If your goal is to be traditionally published and you’ve gotten to the submission stage, or have author friends who have, you may have heard that an editor is “running numbers.” That's a good thing, but what exactly does it mean? In a nutshell, it means the editor is interested in acquiring your book, and needs to show that it makes sense financially to do so.
Most book publishing companies are for-profit businesses, so one of the biggest factors they consider is if there is good reason to think that publishing the book is likely to make money for the company. To determine and demonstrate this, the editor creates a profit and loss statement (P&L). The P&L is also how the editor determines what advance she can offer you. (Yes, even if you become a book editor, you still have to use math.) So what goes into a P&L? A lot. Here’s what an editor usually does when she creates a P&L.
First, if you're previously published, she’ll get the details of your sales history—titles, formats, prices, publishers, publication dates, and number of copies sold. You might provide this information in your proposal, but she'll also likely look up your author history on BookScan, which tracks sales to consumers reported by book sellers.
Next, she’ll find 3-5 comparable titles—books published in the last one or two years that are similar to your proposed book in category, subject, and author platform. (If you know some good ones, you should include them in your book proposal.) She’ll use this information and her knowledge of the market to decide what format(s) your book will be published in: hardcover, paperback, mass market, eBook, eAudio, CD audio, etc.. She'll also look up the sales of those books to make an educated estimate of how many copies the publisher would print of each format of your book, and how many of those copies they might sell.
She’ll figure out the unit cost (what it will cost to make one copy) for each physical format by selecting a trim-size (dimensions of the book) and estimating the page count (based on word count and trim size). Typically, the more copies of a book that are printed, the lower the unit cost will be. It's also usually less expensive to use one of a few common trim sizes as the printer keeps that paper in stock. This is why most books by the same publisher are the same size. If your book would have any special features—a photo insert, photos throughout, unique paper, or effects on the cover like foil or embossing—she’ll get a quote from the production department and factor that into the costs as well.
She’ll determine the price for each format based on the page count, author history, and prices of comparable titles. Costs for production, marketing, publicity, shipping copies to retailers, and the publisher’s overhead are also factored in, as is the booksellers’ share of the proceeds.
The editor may ask the subsidiary rights department to give her an estimate of proceeds if they think foreign language translation, book club, audio, large print, or other rights are likely to sell. She may get input from the audio department as well if the audio edition would be done in-house.
Of course, the author’s royalties (a percentage of either the price of the book or the proceeds from book sales) are also included, as are the author’s share of any proceeds from subsidiary rights sales. These two numbers are the key components of the advance the editor can offer. So the advance is basically the author’s share of the income based on the editor’s educated prediction of how many copies the book will sell at a certain price. If the editor overestimates how many copies the book will sell (and most do), the author keeps the advance. If the editor underestimates how many copies the book will sell, the advance will “earn out,” and the author will receive royalties in addition to the advance—everyone is happy when this happens!
Once complete, the P&L is usually reviewed by the editorial director and the publisher. Others, like sales, marketing, and publicity, may also offer feedback (this varies by publisher). The editor may need to change some of the numbers based on the feedback, but hopefully the final P&L will support the editor in making a good offer.