It Takes Money To Make Money


There’s an old saying: it takes money to make money. I hate to tell you this, but there’s no way around that.

But let me back up for a minute. My wife tagged me further down the thread in this Twitter discussion earlier today.

Note 1: I am not picking on Oghma in anything I’m about to write. He asked some fantastic questions today and exhibited the mindset of one truly willing and ready to learn. That’s where all of us started.

Note 2: The thread itself is pretty good. It’s worth a read if you want to sell books.

Now back to the meat of the post.

Self publishing a book means going into business for yourself. Congratulations! I love small business. Welcome to the lifeblood of America! You’re foreign? That’s fine, too – way to go helping to make you’re country great!

But going into business for yourself means that you want to make money. And if you want to make money – real money – in business, you have to do marketing. It is not optional.

Now, some forms of marketing are cheap. I run this blog for an annual price tag lower than what it would cost me to take my family out for a single nice dinner – and even that is a cost that I mostly share with two small businesses. It’s cheap. But cheap marketing brings two issues.

  1. Spending less money means working harder. There ain’t no such thing as a free lunch. You’ll pay one way or another. Less money means more time and sweat equity.
  2. Spending less money often (but not always) means the marketing is less effective.

Now, rule 2 isn’t magic. You can’t just drop a million dollars on advertising and expect to just get it back. You still have to work at it, be smart about it, and choose the right kind of marketing. But if you want to make money, you have to spend money.

So Oghma is asking the exact right questions. He knows he needs to spend money. He’s trying to figure out how to spend it intelligently.

Here’s the thing about the publishing market: spending a lot of money marketing one, single, solitary book is almost always a waste of money. If you only have one book, it’s very difficult to get a good return on investment. It can be done – especially if you’re very good at marketing, or if you’ve written a very good book. But it ain’t easy.

Let’s run through some math as an example. I’m not the best Facebook marketer, but neither am I the worst. And I don’t have the best web sites for my businesses, but again, neither do I have the worst. I’m in the somewhat typical range. So this is actually a pretty reasonable example.

On my typical Facebook ads these days, I can usually achieve a click through rate between 4% and 8%, discounting the occasional outliers in either direction. That means that out of every 100 people who see my ad, 4 to 8 of them will click through to my web site. This is a pretty decent rate in the marketing world.

Depending on the ads, the targeting options I’ve selected, the product I’m marketing, etc, those ads usually cost me between $0.50 per click and $2.00 per click. That’s not really terrible, either.

The next step of the funnel is conversions. For every 100 people who click through my ads, typically somewhere between 4 and 8 will actually buy a product afterward. That’s also pretty typical.

But it’s also the problem.

Let’s assume the best case scenario on both fronts.

  • 1250 people see my ads.
  • 8% (100 people) of them click through to my web site.
  • 8% of those (8 people) buy my product.
  • My ads cost $0.50 per click.

I’ve now spent $50 on ads to get 8 sales.

Now first of all, this is a best case scenario. I, personally, rarely have a marketing campaign do this well. If I could pull it off every time, I’d be quitting my day job and working at the dojo full time.

Second, this is fantastic… for my dojo. A typical new customer at the dojo nets me either $95 (ish) or $250 (ish). Let’s take the worst case number here: $90 per sale, or $450. I spent $50 for that. That’s $400 in revenue increase, and that’s fantastic! Seriously, if I could do this reliably I’d quit my day job.

Now, let’s talk books. Say I’ve sold 8 e-books for this at a cost of $4.99. Amazon gives me 70% royalties, so that’s $3.493 per book. For 8 sales, I’ve made $27.94 – well less than the $50 I spent to get it. At this rate, the more I advertise the more I’m losing money.

And, remember, this is a good ad campaign.

The secret (It’s not really a secret – you can find this all over the internet) to making money off of this in the book world is to have lots of books – preferably in the same series. Then, some portion (but not all) of the customers who pick up one book will buy all of your books, or at least all of the series.

So let’s add one more assumption: let’s assume that 12.5% of the people who buy book one in my series will end up buying the entire series, and let’s assume that I have 10 books. Note: I don’t have many books out yet, and I don’t have good figures for this rate. I’ve completely made this number up for my example.

Now I’ve sold 8 books at $3.493 per book, for $27.94. And I’ve sold one of those people (12.5%) another nine books ($31.44), for a total return of $59.377.

My return isn’t great in this example, but at least I’ve made a profit. Multiple books change everything. And in this example, now I’m at a point where I can start tweaking every step of my process in the hopes of improving my return.

  • I can try to make better ads. If I can raise my click-through-rate to 10% instead of 8%, I’ll sell more books – and because of how click-ads work, I’ll probably pay less per click.
  • I can try to raise my conversion rate. If 10% of ad-clickers buy instead of 8, I’ll make 25% more money overall – and now the return on my ad money is starting to look pretty decent.
  • I can try and convert more “first book” readers to “series readers.” This might mean writing a better book. Or it might mean putting better ads or better sample chapters in the back of book one.

The point is, once my return on investment is positive, I can start tweaking it to make money.

But if I’ve only got 1 book, then just about the best I’m going to do is spend $2 on ads for every $1 I make back (my general experience is more like $5 in ads for every $1 I make back, on a single book).

The moral of the story: writing 10 books won’t necessarily make you rich. But if you want to get rich from writing, you pretty much have to write 10 good books. Unless your name is J.K. Rowling.


Russell Newquist

My name is Russell Newquist. I am a software engineer, a martial artist, an author, an editor, a businessman and a blogger. I have a Bachelor of Arts degree in Philosophy and a Master of Science degree in Computer Science, but I'm technically a high school dropout. I also think that everything in this paragraph is pretty close to meaningless. I work for a really great small company in Huntsville, Alabama building really cool software. I'm the owner and head instructor of Madison Martial Arts Academy, which I opened in 2013 less to make money and more because I just really enjoy a good martial arts workout with friends. I'm the editor in chief of Silver Empire and also one of the published authors there. And, of course, there is this blog - and all of its predecessors. There's no particular reason you should trust anything I say any more than any other source. So read it, read other stuff, and think for your damn self - if our society hasn't yet over-educated you to the point that you've forgotten how.

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