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There are several ways to evaluate a market, as outlined in Josh Kaufman's The Personal MBA, which should go into an assessment of whether a business idea should be investigated further. I've taken his concepts and applied them to the business of being an indie author.
This is an excerpt from Business For Authors: How To Be An Author Entrepreneur, available in ebook, print and audiobook.
We've seen the outliers of the uber-successful indies making 7 figures, but is the business model really sound for the rest of us?
Kaufman suggests that you rate each section from 0 to 10, where 0 is extremely unattractive and 10 is extremely attractive. I've put my scores in below based primarily on my fiction, so you can add yours in the comments at the bottom of the post if you want to join in.
(1) Urgency. How badly do people want or need this right now?
In general, people only desperately want a book if their information need is immediate (generally non-fiction), or they are about to get on a plane with nothing to read, or if there is a ‘must-read' book that everyone is talking about e.g. 50 Shades. But in general, books are not an urgent purchase.
(2) Market Size. How many people are actively purchasing things like this?
I don't have the latest figures, but the market for books worldwide is certainly in the billions of dollars. The question is – how does that break down for your type of book? For example, compare a romance novel ebook selling on Amazon in English with a poetry chapbook in Dutch selling in a unique bookstore in a chic corner of Amsterdam.
Think about the market for your book/s in multiple dimensions:
• Genre – big sellers like romance, sci-fi/fantasy, mystery/thriller vs lit fic or poetry. AuthorEarnings.com has a done a great job of giving the data behind the assumptions.
• Format – ebook, print, audio. If your book is only in print and only in a local bookstore, the market is small.
• Distribution platforms – the big ones are obviously Amazon, iBooks, Kobo, Nook but there are also platforms per country. If you're only on one, or not on any, your market is small.
• Language – English is the biggest seller in digital format and sold in the most countries with US and UK being the biggest markets. In Europe, German is the next biggest language seller for indies, with Spanish coming next. Although the Mandarin or Arabic languages would reach a lot of people, indie authors don't have platforms to reach that segment yet. If you are writing in Czech, your market is smaller than if you're writing in English.
One of my pet peeves is when authors say, “my book is so original that it doesn't fit any other categories.” We all write books that are original in some way. But clearly, if it doesn't fit any category on the biggest bookstore in the world, then there is likely to be no market for it, or at least a very small one. You have to have a look at the most popular categories on Amazon in order to assess the potential market. With self-publishing, you get 2-5 categories so you can be cross-genre.
Score: 8 – for mystery/thrillers which is the genre I write fiction in and one of the top-selling genres, although indies make up a smaller proportion of the top-sellers right now. That's OK … I have time!
(3) Pricing potential. What is the highest price people will pay for this type of product?
With books, we are down the lower end of the scale. I read 99% on the Kindle and I prefer to pay under £10 for a book, preferably under £5. The most I have paid for a book was ~£100 for the oversize, full color edition of Carl Jung's Red Book.
There are some non-fiction authors who will charge several hundred dollars for essentially a PDF ebook that they would only be able to sell for max $15 on Amazon. They call these guides or courses, but the information is similar to a book. That's one way to get higher prices.
Personalized, limited edition hardbacks for super fans may also hold higher prices, for example, Cory Doctorow's hand-bound, hardcover of With A Little Help for $275.
But we all know that books are a commodity game – we price low, and we need to sell in bulk to make decent money. The bickering about whether it's 99c or 2.99 or even 8.99 is a pittance compared to the price that people pay for other things.
Score: 2. Prices are low in general and we don't have much of a chance for variability.
(4) Cost of customer acquisition. How easy is it to acquire a new customer? How much will it cost to generate a sale?
This is an interesting question because most indies sell through established retailers like Amazon, Kobo, iBooks and Nook who already have the customers. The difficulty is getting the customer onto our own book sales page and this is generally through marketing activities. Most indie authors use free and low cost marketing tactics, and occasionally spend a few hundred dollars on BookBub or equivalent as well as print book giveaways. I haven't personally attempting to calculate a cost of acquisition, but in general, I think having a first book for free in a series and using ongoing marketing techniques keeps the cost down.
Score: 7. Indie authors use free and low cost methods to attract customers on retailers where customers already shop.
(5) Cost of value delivery. How much does it cost to deliver this product?
Professional editing and cover design generally sits between $500 – $2000 in total, and are recommended, although many indies do without them.
For ebooks, the delivery cost is taken out of the royalty in 70% rate for Amazon, which is why you should be minimizing file size by removing images at that level. But in general, delivery rates for ebooks are low to non-existent. Publishing on the ebook stores directly is free, and then the author is paid a royalty.
For print books, print-on-demand delivery costs are just billed to the customer for shipping, and the author receives the royalty from what's left.
Score: 9. Very low delivery cost if using ebooks and print on demand digital model.
(6) Uniqueness of offer. How unique is your product in the market and can people copy you quickly?
Yes, every book is unique, but the product itself is not particularly unique. I will absolutely acknowledge that there are other action-adventure thrillers out there in the Dan Brown-style niche, and my ARKANE novels fit in that grouping. Any of those books may satisfy a customer's desire for fast pace, global locations, religious conspiracy and explosions, but only my books contain my spin on tales created from my own adventures.
So for fiction, this question is hard to answer and probably comes down to the author's voice and the customer's desire to hear your particular spin on the genre in the future.
For non-fiction, it's a certainty that you can write similar books in a niche and customers will buy lots of books on the same topic. Just look at how many diet books there are, or how many books on specific self-help topics.
In terms of copying, you shouldn't be worrying too much about piracy. Here's a roundup on why you should be more concerned about obscurity.
Score: 5. Uniqueness based on the author's voice within a genre.
(7) Speed to market. How quickly can you create something to sell?
Speed to market is one of the most commonly cited reasons to self-publish, and indie authors certainly have an advantage over traditional publishing here. We can upload an ebook and it will be selling in 4-72 hours, depending on the site. We can get even print books up for sale within a week or two. Traditional publishers have such long lead times and pipelines that many authors won't see their books hitting the shelves for 6 months – 2 years after they have completed the book.
But that's the publishing side, and the creation of the book to sell will take as long as it takes you to write, edit and polish your manuscript to completion. The time that takes will depend on what you're writing, whether it is in a new series, how much research you need, how experienced you are and other variables. What we can say is that the more books you write, the better you will become and often, the faster you become too.
Score: 10. With online technologies, speed to market as an indie is super-fast!
(8) Upfront investment. How much do you have to invest before you're ready to sell?
I've tried businesses that involve a lot of upfront investment. Try starting a luxury scuba diving charter boat business in New Zealand! Or property renovations for on-sell. Both of those require large investments upfront before anything is ready to sell and you can start to see some return. I made substantial losses and gave up both of those ideas. (If you're interested, I go into a lot more detail in my book, Career Change.)
Authors have a very low start-up cost, as the overheads are practically nothing with a book. You only need a computer and an internet connection really, or just a notebook and a cafe!
It's definitely recommended that you budget for a professional editor and a professional cover designer, but many indies manage without. Publishing is free or very cheap if you know what you're doing! If you don't know what you're doing, read this.
Score: 8. Low start up costs and high profit potential with volume.
(9) Upsell potential. Are there related products that customers might also buy?
This is the power of the backlist, which many authors who have been writing for years are now realizing as they get their rights back. The backlist seems to be any book that is not currently the one in the current promotional cycle, but of course, with digital sales, there is no end to the promotional cycle. A book is always new to a new customer, even if it was written years ago.
If you have 10 books in a similar genre, or the same series, you absolutely have related products that a customer may buy. You might also have box-sets containing more of your books for a better price, or other products like consulting and courses (mainly for non-fiction authors).
The latest Author Earnings report demonstrates the earning potential of the backlist, so writing more great books should always be the focus if longevity in this market is your goal.
Score: 10. If you focus on writing more books in related niches, your backlist will grow and you can always upsell.
(10) Evergreen potential. Once the initial offer has been created, how much additional work will you have to put into it in order to keep on selling?
Books are fantastic products because they are scalable. That means you create them once and then you can sell them multiple times in multiple formats. Compare that to my old job as a business consultant, where I was paid once for every hour I worked. Work for time is not scalable and we will never make any more time. So scalability is one of the fundamentals of the book business model.
I knew all about scalability, it was one of the main reasons I moved into the online product creation space in 2008. But the penny only dropped for me on evergreen potential in early 2013 when I realized that fiction doesn't age, and the stories you write today can keep selling for the rest of your life and even after you die. Compare that to non-fiction, much of which does age and therefore have to be updated or removed. Check out the video below, which I recorded when I realized this!
My business model also used to include online digital courses, which also age and have to be updated or removed. I only have a few left now, in the ProWriter series and courses on writing, which are more evergreen. Now, I am moving as much as possible into the fiction evergreen model for my future income.
Score: 10 – for fiction, probably a 7/8 for non-fiction.
Kaufman suggests that a score of under 50 means you should try another idea. I make my score 70 which means being an indie author writing fiction reasonably fast in a popular genre is a decent business idea. Judging by the numbers at AuthorEarnings.com, we already knew that! But it's interesting to break it down.
I go into the detail of the business models for authors in my book, Business for Authors: How to be an Author Entrepreneur, available in ebook, print and audiobook formats.
I'd love to know what your numbers come out at, and what your thoughts are on this type of business evaluation. Please leave your thoughts below.
Top image: Flickr Creative Commons calculator by Anssi Koskinen