I don’t think a lot of people understand how book advances work with traditional publishing. I get some rather strange emails and comments from those within and without the publishing world, and to be honest, I didn’t even know how book advances worked before I went through the process of signing my first book deal. It wasn’t until I’d been through the launch process, and then the years post-launch, that I saw exactly what happens after you receive a book advance, and how you find out about royalties from a traditional publisher. As with most of the money aspects of traditional publishing from the author’s perspective, this stuff was never ever taught to me in my academic writing courses!
Read on to learn how book advances work in traditional publishing, when to expect your book advance, how authors receive ‘royalties’ and why getting a six figure advance may NOT be in your best interests, as a first-time author.

Why you need to understand book advances

Understanding book advances will empower you to make the right decision about which publishing house you go with, it will help you plan and prosper as an author, and it will also ensure you don’t make the most common mistake every first time author makes, which is to take the first thing they’re offered and assume the ‘job is done’ when you hand in the manuscript!

Common misconceptions around book advances, royalties and an author’s book sales

I was in a long taxi ride with a bestselling author to a library event a few years ago, and we talked about the funniest misconceptions people make when you hit the bestseller list. Like me, she’d written a book that sold really well, but also like me, she had a good work ethic and understood it wasn’t time to relax and rake in the ‘royalties’ – this author was out there doing events and actively promoting her books within the precious post-launch window of 2-3 months post publication.
At the same time, she had many people emailing her, assuming she was sipping pina coladas on the beach and that when they bought a book, she was directly receiving the entire amount!
I have had this exact same misconception emailed to me. People also tend to ask how your book sales are in those first months post-publication, and while you might be lucky to have a generous agent or editor who can look it up for you (and manually email you the figures), as a traditionally-published author, it’s very hard to learn your accurate sales figures in the first 6 months after publication. Why? Because bookshops can return unsold stock, so you may see a huge number of sales, but these may vanish a few months later… it’s complicated!
I had a friend who truly thought that the book advance was for the manuscript, and then as soon as your book hits bookshops, you see OTHER money roll in.

Which brings me to the first misconception: the book advance itself.

How the book advance actually works

Your book advance is just that: an advance on royalties. Think of it like a business loan from a bank on future sales!

Most people think that the book advance is a sum of money for your manuscript. And then you’re going to start going into royalties as soon as the book hits the shops. But this is not how an advance works. It is an advance calculated on an estimated future book sales, and a traditional publisher pays for SO much more when it comes to producing your book than simply writing advance cheques. This is one of the reasons you need to show publishers ‘platform’ when pitching a book. They want to know they will make their money back!

  1. You need to ‘earn out’ your book advance before you will receive any royalties
    Now, not many authors actually go into royalties, in fact, as few as 5% of first time authors ever go into royalties. My first book never went into royalties, because it didn’t sell out the number of copies that would need to pay back the advance. You do actually need to sell a lot of books to earn out your advance! And the bigger your book advance, the more copies you will need to sell before you see your first royalty payment from a publisher.
  2. You will receive a book sales statement / royalty statement every 6-12 months from your publisher AFTER publication
    Traditional publishing is amazing, and I love it, but one of the most strange aspects is that you don’t see sales figures immediately. You get your book sales figures 6 months after the fact – so you will not know how many sales you’ve made until then.
    Like many authors, when my books have been published, I’ve had well-meaning friends and family enquire “how’s it selling?” and to be honest, you don’t know!! I did have a publisher send me the Nielsen Book Scan figures weekly in the first month, once, but most don’t have time! The only way you can see how your book is selling is with this Nielsen Book Scan software, which is costly. All publishers have access to it.
  3. Your royalty / book sales statement from your publisher will include the following:
    When you receive your royalty statement every 12 months, you will find out how many copies of your book have sold, and how much more of your advance needs to be paid back. Now, my literary agent, Curtis Brown, have told me that they don’t typically forward book royalty statements UNTIL the advance has earned out, which I find completely bizarre. So before my advance earned out, I had to specifically email to request them. You must request your book sales statements (from your agent, if you have one, or your publisher, if your book deal was without an agent), so you can keep track of how many books you’ve sold! If you didn’t go with an agent, you will get your royalty statement directly from your publisher, and again, if they don’t send you a statement, make sure you enquire, make sure they have the right postal address for you, etc etc!
  4.  Once you’ve earned out the advance, THEN you’ll go into royalties.
    Once the the print run that needs to be covered, sells, you go into royalties. Your royalty rate will be 10-20% of the book purchase price of the book, depending on your contract.
    So, let’s say your book retails for $30, you will receive maybe $3-$6 per book. With e-book sales, that will be much less (because these are generally cheaper).
    Also, highly discounted books and promotional things like if Amazon has put it on Kindle, for $1.99, or it’s available very cheaply at Big W or Walmart or Costco, you will receive a lesser royalty rate.
    Many publishers have ‘rules’ about royalty payments – eg. if the royalties owed to the author is less than $50, your amount owing will accrue until it goes over that minimum amount. The money will go into your account and you’ll receive a statement, and yes, you need to claim royalties as income when you do your tax return.

The one main element of the advance that you really need to understand is you need to sell a certain number of books to actually go into royalties. And your royalty cheques (while they’re amazing!) are certainly not going to be enough to pay off a house unless you sell millions of copies! So, while your job as an author is to write, yes, it’s also to do all you can to sell more of your books. Events. Interviews. Talks. Building relationships with your audience.

And this is what I didn’t really know and understand when my first book came out. Most first-time authors have NO idea how much they will need to contribute to the promotion and the marketing side of things, and THIS is why publishers and agents look at your ‘platform’ and how many industry associations and networks you have that may mean you sell more copies.

Average book sales

The average book sells 250- 400 copies in its lifetime! This is NOT a lot, and this is why publishers are so keen to see your ‘platform’ when you pitch a nonfiction.

You need to do lots of strategic and well-timed marketing and promotion of your own (and not just harassing your dear friends to buy it but thinking wider and deeper and more laterally about cross promotion) to sell your books. Learn more about what I did to crack the bestseller code with my second memoir in the training above.

You don’t necessarily want a big advance

I know an Australian nonfiction author who had a massive advance for her first book. There was a bidding war and for an Australian memoir, a high 5-figure advance is very rare. She had ‘connections’, so it was assumed her book would sell far more than it did.

This author went into her book deal completely green (as most first-time authors do!) and didn’t understand how marketing differs from media, and what she would need to do to sell more copies of the book.

So now, rather than kicking off her publishing career, she cannot get another book deal.

Your book sales affect future book deals

Every publisher  will be able to access the sales figures from your previous books, so if you’re pitching a follow up, you want them to see that you’ve earned out your advance. So if you get a massive 6-figure advance for your first book and it doesn’t earn out, you’re basically still in debt to your publisher, and it doesn’t look too good for future book sales.

So this is why I’m not necessarily pro getting a big advance. I think a modest or low advance is actually better for you, particularly if it’s your first book, then you can a go into royalties a lot quicker, you only need to make sure you’ve sold, you know, a fraction of the number of copies that you would if you’ve got a six figure advance, for example. My first book, while it didn’t go into royalties, it sold almost 3000 copies, which is pretty good for a first-time author. And I don’t ‘owe’ my publishers tens of thousands of dollars! And I was able to sell a second book (A Letter From Paris) because obviously any agent or potential publisher looking at my proposal for A Letter From Paris looked up my book sales for the first book. A Letter From Paris has now been a bestseller on multiple continents and earned out the advance. So, my agent makes money, my publisher makes money, everyone is happy!

Your book advance is not the only way you can make money from your manuscript

You don’t have to focus so hard on getting a 6-figure advance, even though your ego might like that story!

It looks a lot better for future publishing, pitches and proposals – and income streams – to get a smaller advance but go into royalties quicker.

And you’ve got to understand that the book advance is only one of the revenue stream that you will make from your manuscript.

If you have an agent, for example, or if, if you’re really good with negotiating other sorts of contracts and things, here are just some of the other potential revenue streams that you can receive income from as an author:

  • Movie rights and screen options

It doesn’t even need to be made into a movie for you to receive money! They pay you for a particular amount of time that they get to hold on to the option to to produce your book into a film. I know some authors have made over $100,000 from just having this option extended three years, six years, nine years. Even when the book wasn’t made into a movie.

  • Audio rights

Not every book is made into an audio-book, so if your agent or publisher sells the audio rights you will receive another advance.

  • Story  / serial rights

Podcasts and serial rights are another potential income stream for manuscripts – true crime is particularly popular in this genre.

You’ll generally need a good agent to negotiate and pitch you for these, and there are agencies which specialise in selling these above all else.

  • Territories

If your book sells into a different territory than what was on the contract (for example, if you sold Australian rights and it gets printed in the US, you will receive a sum of money per new territory).

  • Translations

If your book is translated into a different language it will be released with a new print run in a new territory with a new cover. Again, you should receive a separate sum of money for this! It may not happen within the same time frame as your book’s release, it may come much later, so you have that to look forward to. Some books are translated into 11 different languages!

  • Focus on your author career – not the advance

Focusing on getting a six figure advance may not necessarily be the best idea for you. In fact, I think it’s very, very, very risky for your long-term writing and publishing career. If you don’t sell 40 000 copies, you may never get a second deal. And it also just, you will never really see any more money for that book!

And if you want to you no longer career as an author, and to be the kind of author agents and editors vie to work with, then you want to make sure that your sales figures are looking good for every new proposal.

You don’t get your book advance in one lump payment

The other thing I want to talk about with book advances is how they are structured. You don’t sign a book contract and receive your money all in one lump sum.

Let’s say you receive a healthy book advance from a Top 5 Publisher and it’s $100,000: you will receive that in either three or four payments and they could be spaced out over two to three years, depending on when your manuscript is due to the publisher and when they slate it for publication.

How it’s structured is you will receive a portion upon signing the contract, a portion upon submission of manuscript, and a portion within two weeks of publication.

This protects the publisher from you not submitting any work (or working cooperatively with their editor!) and it also means that you want to ensure they have something in the contract about the LATEST date they will publish your submitted manuscript! This might be within 2 or 5 years of submission. You need to check!

Making good decisions for your long-term career as an author 

Knowledge truly is power, and I wish I’d known exactly how book advances and royalties worked before I signed my first book deal. It’s my hope that you’ll use this information about book advances to make a more empowered decision about whether you will or won’t go with a literary agent or a potential publisher. You don’t just need to look at the advance sum itself, you need to consider all the other factors that go into the success of a book! Sometimes it might be better to choose a boutique press over a Top 5 Publisher, and vice versa. Sometimes you might be better off pitching without an agent, or you might be better off taking that agent who is a little cold but gets good deals for audio rights – if that’s your deepest desire in the long-term, for your manuscript. Choosing a publisher or an agent over another one really depends on YOUR goals for your book and what you most want in your author career.

In summary

The book advance is only one revenue stream to consider from your manuscript, and focusing on a six figure advance may NOT be in your best interests, particularly if it’s your first book.

Where to now?
If you’ve signed a deal (or you’re about to!) and you want to know how to make MORE sales of your forthcoming book, I share exactly what I did (and what’s proven to drive the needle with book sales) in the Bestselling Author Code.

YOU’LL ALSO LOVE:
How to get a book deal before writing the book
How to get your nonfiction book traditionally published
What is a writer’s platform?