlike true royalties, in which the bulk of the production, administrative, and marketing expenses are paid for by the publisher.

Depending on the definition used and what country's laws we're talking about, yes, your Amazon sales can result in royalties--at least, according to my research, which includes "payment from distributors." That's why Amazon sends you a 1099 when you make more than $10, which is the IRS trigger for "royalties," rather than the $600 trigger for other income.

https://definitions.uslegal.com/r/royalties/

https://dictionary.law.com/Default.aspx?selected=1870

Then again, I'm not a lawyer. Perhaps someone else has a better answer.

The use of the term royalty hasn't really become standardized. However, I think regardless of the term, the financial reality is the same. People need to keep an eye on how their income relates to their expenses.

It's true that trads still pay for quite a few things that would be expenses for an indie author, though more and more of them seem to be expending less and less. I'm sure the largest publishers still do a lot, especially for A-List authors, but smaller publishers often don't see promotion, for example, as their job. I know a number of people who are published by small publishers who spend a lot of money doing promos, something I don't think would have happened as often in the past. I've also heard that publishers are trying to cut down on editing costs by trying to avoid accepting manuscripts that need more than a very cursory edit. (It was probably always a good idea to edit as thoroughly as possible before submitting to a publisher, but now it seems increasingly vital, with the result that authors, even working with trads, are spending more time and money on editing.)

[munboy]

I use a timesheet app on my phone to keep track of my hours down to what book I'm working on and what I'm doing on that book, whether I'm planning, writing, or editing. I set an hourly wage for myself and I input it into a spreadsheet along with the editing costs and cover. That way I know exactly the cost of producing a book.

I keep track of time spent on the business side (advertising, newsletters, taxes, and such), too. Basically, any time I spend on my writing career, it's tracked and put into the spreadsheet as an hourly wage...I don't pay myself other than in royalties, but it's good to know how your books are doing really when stacked against the cost to produce and hourly wages is the best way to calculate time.

This is what my timesheet app looks like, the options I have to choose from when I "clock in."

• Business
  Boundless Writing (my next release)
  Boundless Editing
  Boundless Planning
  Future House Project (ghost writing for a publisher)
  Echodragon Planning (side project with my wife)
  Echodragon Writing
  Heir Planning (long term epic fantasy project)
  Heir Writing
  Heir Editing

[bardsandsages]

Depending on the definition used and what country's laws we're talking about, yes, your Amazon sales can result in royalties--at least, according to my research, which includes "payment from distributors." That's why Amazon sends you a 1099 when you make more than $10, which is the IRS trigger for "royalties," rather than the $600 trigger for other income.

The decision to call them "royalties" instead of "net revenues" was a business decision started by POD services like Lulu because "royalties" sounded easier to digest than "net revenues." There was no legal reason to choose one over the other. It was a marketing decision. I know this because I "lived" through the revolution, so to speak. 

Before the rise of POD services (which was the precursor for the digital movement in self-publishing) most self-publishers went to a printer, printed the books in bulk, and sold them on consignment or worked directly with wholesalers who sold your books to bookstores. POD services provided a means of selling the books without the up-front printing costs, but the basic sales mechanic was still the same. Lulu and others provided storefronts that allowed the self-publisher to sell their books without having to maintain an inventory. But the process was still the same. You paid for the production cost and the seller (which, in this case, was also the printer) paid you the difference between your list price and the price they were paying for the book.

When POD services started offering distribution to stores like Amazon and BN, they were STILL doing the same thing a regular wholesaler was doing, they were just doing it in addition to other services. Instead of having one company print and another company distribute, you had one company handling both.

But to expand their businesses, they needed to attract more self-publishers, because self-publishers sell low volume. I remember a very telling quote from Bob Young, owner of Lulu. It was something like, “I don’t need a hundred authors selling a million copies. I need a million authors selling a 100.” POD services were looking for volume of users, not volume of book sales.

Back then, most people weren’t interested in “running a business” and generating “revenue.” You can’t “sell” that idea to a housewife or a college kid or a retiree.

But you can sell them on royalties, because royalties aren’t scary. Authors understand the idea of “royalties” even if they don’t understand how to run a profit and loss sheet. THAT is why POD services called them “royalties.” Because royalties were easy to sell to people who wanted to publish their books but didn’t have any interest in running a business.

In addition, this allowed POD services to set up the false comparison between trade publishers and POD services. “The average trade publisher only pays 15% royalties. Self-publish and make 50% royalties instead!” It was always a marketing strategy.

Before Amazon moved everything to KDP, they had bought mobipocket. Mobipocket issued 1099s at $600 revenue, because Mobipocket did not pay “royalties.” They paid out revenue. I know this because I sold books through them. It wasn’t until Amazon bought Mobipocket and forced everyone into KDP that the “revenues” became “royalties.” Because, again, it is easier to sell “royalties” than it is to sell “run your own business and earn revenues.” And Amazon did it for the same reason.

Google Play doesn’t call them royalties. I don’t run a royalty report with Google Play. I run an earnings report. Because the Google store never actively recruited self-publishers or “sells” itself specifically to self-publishers. It treats all its business partners the same.

[bardsandsages]

I use a timesheet app on my phone to keep track of my hours down to what book I'm working on and what I'm doing on that book, whether I'm planning, writing, or editing. I set an hourly wage for myself and I input it into a spreadsheet along with the editing costs and cover. That way I know exactly the cost of producing a book.

What is the name of the app that you use?

[munboy]

I use a timesheet app on my phone to keep track of my hours down to what book I'm working on and what I'm doing on that book, whether I'm planning, writing, or editing. I set an hourly wage for myself and I input it into a spreadsheet along with the editing costs and cover. That way I know exactly the cost of producing a book.

What is the name of the app that you use?

Time Recording Timesheet App by DynamicG... I'll include a screenshot of it in the Play store. I have an Android phone, so I don't know if it's available for Iphone.

The app is free, but has a small ad banner at the bottom. I have used it for around a year and barely noticed them, but since this was the only app I found that did everything I wanted it to do (breaks down into an unlimited number of reoccurring tasks and allows for downloading of spreadsheet reports), I went ahead and bought the Pro version to support it and get rid of the ads. (I think it was $4.99)

Although it takes a little bit of fiddling with to figure out all the settings and things it can do (which is A LOT), once I got it all figured out, I'm amazed at the features it gives away in its free version. (The only feature that is added with the pay version is the ability to export reports and backups to dropbox or google drive).

It also has a widget for easy punching in and out.

[Lorri Moulton]

The accountant considers total revenue - total explicit costs, while the economist will include implicit costs.  What could a resource (like a business owner) make if working somewhere else?

I do like that this economist mentions personal satisfaction has a value as well.

[bookworm]

I use a timesheet app on my phone to keep track of my hours down to what book I'm working on and what I'm doing on that book, whether I'm planning, writing, or editing. I set an hourly wage for myself and I input it into a spreadsheet along with the editing costs and cover. That way I know exactly the cost of producing a book.

What is the name of the app that you use?

Time Recording Timesheet App by DynamicG... I'll include a screenshot of it in the Play store. I have an Android phone, so I don't know if it's available for Iphone.

The app is free, but has a small ad banner at the bottom. I have used it for around a year and barely noticed them, but since this was the only app I found that did everything I wanted it to do (breaks down into an unlimited number of reoccurring tasks and allows for downloading of spreadsheet reports), I went ahead and bought the Pro version to support it and get rid of the ads. (I think it was $4.99)

Although it takes a little bit of fiddling with to figure out all the settings and things it can do (which is A LOT), once I got it all figured out, I'm amazed at the features it gives away in its free version. (The only feature that is added with the pay version is the ability to export reports and backups to dropbox or google drive).

It also has a widget for easy punching in and out.

That app looks amazing. I'm hunting for an iPhone version. Hope it exists.

[okey dokey]

I've been saying for a long time that if you only end up with $2 or $3 on each book, you will slowly go broke.
That's not enough to keep you in printer ink, paper supplies, domain hosting, etc.
No body, not the printer nor the retailer, should end up with more money than the writer.
How you price your book is critical.

[Jan Hurst-Nicholson]

No body, not the printer nor the retailer, should end up with more money than the writer.

Tell that to a trad publisher  Everyone makes more money than the writer.

[LilyBLily]

Going back to the OP, I dispute the need to calculate the value of my time, and I suspect that many others need not, either. If we know that there is no way to earn money in the blocks of time in which we do all our indie stuff, there's no point counting those hours. They're dead, anyway. Might as well binge watch GoT.

I can think of numerous scenarios in which employment is not possible, but writing and indie production and marketing are. These relate to personal responsibilities (caring for young children or an elderly parent) or to health (being too ill to reliably do freelance gigs and way too ill to leave the house for a steady job) or to general circumstances (living where there are no other jobs available, being discriminated against in hiring, being too young or too old to do other paying jobs, routinely being too tired from a main job to do a second job). Physical employment revolves around devoting entire blocks of time to the job--usually four hours at least--but writing doesn't. Freelance gigs have deadlines that other people impose, but writing and indie publishing doesn't.

We've seen many people who describe working for an hour or two a day or even per week over a period of months or years to produce a novel. Often, they try to give their brains' best moments to that. Realistically, there may not be any other competing opportunity to earn money with that small and irregular amount of time available.

What indies ought to do is keep a firm grasp of their overhead. This I totally agree with because many if not most home businesses are not profitable.

[DrewMcGunn]

I've been saying for a long time that if you only end up with $2 or $3 on each book, you will slowly go broke.
That's not enough to keep you in printer ink, paper supplies, domain hosting, etc.
No body, not the printer nor the retailer, should end up with more money than the writer.
How you price your book is critical.

Do you mind elaborating? Most writers here sell most of their e-books somewhere between 2.99 and 3.99. I'm curious to learn more about what you mean.

[Dormouse]

What indies ought to do is keep a firm grasp of their overhead. This I totally agree with because many if not most home businesses are not profitable.

I completely agree the importance of doing this. Preferably as simple cash flow.
But this is more about constraints and potential rewards. Not about 'profit'.

Going back to the OP, I dispute the need to calculate the value of my time, and I suspect that many others need not, either. If we know that there is no way to earn money in the blocks of time in which we do all our indie stuff, there's no point counting those hours.

This, I think, is an error.
All time has a value. For any activity there is always the opportunity cost of an alternative activity.
Going home to bed or staying at the party?
The problem is integrating these judgements with cash flow and profit analyses.

This should be a personal judgement. The OP proposed the opportunity cost of the earnings from a different type of work.
That's one way. But, as you point out, there may not be realistic alternatives for many people.
And having a drink with friends, chilling with children or walking the dog are non-earning alternatives money wise but are valuable in other ways.
The simplest way of deciding is simply to decide what you would need to be paid to give up the alternative activity you would choose. That puts a value on opportunity cost.

But it's not as simple as that. You also have to put a value/cost on indie related work. Many writers enjoy writing. Doing it is a valuable activity, because it is enjoyable. If you enjoy it, then you should work out the value of that enjoyment and that goes into the calculation as a negative cost.
Ditto for all the other indie related activities. I suspect that most indies would 'require' considerable remuneration for publishing, but a minority would actually enjoy them.
Strictly speaking you should also take account of diminishing returns. Lying on the beach might be nice, but by hour 10 it would surely be a punishment for everyone.

I'm not suggesting everyone do this, though I suspect that most indies are losing money on any realistic appraisal of their business. But, if someone is going to do the calculation, then they should go the whole hog.

[sliderule]

Thanks for the rundown and the thoughtful comments. I had heard of this concept before but usually the conversation got needlessly complicated and spider solitaire started looking attractive.

I did quick and dirty calculations and came up with some numbers based on my abilities to hit certain milestones. Whether I hit them or hit close, I now have a benchmark to shoot for at least until the end of the year.

[LilyBLily]

What indies ought to do is keep a firm grasp of their overhead. This I totally agree with because many if not most home businesses are not profitable.

I completely agree the importance of doing this. Preferably as simple cash flow.
But this is more about constraints and potential rewards. Not about 'profit'.

Going back to the OP, I dispute the need to calculate the value of my time, and I suspect that many others need not, either. If we know that there is no way to earn money in the blocks of time in which we do all our indie stuff, there's no point counting those hours.

This, I think, is an error.
All time has a value. For any activity there is always the opportunity cost of an alternative activity.
Going home to bed or staying at the party?
The problem is integrating these judgements with cash flow and profit analyses.

This should be a personal judgement. The OP proposed the opportunity cost of the earnings from a different type of work.
That's one way. But, as you point out, there may not be realistic alternatives for many people.
And having a drink with friends, chilling with children or walking the dog are non-earning alternatives money wise but are valuable in other ways.
The simplest way of deciding is simply to decide what you would need to be paid to give up the alternative activity you would choose. That puts a value on opportunity cost.

But it's not as simple as that. You also have to put a value/cost on indie related work. Many writers enjoy writing. Doing it is a valuable activity, because it is enjoyable. If you enjoy it, then you should work out the value of that enjoyment and that goes into the calculation as a negative cost.
Ditto for all the other indie related activities. I suspect that most indies would 'require' considerable remuneration for publishing, but a minority would actually enjoy them.
Strictly speaking you should also take account of diminishing returns. Lying on the beach might be nice, but by hour 10 it would surely be a punishment for everyone.

I'm not suggesting everyone do this, though I suspect that most indies are losing money on any realistic appraisal of their business. But, if someone is going to do the calculation, then they should go the whole hog.

I don't think I would know how to do the kind of calculation you're talking about. Isn't it comparing apples to oranges? And further, doesn't each of us put a different value on some things? For instance, people with large families may not value family time highly because they have so many opportunities for it. People who live in culturally isolated areas may value individual cultural experiences more highly than do people who live in culturally rich areas. And then there's the self-esteem value in having completed and published one's writing, which for me trumps every other calculation.     

[DrewMcGunn]

I don't think I would know how to do the kind of calculation you're talking about. Isn't it comparing apples to oranges? And further, doesn't each of us put a different value on some things? For instance, people with large families may not value family time highly because they have so many opportunities for it. People who live in culturally isolated areas may value individual cultural experiences more highly than do people who live in culturally rich areas. And then there's the self-esteem value in having completed and published one's writing, which for me trumps every other calculation.     

I don't want to put words in Dormouse's mouth, so I'll limit it to my own perspective. On the business expenses, I absolutely believe in tracking that stuff religiously, so to speak. I need to know every legitimate expense I can put on my Schedule C (for those not in the US, that's Americans' self-employed tax form that determines our net income).

But for me to determine the monetary value of my time is a bit like nailing Jell-O to a wall and it is different depending on what's competing for my time. Before I married, I spent a lot of time playing video games (still do when I get the urge). Any writing I do, no matter how unmarketable or unprofitable, for me is more valuable than the time-sink of my gaming hobby. This is, of course highly subjective and unique to each of us.

What competes for my time has a lot to do with how I value the time I spend writing. If someone is super talented in several fields and writing is just one means to an end (more money in the bank or some other goal), then I think the monetary value of their time spent writing is important. On the other hand, if writing is what makes me feel most alive (and it replaces my World of Warcraft addiction) I'm not sure I care particularly what the monetary value of my time spent writing is, because it's replacing something intrinsically less valuable.

Lily, I think you and I are a lot alike when it comes to the drive and need to write. I love seeing my words on paper and it gives me a feeling of accomplishment to see my books on Amazon. Heck, I enjoy the process of creating and writing the story, too. And if I’m honest with myself, it’s worth a good portion of my time, even if the books don’t sell a lot. But I confess, I’m enough of a numbers nerd that I want to know the monetary value of the time I spend writing, regardless of whether the 80 hours I spent writing this month is monetized at $30 dollars after expenses or whether it’s worth 2 bucks. Did I mention, I’m a numbers nerd? 

[Vijaya]

Enjoying this discussion very much and really appreciate what LilyBlily brought up regarding time. I track all writing expenses and my time and except for my work-for-hire I do not put a monetary value on my time. It is the most precious resource. Once lost, never regained (unlike money). This is why I've turned down some projects even though I like the topic. At this point in my life, I'm writing what I love, writing what stretches me, writing to learn and I still can't get over the fact that people are reading a book of my heart! 

[Dormouse]

Isn't it comparing apples to oranges?

Yes, it is. It revolves around a method of giving them a relative value; easiest done by giving them a monetary value which can then be easily compared to other products.

And further, doesn't each of us put a different value on some things?   

Yes. I had thought this was what I was explaining; looks as if my ability to explain what I mean is very deficient - though I'll admit I was trying to avoid too much detail, explanation and eye glaze.
Everything has to be done on an individual basis.

And then there's the self-esteem value in having completed and published one's writing, which for me trumps every other calculation.     

Indeed. As I said, some activities should be given a negative cost (ie a positive value) because they are intrinsically valuable.

[Dormouse]

Did I mention, I’m a numbers nerd? 

Someone who'd like more detail then. 

But for me to determine the monetary value of my time is a bit like nailing Jell-O to a wall and it is different depending on what's competing for my time.

That's absolutely true. So, if you were doing these calculations, you would have to constantly update because the values keep changing. This is what we do when we buy physical products, except that to save brain power we tend to fix on a notional average value which we change every now and again. We may have a relative value of 5 apples = 3 oranges. In which case we buy more oranges when they are the same price as apples. We then save further brain power with a habit of always buying 5 oranges and 3 apples (because the relative value changes once we already possess one item, or two &etc). And only challenge our habit when we find that we frequently have too much or too little of one of them in the bowl.

I'm not sure I care particularly what the monetary value of my time spent writing is, because it's replacing something intrinsically less valuable.

That may be true. The advantage of monetary values is that they are easily compared to other things. In your case the writing itself would have an enormously high value compared to the alternative. But that is only in the context of it only being a comparison between those activities. What would happen if you had to do more hours at work? What would you choose if you had  the chance of a free trip to the Great Wall of China? The advantage of monetary values is that they allow easy comparison if you want to make one. Would it be the same if you had been writing 20 hours in one stretch?

[Dormouse]

Just to emphasise that I'm not suggesting anyone sit down and do this - unless they really need to assess the actual value of going on with writing. Most of the time we do similar calculations completely unconsciously. The basis of our calculations switches only when we find that we don't really like some aspect of the way we are living our lives. Then we think.

The only reason for mentioning it is that it is a very large part of the cost of writing/publishing for most indies and our unconscious calculations have a tendency to particular biases.

For indies, I think there are two main ones. The first is to under-estimate the number of hours being spent altogether - they're not counted so memory fades. The second is to over-estimate the rewards - they might be low now, but things will be better in the future, or they might have a lottery scale impact (if it's the latter buying a few lottery tickets is probably cheaper, and no less likely).

Same types of bias in domestic abuse situations (under-estimating the number of incidents; over-estimating the likelihood of change) and probably many others.

Doing calculations of this sort simply helps consciously identify and quantify the costs and rewards making rational decision making easier when there is an alternative to consider.

[LSMay]

Going back to the OP, I dispute the need to calculate the value of my time, and I suspect that many others need not, either. If we know that there is no way to earn money in the blocks of time in which we do all our indie stuff, there's no point counting those hours.

This, I think, is an error.
All time has a value. For any activity there is always the opportunity cost of an alternative activity.
Going home to bed or staying at the party?
The problem is integrating these judgements with cash flow and profit analyses.

The thing is, for a lot of our choices there is no real cash flow or profit to be had - or if there is, it's so small as to be negligible.

On the whole, my writing business is in the red because I overspent on putting out my first series, and, without having done all the math, I'm fairly certain my subsequent books would have only paid me cents per hour. But if I wasn't writing, I wouldn't be out working a second job, or working on an app to make me rich or whatever. I'd probably be playing video games, or reading novels, or watching TV.

Now, if writing were a day job for me, it would certainly have to be weighed against the salary I could pull for the same hours in a normal 9-5 type job, but I think those of us who do writing on the side, in time that would otherwise be used non-productively, don't need to put the same weight on our time.

[Dormouse]

The thing is, for a lot of our choices there is no real cash flow or profit to be had - or if there is, it's so small as to be negligible.

True for many people. And it is possible that your time has no value to you in the absence of a money transaction. In which case, you will do anything for a dime unless there's an alternative offering more than a dime.

But if I wasn't writing, I wouldn't be out working a second job, or working on an app to make me rich or whatever. I'd probably be playing video games, or reading novels, or watching TV.

This, however, suggests that you do put a value on your time. Video games, novels, TV all involve some money spending at some part of the process. Though maybe not for you if you can scrounge the electricity &etc.
If you do spend some money though, then it suggests that those activities are worth more to you than doing nothing at all. So either they have a value or doing nothing has a negative value. Those values may be negligible, in which case it's reasonable to ignore them, but they do exist.
Most people value seeing friends, having fun etc etc and they put different values on them, which helps them make decisions about what to do. What they don't do is try to put a financial value on them because there's no point. If they stop enjoying them, they stop doing them. But it becomes a useful exercise if every time-consuming activity is potentially money making and there's a desire to work out 'whether it is worth the effort'.

There's two calculations. One is pure cash flow. Overall how much is coming in or going out. The reason for that is because most people have a limited amount of cash and cash flow and conserving it is important.

The next is about profit. And working out whether something is worth doing is much easier if you can put a value on the time you spend on each activity. This then makes it easier to make rational choices between activities.

My guess is that those writers who do not put a high value on writing as an activity, or put a high negative value on publishing as an activity, are the most likely to be unprofitable on this basis (in the absence of a high positive cash flow from writing/publishing). I'd further guess that those who put a high value on writing and a high negative value on publishing would be at their most profitable if they cut down on the time and expense of publishing; chasing sales may not improve their lives even if it increases overall cash income.

[LilyBLily]

The thing is, for a lot of our choices there is no real cash flow or profit to be had - or if there is, it's so small as to be negligible.

True for many people. And it is possible that your time has no value to you in the absence of a money transaction. In which case, you will do anything for a dime unless there's an alternative offering more than a dime.

But if I wasn't writing, I wouldn't be out working a second job, or working on an app to make me rich or whatever. I'd probably be playing video games, or reading novels, or watching TV.

This, however, suggests that you do put a value on your time. Video games, novels, TV all involve some money spending at some part of the process. Though maybe not for you if you can scrounge the electricity &etc.
If you do spend some money though, then it suggests that those activities are worth more to you than doing nothing at all. So either they have a value or doing nothing has a negative value. Those values may be negligible, in which case it's reasonable to ignore them, but they do exist.
Most people value seeing friends, having fun etc etc and they put different values on them, which helps them make decisions about what to do. What they don't do is try to put a financial value on them because there's no point. If they stop enjoying them, they stop doing them. But it becomes a useful exercise if every time-consuming activity is potentially money making and there's a desire to work out 'whether it is worth the effort'.

There's two calculations. One is pure cash flow. Overall how much is coming in or going out. The reason for that is because most people have a limited amount of cash and cash flow and conserving it is important.

The next is about profit. And working out whether something is worth doing is much easier if you can put a value on the time you spend on each activity. This then makes it easier to make rational choices between activities.

My guess is that those writers who do not put a high value on writing as an activity, or put a high negative value on publishing as an activity, are the most likely to be unprofitable on this basis (in the absence of a high positive cash flow from writing/publishing). I'd further guess that those who put a high value on writing and a high negative value on publishing would be at their most profitable if they cut down on the time and expense of publishing; chasing sales may not improve their lives even if it increases overall cash income.

Either I do not understand your calculations, or I disagree with them. I'm sufficiently confused not to be sure.

[PJ Post]

I'm not sure how to react to this thread. On the one hand, B&S makes a good point about understanding business and how to apply that knowledge, as she always does, but on the other...

This is Art. And, in spite of anecdotes to the contrary, Art is not bounded by business theory, and most importantly, Artists are not bounded by common sense. We're a flaky bunch.

If you have become a publisher with the intent of earning meaningful income from your endeavors, you've probably already f*cked up. Art is notoriously difficult to monetize, especially consistently. We only have to examine the history of any publishing house to observe the desperation with which they approach the market. The internet has not changed this.

What we do know, is that if you are really good at generating commodity-style art, and if you can do it fast, AND...if you can master CPC, SEO and other internet marketing tools, then you have a decent chance at making a few points on your ad spends, which, to be fair, can be quite a lot. On the flip side, if you get lucky enough to capture the ephemeral zeitgeist of the moment, you can also do quite well. Good luck making a career out of it though.

Let’s face it, digital publishing is an attractive business because, with a little talent, a little learning and a bunch of open source software, nearly anyone can do it, and apart from the time we invest - which, opportunity costs notwithstanding, is free as far as most of us are concerned - we can go to work with next to zero investment. This is just about the only business in the history of ever where that's possible.

But publishing is also one of the worst businesses ever when it comes to sustainability.

Writers write because we write. It's what we do. Accounting spreadsheets rarely figure into the equation. Running a successful business is hard, as well as time consuming. Most importantly, there are no step by step action plans to go by. If anyone says otherwise, they’re selling something. While the basic foundations of business are always the same, even for publishing, every opportunity is riddled with its own obstacles. This is true of every new book published, even if it's written by the same author.

At the end of the day, time we enjoy wasting isn't wasted time.

[Vijaya]

At the end of the day, time we enjoy wasting isn't wasted time.

This.

When you love someone or something, you waste time with that person or thing and what the world thinks is a waste is not at all.