5 Steps to Launching A Profitable Book Business
I’ve been there too. Wanting to build a profitable business so I can continue to do what I love most. Let’s face it, the in’s and out’s of business is not everyone’s cup of tea. In fact, it’s the least favorite thing for many creatives. The process and knowing where to start can all feel a bit overwhelming.
What if I told you that building a profitable book business doesn’t have to be that daunting? In as easy as 5 steps, you can launch your book business where you have multiple streams of revenue and possibly passive income.
I’ve created The Kidlit Business Roadmap to help you with this process. Go ahead and download it and I’ll review a few points that I’ve taught several children’s lit authors and illustrators below. I’m certain once you start implementing these steps, you’ll feel confident that your book business is well on its way to being profitable.
Most of us want to dive right into ways we can create revenue for our business. We tell ourselves that making money is a priority and we will worry about the details later. But it could get really messy, so the best way to avoid trouble is to build a financial foundation.
I should state that I am not a Certified Public Accountant in any country. I recommend consulting with a certified accountant, tax preparer, and/or lawyer when making any significant business decisions (i.e. partnering, creating an LLC, incorporating your business, etc.). Also, I recommend consulting with a certified accountant for anything tax-related.
1 | Build Your Financial Foundation
Ever wonder what is meant by a business structure? Well, it’s the type of legal structure you select for your business. There are several to consider, but most children’s lit authors and illustrators will register as a sole proprietorship or limited liability company (LLC). Each business structure has pros and cons when it comes to tax implications. I’ll briefly cover those below, but it’s best to ask your accountant based on your current needs.
A | Sole Proprietorship
The majority of you will adopt a sole proprietorship since it will be just you that owns and runs your book business. It is the simplest business structure, start-up costs are zero, and your book business’ income and expenses can be filed under your personal income tax returns.
However, the biggest downside to a sole proprietorship is having your personal assets at risk if there is ever legal trouble. So you should seriously consider a different business structure if this is a legitimate concern for your book business.
B | Limited Liability Company (LLC)
Now, if you want to protect your personal assets in your book business, then consider creating a limited liability company or LLC. This business structure separates your personal and business assets.
The drawback to an LLC is that you will have more tax regulations than a sole proprietorship and yearly fees are paid to maintain your LLC. Check your state business laws for fee details.
A question that often arises is, “When is the right time for me to change from a sole proprietorship to an LLC”? Your accountant will tell you the best time frame and I usually advise kidlit to wait 2 years so that you are earning a consistent amount of revenue. That way you have proven a healthy book business that is worth the time and money to register with your state.
C | Bookkeeping Practices
Once you’ve decided on your book business structure, it’s time to tackle your bookkeeping practices. I always suggest for the most inexpensive way, which entails creating a simple spreadsheet to track all of your income and expenses. As your book business gets larger, you can migrate to Quick Books and there are many online tutorials and courses to guide you through set up and use.
Make sure to open up a separate bank account specifically for your business. Again, making a distinction between personal and business to avoid confusion. Set up a business savings and checking account. Some sole proprietors even have a third account for putting aside a percentage of their earnings for paying business taxes.
As you record your income and expenses in your spreadsheet, make sure to denote the day the transactions actually happened. This type of bookkeeping is called cash accounting and it’s the preferred method for sole proprietorships.
2 | Assess Your Revenue Streams
Next on the agenda is assessing your current streams of revenue. Start by creating a list of how you generate income for your book business. You should also include whether or not you actually like doing that type of work. That’s such a critical component of assessing your income because it’s true what they say, “Making money doing what you love comes easy”.
Your list of revenue streams could include freelance work, an online store that sells your products, published work, or even author illustrator appearances. Regardless, you need to conduct a profit-cost analysis for each revenue stream to fully understand whether or not you should continue to offer those items.
For products that you sell, it’s best to consider cost of goods sold (COGS) which includes the cost of materials, labor, shipping, inventory levels, and any fees required to sell your product. Obviously if you are offering your product via on-demand that eliminates held inventory which is a good thing.
3 | Increase Your Profits
As you are analyzing your COGS and profit-cost analysis, it’s best to remember that your number one goal is to have revenue streams that are contributing in a positive way to your book business. Through your analysis, you’ll most likely increase your prices or eliminate costs to meet your goals. You might even discover that one of your revenue streams is costing you more money than you are making and it might be best to discontinue it from your product portfolio.
4 | Create Marketing Strategies
Things are probably starting to feel like they are moving along smoothly. You’ve taken the time to build a solid financial foundation with great bookkeeping practices. You’ve conducted a profit-cost analysis of your current revenue streams and even know which ones to keep and discontinue. All of these things are truly helping you to focus your efforts in your book business. Now it’s time to market yourself to generate even more profits.
But how do you develop a marketing strategy? Well, I could write an entire post about marketing strategies, which I’ll save for another time. But the short version is to define:
your ideal audience
know your competitors
decide which forms of media to share your message (could be digital and traditional methods)
and create a sales funnel
5 | Establish Passive Income
So your book business is really humming. Your marketing strategy has provided a set of new potential readers. It’s time for you to look at passive ways to generate additional income for your book business.
Wait, is there such a thing as recurring income on autopilot? Yes, it’s called passive income. Here are some examples:
blogging and then using affiliate marketing
online courses or ebooks on how to’s
creating how to videos/tutorials and making it available on YouTube
having an online shop to sell your work
selling the book rights for a made for TV show or movie
writing a book for a different genre
I want to mention quickly about third party websites for selling digital prints. There are plenty of them and although they reduce the stress of managing everything, they do not come without a hefty fee that eats into your profits.
Also, listing your digital products elsewhere and not on your own website only invites your potential customers to do the comparison game on pricing.
So before signing up and listing your work on those third party sites, ask yourself if lowering your prices and paying fees are things you can accept. Otherwise, invest some time in setting up your own webstore.
There you have it! 5 steps on how to launch your Kidlit Book Business. Don’t forget to download the roadmap so you have it for reference.
If you think you need accountability and a coach to nudge you along, book a 30 min Discovery call with me.
Be sure to share this post with any other children’s lit author or illustrator who might benefit from my framework.
Where are you currently with your book business? Is there something you would like more details on?