Posted on Friday, May 31 2024
Today, Erika Everest joins us to talk all about the book Profit First and how we can apply sustainable business strategies to our author career. It’s an awesome episode that may just change how you think about business.
Join Season 1 of the Storytellers Rule the World Summit here for access to 4 virtual summits and a mastermind group for fiction authors: https://academy.storytellersruletheworld.com/summit
Read Profit First here: https://mikemichalowicz.com/profit-first/
#83: Episode Transcript
Michael Evans: [00:00:00] Hello everyone, and welcome back to another episode of the Storytellers of the World show. And today we have a really special episode because one of the things that is somewhat of a dirty word, we always talk about growing and growing as authors and making more money, but that’s really revenue.
What we’re really talking about in the kidney is making more revenue. But at the end of the day, What actually pays our bills and what we are left with isn’t revenue, it’s profit, right? That’s what we get to take home as authors out of our businesses. And that’s what we get to be able to, save up for rainy days and maybe potentially, have savings and security.
That doesn’t come from revenue. It comes from profit, which we don’t often talk about as much. I think we need to, and Erica thinks that as well. And Erica basically wants, I was like, what do you want to talk about, Erica? I want to have you on the podcast. Erica is brilliant. And she goes I think we should talk about this book called profit first, which we’ll link the book down below.
And [00:01:00] I’d heard this book thrown around quite a few times. It’s I’d say like a pretty popular book in the optional community. But I never read it and I read it before. Our conversation today. And I think it’s really interesting. I think it’s something that if I had read five or six years ago, it certainly would have changed how I approach my author career.
And I’m curious for you, Erica, before we dive into anything, let’s just zoom out, tell us a little bit about your author career up to this point. And then we can start talking about how you ended up reading profit verse, getting down this pathway and like all your awesome advice for us on how we should manage.
Ultimately our finances as authors, which I should just add a quick disclaimer. Me and Erica are both not accountants. We’re not financial advisors. So anything we say in this podcast is not financial advice, just two fellow authors trying to help you. And any specific questions we definitely recommend, consulting your financial advisor or something of that sort.
But Erica, tell us just before we get into all the money talk, all the money talk, talk to us about how you [00:02:00] got started as an author.
Erika Everest: So like many people, sir, stories are always. There in the background, but it was 2016 when I first discovered the possibilities of the ebook revolution and the new wave of storytelling and indie publishing as a viable business industry.
So I got involved with beta reading, proofreading and editing for a small publisher. Then started writing my own work on the side. Did Nano the first year in 2017, didn’t win. But I got a good chunk of words done. From there, started putting together the first book of my trilogy. But, first series.
There are so many things you learn after you’ve done them. I wish I’d known this at the start. But some of the things I feel I did well were in terms of growing community around those books and around the genre, which then helped me launch them well. But some things I didn’t do [00:03:00] was I was just slightly to the side of the genre and I missed the mark somewhat.
So it’s I’m really proud of those books, but they’re, to me, they weren’t the ones worth investing all the time in. And then. That sort of question of what am I doing and why, where is the value proposition? While writing those three fantasy fiction books, I also was working on some author help books around newsletters and growing an audience.
And it’s all this sort of sense of author improvement and author mindset, that brought me to Profit First, which was recommended to me by an author friend who had been recommended to by someone she had met at a conference. Just, those word of mouth things that are so valuable. I guess you’re read it and this is such a simple concept and yet it’s a complete switch in your mindset.
So for my background I’ve degree in economics and statistics. Been strategic consulting for [00:04:00] around 20 years. So that’s my other life, my day job, but that thinking is being applied then into the author space saying, so how would you adopt this? And how would you adapt this? And what I realized was that naturally over time I had, tried to identify, is this worth investing more in?
Is this the right choice? Is this expense? a good thing or is it just a shiny new toy? And some of that I’ve been doing almost intuitively, but reading Prophet First put into very stark relief. And when I went back through what am I spending money on? What subscriptions do I have open for author stuff that I’m not actually using?
Oh, don’t need that, don’t need that, don’t need white. A friend of mine has what she calls her app graveyard, where she has, every time there’s a new deal on a, this tool will change your life. It’s Oh, I’ll get that because I might need it one day and she’s never used any of them. And yes, one day we’ll come, but right now is at the best use [00:05:00] of time, money, et cetera.
Lucky in that financially outside of writing, I’m very secure. That’s allowed me to be more flexible, or lax even, in how I approach my writing business. But I did decide last year that I wanted it to be a business. I wanted it to be functioning by itself, not just because I kept feeding money into it from other sources.
And then that sort of led me to think about how do you restructure to it being self sustaining? Because only at that point can you really invest in growing it beyond, the So that’s how I ended up here.
Michael Evans: No very fitting. Like the thematic change in you shifting your business. As an author, sustainability, because I also know that you found it right around that time, the author sustainability conference with that team.
And then before then, where, helping lead 20 books in that CUNY in that conference, which it feels like, we’re seeing like almost like a shift in ethos, in terms of like [00:06:00] where this industry is going. And I think profit first is a part of that because, what you’re saying is very logical in terms of something very simple of don’t want to have my business be eating money from other areas of my life, but in practice in practice, that’s been much more challenging. So why don’t you walk me through in your words, what the framework of profit first is. at the simplest level.
Erika Everest: So profit first is structured around the equation sales minus expenses equals profit.
And the standard accounting thing is you grow your sales, the more sales you get, you take away the expenses, the more profit will be left over. What that fails to account for is that as your sales grow, Your costs, direct and indirect, likely grow too. You may not actually change your profit, or in fact you could negatively affect your profit, depending on what balance [00:07:00] of increased revenue for the increased expenses you have.
So that focus on sales, and we hope that profit will eventually turn up. The, if you just keep hustling and pushing for more sales, run a promotion, run a sale, get in some more clients this month, hit your quota, hopefully profit will happen. The idea was flipped. That’s a mathematical equation, A minus B equals C, but you can flip them around and say sales minus profit equals expenses.
The idea being here, that instead of profit being whatever is left over, you decide how much profit you want. And then you say what’s left over is this is the budget I have to spend. If I have expenses that exceed my set budget, no I don’t get to say oh this month it’s okay I’ll borrow. You say no, I need to find a more efficient way to do it.
Do I really need that thing this month? Do, is there a cheaper alternative? One [00:08:00] for me when I was starting out was, oh, for custom images for my Facebook group, my newsletter, I got Shutterstock. And then I discovered that I was paying 50 for five images. And when I got a deposit photos bundle deal, I got a hundred images for 39.
Oh for exclusive images and so forth, a lot of them are the same. Yeah, there may be one or two that are like only in one site or the other, but we’re still talking about stock photo. Someone somewhere is going to have the same picture as you. So the question Is it really worth to be paying 10 a photo versus 40 cent a photo?
Is it going to be that much higher quality? Is that different image on your website going to, raise the bar of your income? Probably not. So is there a cheaper alternative that you can be using that will do the same job? Can you put off this expense until another month? Do you really need to, run a promotion?
[00:09:00] For this, or pay for this booktalker to promote your book this month, maybe it’s next month we’ll do that instead. And it’s that idea of pushing the boundary of, or rather holding the boundary of saying, this is all I have to spend. And just because there’s that little bit over there in the profit account, Doesn’t mean that I get to borrow that because that is for another purpose.
And then
Michael Evans: profit, like you need profit to, for,
Erika Everest: yeah. But again, people talk about, Oh, we reinvest the profits in our business. Actually that’s really good because we’re growing our business. And it’s no, it means your business isn’t profitable because it cannot generate a profit without stealing that money back into the business, which means you’re not able.
And it’s that’s the thing. There are an awful lot of financial lies we tell ourselves, saying, if we just get one more sale, we’re reinvesting in the business. We’re, and actually all we’re doing is throwing money in the [00:10:00] hopes that something is going to work. It’s spaghetti at the wall, hoping something sticks, not a very viable strategy of this is what I’m going for.
This is how I’m testing it. This is how I know it works. And and the more money you have to start with, like if you get a, say, I’ve got, I’ve I see it in writing groups all the time. If you suddenly had 10, 000 to spend, what ads would you use on it first? And it’s like, how can I blow my budget to really give myself an oomph?
Stop. Is your product ready for that kind of oomph? Is this the best use of money? Because when we have the money there, we’ll try lots of things. We’ll spend it all. When the money is like ring fence. No, actually, you only got 1, 000 to work. You’ll find a way to be more efficient with that money, be more effective, be more frugal, to be more creative with how you spend it.
And I think that’s, because that actually then promotes with your business, if you can be creative at a small budget, and efficient and effective at a small budget, [00:11:00] that scales too. So you can still be effective with more money coming in, but you’re still only doing a small percentage of that money needed for expenses because you’ve got a better process, a system way of minimizing.
That’s why there’s compound effects on it.
Michael Evans: And that system that you’re talking about in terms of okay, I understand what you’re saying. Like I make 1, 000 in a month. I shouldn’t be spending all that thousand dollars in that same month or the next month. I should instead, profit first I should have a portion of it that is set aside as profit, not to later go back into the business, but now is like actual profit.
That, can then go into one’s life, but how does one actually do that? In the sense of like, are you taking, are you paying yourself, like sending yourself an invoice for the profit each month or walk me through how, like [00:12:00] systematically how you would actually turn your author business.
Into a profit first one.
Erika Everest: So Mike Wolowitz’s whole idea behind this is to use separate bank accounts. Now, some people might think, oh, that’s a bit much, but he said that time and again when he was testing it, and I found it myself, that when you go and look at your bank balance and say, oh, there’s plenty of money there, I can afford to do this month, but you forget that you still have to pay taxes and have you paid yourself a salary?
And what about the expenses coming up? And oh, I need that new software next month and I need to renew my hosting on my website. Where’s that money going? But I’ve got all this money here right now, so I’m going to spend it. Because that’s human psychology. If it’s there, we’ll use it because we think it’s there.
And it’s hard to remember and keep in your head all those future things that money is already earmarked for. So by taking the money out, so you get all your money in from all your different revenue sources, this money from Amazon, [00:13:00] that from Kobo, this from your subscription, it all lands into your author income account.
And immediately, you take your profit out first, so say 2 percent of all that money. goes out into a separate account called profit. Don’t touch that. Then you take out your tax money because sometime around April the tax plan is going to come knocking and say that you’ve got a big bill. You want to have the money there ready to pay it.
So you take that out now, so every month you’re taking out that so that what you’re spending Or what you’re earning is automatically being accounted for tax so you don’t get a surprise and a nasty shock at the end. In fact, you might even get a pleasant shock of, oh, we’ve got leftover bonus, and then you have your salary.
This is a weird one for authors because we do it for the love of it and our profit is going to be our return. No, your profit is your business return. It’s for having invested in the business. You as a worker in your company deserve to get paid. [00:14:00] It’s weird in the author space because we can’t really outsource being the writer.
If someone else writes my books, they’re not my books anymore. However, in terms of working out what’s reasonable compensation for me and for my time? If I was to ghostwrite for somebody else or work at someone else’s company in writing as a co author, what would I be expecting to be paid per hour?
Or alternatively, if I was to hire someone else to write my books, even though you can’t really, what would I have to pay them? And then you should be getting paid at least that.
Michael Evans: And
Erika Everest: then for social media, how much time do you spend, doing that? How much would you have to pay an external person to do it?
Maybe it’s 20 an hour. So if you’re doing five hours of social media a month, you should be putting 100 an hour, 100 a month, aside for paying your social media person. It happens to be you, but one day it won’t be. And if you’re doing it for free, then your business won’t be able to afford to help you outsource when the [00:15:00] time comes.
So it’s working. What is your time worth at the different rates of the type of work you do? Whether that’s writing, whether it’s editing, whether it’s writing an outline and that thinking time that goes with it. For me, I’ve used a benchmark of ghostwriting rates and then pre made rates for plots and editing passes and proofreading rates.
So anytime I do That sort of work for myself, if I’m doing a proofreading pass, if I’m doing a ghost writing, or a first draft writing, if I’m thinking about what the plot is before I start, each of those, there are providers in the marketplace. Check what they’re charging. What would they charge if you weren’t doing it yourself and you asked someone else to do it for you?
Pay yourself equivalently. Maybe you’re going to give yourself a discount. Maybe it’s only going to be 80 percent of that because it’s just you, not somebody else. But it’s that idea of your time is valuable. And if your business doesn’t start paying you, you’re going to find yourself struggling to pay your bills.
Because if you put all your money [00:16:00] back into the business, who’s buying groceries this week?
Michael Evans: No. Yeah, I know. I agree with you. And I think there’s kind of two tracks about for an author who is Operating a business that is generating revenue. That’s maybe consistently above a hundred dollars a month, which seems like a low bar, but I’m going to guess that most people listening might not be at that bar yet.
There’s nothing wrong with that. Most people are starting and or are trying to get to that point. So if you’re more, we’ll call it intermediate to like advanced author in terms of your business income, there’s like actual revenue in your business. Then I can see this whole mindset. being really useful, especially because I think there’s this fallacy that we can get into, which is like, Oh, okay, I’ll reinvest everything to keep growing.
But the truth is every business stops growing at some point. And when that happens and you’ve kept reinvesting up until that point, either one, you’re a magician and can predict when that moment is, most [00:17:00] people aren’t going to be able to do that. So then when that moment happens, You’re going to have to cut your expenses.
And for most author businesses, it’s not firing, 100 employees of a public company. It’s firing yourself. And that’s very brutal to have to go through to have a business generating revenue, but to have to fire yourself from it. So that’s where I like profit first, obviously is like super, super useful, you’re suggesting paying yourself as a ghostwriter.
Inlet, I’m just going to use a random rate because there’s different countries and, different types of things, but let’s just say 20 bucks an hour. Because I think that’s, just good for math. Okay, and you did spend 5 hours and social media that month. Okay, great. Or you did spend 5 hours writing that month.
So you would owe yourself 100 dollars. But what if your business makes 0 that month? How do you approach that with the profit first mindset? There’s no revenue to pay out.
Erika Everest: So the profit first mindset is not based on a number, it’s based on a percentage. And what they have is target allocation percentages, TAPs.[00:18:00]
And the target is ideally, if your business is healthy, you should be paying this amount for tax, for profit, for yourself, for your expenses.
And then the ideal owner compensation for a regular company, obviously authoredom is slightly different, was, is recommended at 50 percent for the, no, up to 250, 000 a year, which I think is pretty much all of us. If you’re one of those, above six figures a year, five and a half million and more, good on you, but you’re having a different conversation.
But for most authors, they’re in that small. business space where really they are the only employee, the author, and every other hat that person wears. And maybe a part time PA, an executive assistant who does some social media or other admin on an hourly basis. So it’s a small group and it’s 50 percent of the money should come back to that person.
But [00:19:00] initially most At the moment, most of us are probably, whatever comes in goes out immediately as expenses. So we’re talking about 100 percent or at least 80, 90 percent of our revenue is expenses because we manage to spend it each month. So if we’re starting with 80 percent for expenses, there’s nothing left to pay yourself as a salary.
You’re like 80 percent for that, 2 percent for profit. We need to pay tax as well. So maybe you’re only paying yourself 5 percent initially. But then your target becomes next month. What if I drop that 80% down to 60% and say, I can only spend 60%. So 60% of what I earned this month, and maybe I only earned $40, 60%, I’ve got $24 to spend next month.
What do I really need? And what is a lot of things that are draining money from my account that I am not using? Looking at that, then it’s okay, how can I cut back on my expenses so that I can start, [00:20:00] my expenses go smaller so I can start making my other areas bigger. And it’ll take time.
It’s the type of transformation that can happen over a year or more. So Mike’s recommendation is you change the targets by about 2 percent every quarter. So you start off at 60 percent on your expenses, three months later it goes down to 58%. Three months later it goes down to 56%. So it’s going to be a long time before you’re getting it down to 25 percent as your expenses.
But then that’s also something to think about in terms of, how long is it going to take you to get to that ideal point? Of course it’s very different. If you’re working on 100 income a month, those percentages make a big impact. If you’re talking about 1, 000, it’s easier to manage your expenses on a smaller percentage of that.
But again, it’s like also then what activities are you doing? What expenses are you using that are bringing back in profit as opposed to just sales? [00:21:00] Or maybe not even. Think of all the overheads we can have your website hosting with that fancy theme and something else, graphics and our subscription to this, that and the other thing.
Do you need all of them? Some of them you do. But the question, what can you eliminate? What is absolutely crucial to your business and revenue generating, i. e. your word? If you’ve got a subscription to Grammarly, or ProWritingAid, or some sort of writing software like Scrivener that is really good for you in terms of your productivity, that’s critical.
If it’s something else that’s nice to have, do you need it? If you’re paying 30 a month for access to Mac for Windows so that you can use Vellum on a license to do this, do you need to? Do it as a once off thing on a free program? It may not look as pretty. Will you lose that many sales because the formatting is [00:22:00] slightly less than what your ideal is?
And if the answer is, the readers of my genre are super picky and it’s all about the special editions, great. You know what to do then. But most people do not need the hardback with foil, embossed imaging, and sprayed edges on their first book release. What’s, what is an appropriate spend to give a good product and get it to market and see how it performs.
Because one of the things we forget a lot of the time is when we talk about marketing, we always make the caveat assumption, assuming that your book is really well written, it’s a great book, then here’s how we market it and sell it. But sometimes, as in my case, your first book isn’t that great. You don’t know what you don’t know when you’re starting out.
Maybe your third or fourth book is where you really hit your stride. But if you’re throwing everything, trying to make, that square peg fit into the round hole, it’ll suck [00:23:00] you dry. But it’s not going to necessarily move the needle the way you want to. So don’t, get it to the market. See whether or not it’s going to resonate in the way that it’s going to make, yeah, this is the one.
It’s worth putting that money in because it’s really taking off. Jamie Albright’s first book was like that. She’s told the story where she sold blood, she sold her plasma to pay for the edits for that book because she wanted it to be the best she could be. Put it out there and it started flying off the virtual bookshelves.
She’s Where did this come from? What do I do now? Do we invest in more ads? What? So that was a huge success story and the market proved it was worth keeping going. But if you go in assuming that and you’re wrong, you could find yourself in an awful lot of debt with very little to show for it.
Michael Evans: No, I mean that’s a very similar [00:24:00] story, but on the debt side of what happened to me, because when I was getting started, I. Was on the impression that I needed three or four books to even like really begin and like even begin trying to market. So I published three or four books, which was, I got the cover and the editing cause I felt like I needed it all.
I bought like all the ISBNs cause again, I thought I needed it. And like that was like four or 5, 000 really, especially cause like it was a website. There was so much things that like, I didn’t actually need, but like that I thought I needed to get started. And then I was like now that I have these books, I can start marketing them.
And spending money to do that. So then I’m spending money on Facebook ads and the out of pocket expense for my business was like close to 20, 000 I spent out of pocket between ads. I also actually technically published nine books before I started marketing because I thought once I get a big enough backlist, then the marketing will go really quickly.
[00:25:00] And I was lucky that I was young at the time where
Erika Everest: I’m
Michael Evans: still young, but I was living at home. So I was in a unique situation where I was able to. Most of the income I was getting from my job back into the writing. So I would serve at night, serve working very long hours. Then I’d wait, completely full time book a month, just trying to get it out.
And really like I had this delusion that, It’s going to grow enough next month where even if my current expenses, I can’t afford right now, like next month, because of the marketing investment, it’s going to generate some sort of new sales that’ll pay back for everything and just waiting for that moment.
But there was really two flaws on strategy. One is that Amazon takes six days to pay you. So even if you thought that was true you’ve got some waiting time, but then the second thing, which was like. And by the way, I was using a credit card actually to try and alleviate that where I was putting actually all of my ad spend [00:26:00] on a credit card to give it like the 30 day window, which like, don’t get me wrong, is technically smart from a cash flow perspective, but is a super dangerous game.
If you don’t know what you’re doing. And I went completely broke cause I lost my job when COVID happened, there was no money. I couldn’t keep doing it. And I’ve realized that Oh, like very quickly, the bank account was at zero playing that game. Yeah. And I think it took me until I was at my 12th book, going on 13th book to finally get this madness to maybe start eking out not profit, but somewhere where I wasn’t pouring in money from out of the business into the business.
And, we’re talking like, maybe I’d already slashed my ad spend at that point. I’d like slash a lot of expenses cause I was really feeling the burn, but I maybe got it to like where I was making 1, 500 in a month in revenue on 1, 350 or 1, 400 in expenses. But then I realized that every new book I published, I was still losing money.
Until I’m like making that back. So it was just still it was terrible. So then I just had to sit down [00:27:00] and be like yeah, this business doesn’t work. And then, you might think that’s the only way to start a business, but the next month, cause that was October when I stopped my writing business, really, I was like, this is not working.
So I stopped all the expenses and the income dwindled, but then I realized there was a new way to approach it. But my YouTube business did 2, 000 in the month of November on very little expenses. We’re talking maybe a hundred or 200 in expenses. So immediately, like that went well, like right after and started to teach me that oh, okay. Wait, you’re telling me that I don’t have to spend 2, 000 to make 2, 000 that I just created something and it was like hitting a target audience. And the answer was like, Oh, wow. The whole thing I was looking for, like a book that actually like a core group of readers wanted. And like that sort of, story market fit just didn’t exist, but it did exist with my YouTube content.
I almost stumbled into it, but seeing the dramatic difference between content that was reaching an audience and had that sort of flying off the shelves feel [00:28:00] versus. Stories that didn’t it was such a dramatic difference that you know If it feels like you’re pushing a boulder up a hill more money probably will never solve your problem It’s just probably going back to the story and it’s not that you wrote a bad story.
I don’t think My first 12 books were like bad in an objective way, but they were bad in the sense that they weren’t going to be products that were going to be profitable. And that’s something that like, is totally fine if you’re just writing for fun. But for me, I did want to make a full time living off of it.
So it broke my heart to realize that. But I think if I had known this mindset earlier, I would have approached it a little bit differently because then you realize that Oh you don’t have to go and Gamble everything on trying to make it. And I wish that I was the only author that’s done that.
But I know from talking to authors maybe it’s not your income from a job, but maybe it’s retirement. Maybe it’s, maybe you. And your partner saved up money so that you can stay at [00:29:00] home with the kids for maybe the first 10 years but you’re going to go and, spend 3 or 4 years of whatever that budget is potentially sacrificing your time home with your kids because you want to turn this into a career in that time potentially, you are dead broke running up credit cards, which I also understand it’s tough, but there’s definitely a way to do it cheaper and I think after my first business, that was the most money I’ve ever spent out of pocket on anything.
And the cheapest business to start was REAN, which is crazy, but true. Definitely the biggest business I’ve ever started will end up being the cheapest out of pocket.
Erika Everest: What’d you
Michael Evans: learned? I learned
Erika Everest: like myself, we started the industry at the same time. But we both stumble through the same sort of mistakes of, if we write enough books, we rapid release and I’m not letting us off the hook, but I do feel that it was very much a product of the [00:30:00] advice that’s been given for a very long time.
And a lot of that advice originated in 2015, 2016, in the heyday of the Kindle Gold Rush, where so much of that advice was true. Throw a book out a month, it will sell because there’s limited competition and go. It’s just a license to print money.
Michael Evans: The competition isn’t even the main part of the, like it’s part of it, but it’s like the market was growing so fast, like month over month.
If y’all look at like even just Kindle limited payouts, right? They were like back in 2015, I think like when it first launched 2014, like maybe a million dollars a month. And we’re talking that those payouts basically went up by 20 X in a span of three or four years. That’s crazy. And then since then they maybe have doubled in the previous four years or so.
And now growth is leveled off where it’s not like dying by any means. This is still a great market to be in. Bye. It’s a market rules are
Erika Everest: different.
Michael Evans: Yeah, a [00:31:00] market growing quadruple per year versus 20 percent each year. 1 is a normal market. In fact, 20 percent is quite large, but we’re still growing pretty quickly, but it’s more normal versus quadrupling every year is
Erika Everest: yeah.
Michael Evans: A gold rush.
Erika Everest: And it was a gold rush, but there’s an awful lot of advice from people who found success in that period, who are now, very rich, so they are seen as successful in the industry, but what worked for them when they were starting out doesn’t apply to people starting out now, eight years later, because the world is completely different.
The industry is different. And that was part of where the sustainability came in for me, that. I was seeing so many people burning out because of that hustle, that push to keep going, to push. Just one more, the next book is going to be the one that hits. And we only ever talked about sustainability when people were coming back after being off for a year and a half of burnout and saying how can I come back without [00:32:00] killing myself again?
And that’s when we had the sustainable conversations, like what’s, what can I manage? And I’m like why are we having this? Afterwards, as like the fix, why don’t we have it beforehand and stop us getting to burnout? And part of that is finding a sustainable writing schedule, but that’s all very well to say.
Sustainable means it has to make enough money that we can afford to keep doing it, so that for the amount of time we put into it, the amount we get back, Because I know myself, every so often my husband would say to me, he goes, you spend a lot of time on that writing stuff. Almost what have you to show for it?
He’s got a point. I say I’ve got my community, I’ve got my friends, I’ve got things that matter to me. But in many ways it’s a glorified hobby that sometimes makes a little bit of money, as opposed to a business. And It’s a shift moving towards that direction where I can say this month, this much is what came from my business.
And [00:33:00] therefore, that’s why I spend this many evenings a week working on it. Now, not everyone is in that position where, if some, but I think most of us have had the experience of someone questioning going, really? You do that? Why? That seems like a waste of time and not understanding. And while there are many reasons to write part of the industry.
And money is only one of them. It’s the one most other people will understand, people outside the industry. The fulfillment, the connecting with readers, the changing lives, yeah, that’s all lovely, but how much? And I’m not talking about political agenda because to me that’s an awful lot of the reason why I’m here.
But at the same time, there is a validity of I am allowed to spend this time and I can close my door and not have the kids come bother me because I can say, this is my business Not just my fun time. And I think making sure that we build ourselves to have that cushion to have that space is [00:34:00] part of being sustainable and being able to keep going
Michael Evans: you need to and it’s part of what made me really passionate about subscriptions and specific for like readers paying an author directly which folks might know i keep saying this but the podcast used to be called subscriptions for authors so if you’re confused because you’ve been listening to old episodes That reference to this descriptions for authors, we’ve rebranded as a story does the world show.
And you’ll keep seeing kind of these changes because we’re not really live with the new show. We just are live with the new branding but like the focus has shifted, right? So this talk isn’t just about descriptions but really though this is also all about descriptions in a way.
If I was an author, like thinking about like my broad business, because I think sometimes what’s really tough about publishing is. Unlike a lot of businesses, most businesses are not like, consistent every month. There’s peaks and valleys, but the peaks and valleys can be quite dramatic as authors where, one month making 1, 000 is not guaranteed you’ll make 1, not saying that to strike fear in anyone’s eyes.
I [00:35:00] hope you make 1, 000 next month. I hope you make more than that, but you also might only make 100. You might make 500. And once you get to the point that it’s a full time income or part time and like the profit that you’re making for the business, the salary that you’re paying yourself as an operator is like covering like expenses for your livelihood, right?
Which is the moment I think a lot of us want to get to when you’re there. Now all of a sudden, you can cut business expenses, right? Software spend, ad spend, but If you’re cutting your own expense on yourself that might lead to you then having to make cuts in your personal life, which I also think it’s worthwhile taking this profit mindset to one’s personal life, maybe a little out of the scope of this podcast, but it’s worth applying it, but still, there’s certain things that like rent is rent and your kids need to go to school and the food needs to be paid and trust me, there’s really not much discounts on milk.
When it comes to all these things, I think [00:36:00] it’s really important to take a step back and be like. It could be interesting if instead of viewing the subscription as this, like my sole income source, cause it’s not for majority of authors for almost every author description, it’s a portion of their income or their revenue.
I should say instead of viewing it as like the ticket to like the, the ticket to unlimited growth, which we’ve talked about, like subscriptions are not necessarily about going blowing you up, but more about connecting deeply with your fans. But what if your subscription was your profit?
What if your subscription was your salary of sorts, right? If you get it to that point, I can say this, your subscription probably isn’t going to dip by 80 percent in one month. I rarely slash have ever seen that. I’ve only seen it. If an author’s positive subscription, this is an interesting couple dip.
It might go up by 10 percent down by 20 percent up by 10%, et cetera, but it’s about as consistent as I’ve seen income in publishing. And if you’re able to leverage that revenue stream, To be yours. [00:37:00] I think that’s a really good way of looking at it. Now in the beginning, obviously for authors who are just getting started and who are just beginning their subscription, that allocation of capital might look different.
But if you’re like an established author getting into subscriptions or are one day hoping to be an established author, like that’s how I view my subscription. Some of the best authors I know view it like that. They’re like, hey, my mortgage is paid by this. That’s great. I know that as long as my mortgage is paid for by this, which this keeps coming in every month that, it takes a lot of pressure off the new sales, and some months you might be able to, invest more, spend more trying to get new sales because you’ve had a good previous few months and your series is hitting and other months you might have to make some dramatic cuts in your ad spend.
You might need to cancel that software. Your subscription can stick with you. So that’s, I think, something that I have a appreciation for because I’ve seen the struggle of not having a subscription and not even having that be a possibility. So it feels yes, [00:38:00] Erica, I agree with you, but aren’t we stuck on this hamster wheel anyways?
And if you can’t beat them, join them. But it’s you don’t have to just be stuck on that hamster wheel of new sales. There can be something else you invite into your author life.
Erika Everest: And that’s where you start small. We’re not saying go from spending 90 percent of your revenue as expenses each month to going to 20 percent because that’s not realistic your business will grind to a halt because the things that you’ve gotten used to doing, you won’t have a new way of doing.
But over the course of a year, 18 months, gradually reducing those expenses by finding more efficient ways to achieve the same outcome. And sometimes that’s outsourcing. Because if you find that your new books. Give you a big bump in revenue, but then it tails off quickly and you need to get the next book out.
If you’re spending like 20 hours a month doing social media, is that the best use of your time? Or would your books, if the time you spend on books is like a hundred dollar an hour task, why are you [00:39:00] spending time doing a 20 an hour task instead of paying someone else to do that? And still be 80 in profit by focusing on what you can do.
So that’s the idea between the dividing up your accounts, trying to, it’s just being mindful of what you’re spending your money on. Do you really use it? Do you need it? Is this the right way to be spending it? And sometimes we’ve got subscriptions and they last for a while and we can’t get out of we’re paying it monthly until it, gets to the end of the term.
Maybe you don’t need to renew that. And then suddenly you’re going to find a month where You’re 25 a month more available to you than you used to have. So your expenses go down by that much overnight. Brilliant. But it’s about just being mindful. I want my business to be successful, not by accident, but intentionally.
I am setting it up for success. I am watching what I spend. Yes, there’ll [00:40:00] be times when you have to spend money to make money. But is this one of those times? Will the return be large enough and quick enough? Audio is a great example in that, yeah, there’s a huge audio market out there, particularly for some genres it blows up, you can get so many more readers or listeners you can find a whole new audience segment, but what is expensive?
How long will it take you to penetrate that market if it’s your first audiobook? How much do you have to pay up front now and do you have it? What’s, if it’s going to take you three years to earn back that investment, can you wait that long? If it’s three months to earn back that investment, that’s a different story.
But you have to do the calculations upfront rather than just saying, Hey, this will increase my sales. So hopefully it’ll increase my profit. And let’s just see what happens. Which is what I think we’ve been taught to do by hustle culture, by sales, more revenues. It’s always the better answer.
Even the fact that we tend to share numbers. It’s Oh, I’m a six figure author. Revenue. You take home 10, [00:41:00] 10, 000 in profit a year from your 250, 000 turnover, like that’s subsistence living. That’s not, it sounds really impressive when you talk about your revenue figures, but it’s not actually a sustainable model.
So that’s where I feel that by changing the conversation, focusing on the parts that is going to allow us to do this job, not just for the next year, but for the next decade and beyond, for as long as we want it to be part of our lives. That’s where we need to be focusing our energies, not just on our writing practices, but on our business practices as well.
Michael Evans: 100%. And, part of the business practice can influence the writing practice in a way of we should always keep the writing fun. That’s definitely what needs to happen. But it’s also fun to see what also is leading to more readers and more, more, More sales, what’s actually generating more eventually profit for you.
[00:42:00] And when you start to write that book, obviously like you writing that first thousand words, isn’t going to immediately translate to money. Now I say this actually with early access, that challenges that notion, I think in a healthy way, because it can help you get money faster for what you’re writing and kind of test to see like, The truth of like how much profit will actually generate you, right?
So there is something really cool about that. But, regardless, like your first 100 words, that’s, until you press publish, you haven’t turned that story into a product. And if you don’t intend to press publish in your stories, you just want to write, beautiful. But you want to make it a product and then want to see what stories are worth writing more, aka what products are worth investing into more.
It is worthwhile seeing at a product line level. You know where that income is coming in. It starts to make me think about, profit first. I think it’s like unruly to set up a bank account for each of your series, but how many of us have passion projects for these almost like we’re acting as investors in our own.
[00:43:00] Like businesses that are like underperforming grossly. And none of us are like, deep pocketed, like institutional investors to do this sort of thing. But how many of us have a series that we’ve just chosen to keep alive, both time, energy, and money. And there’s really one series pulling the weight.
And if you had like visibility into that at a bank account level where it’s like, Oh my God, this series can’t spend more money because this series is broke. It could be an interesting way to extend that further because I know a dangerous thing for authors is like, Okay. When you look at the portfolio of products things can look healthy even from a profit first perspective, but if you nail down into the portfolio itself and get into the individual stories, thinking like a publisher does, you might start to realize, oof, there is some bad bets in here that probably, you probably don’t want to turn your worst performing series into audio.
Now we all know that. But Do you secretly have the idea that one day, one day, when you do make all this [00:44:00] money that you will turn that passion project series that’s not making any money into audio? I think we’ve all had that thought, but if you were thinking profit first, that, that would not, unless that, product line has paid itself back and it is generating revenue where it can then take on those future expenses.
You shouldn’t be making that decision. Not
Erika Everest: if it’s a financial decision. You may decide that, hey, I’ve got enough money now. I’m paying myself a good salary. The profit account is looking healthy. The tax is covered for the year. And you know what? I haven’t spent all my expenses this month. I’m only on 19 percent and I have up to 25 percent of expenses.
I’m going to invest that 6 percent in this book. I know I’m never going to get it back. But I wanted to have that audio copy. I want that print book on my shelf. I want that To see that in German so that my nephew can read it. So it may not be a financial decision, but it may still be okay. If everything else is pulling its weight to leave a [00:45:00] cushion, maybe even something that you spend out of pocket.
So you say I’m spending my own money. This isn’t a business thing. This is a. Passion project I’m paying for myself.
Michael Evans: This approach, right? Wouldn’t you do that? You would take it out. It would probably be weird from a tax perspective, but if you’re to like, really get principled about it, which I don’t think you should follow any framework to it’s absolutely extreme, but if you were to follow up to the extreme, you probably would do that, you would say, I’m taking this out and then this is like a complete dandy expense of my life, which you don’t actually have to do that, but I think a lot at looking at yourself in the mirror and at least being honest about what your intention is.
Because if that’s your honest intention, I love that it’s your money, it’s your profit, you can do with it what you will, but
Erika Everest: if you’re doing it, hoping that if I release audio, this, that’ll be the bump it needs. And suddenly this series will be profitable and everyone will love it. No, look at the data, look at the evidence.
And while I agree, profit first at a book level or a series level is completely unwieldy. [00:46:00] I would suggest everyone looking at an earnings chart. What were the direct expenses your book took? What was your cover? What was your editing? What was your formatting? What was, whatever else that you had to do in ISBN, etc.
And some of those might be like I bought a pack of 10 ISBNs, so it’s maybe a tenth of the cost, if not the cost of an individual one. But then what’s that total value? When did that book earn that much? And maybe you’re just looking at revenue and you don’t think about how much you spent on ads or whatever, or maybe you haven’t run ads, so it’s quite an easy calculation.
But if you’re earning out within the first year, that’s pretty good. If you’re three years on and it’s still not going anywhere, It’s dead. Stop trying to make, to resurrect it because it’s good money after bad. It’s probably not going to hit unless there’s a very strong reason as in you have not even told anyone it exists.
It’s just hidden away somewhere. In which case, there might need to be a strategy around it, but you give it a [00:47:00] test for a period. Because again, I know a lot of people who, while they’ve released the books as they’re written, with that. You don’t mark it until you have three books out. You don’t do this until the series is finished.
You keep going. That their audience is small because they have deliberately not sought to grow their audience yet. Now, once you try and grow that audience, if you can, great, it’s fine. If you try and you can’t, then you have to accept it. Yeah. But it’s, by not knowing that, it’s about saying honestly, I have tried.
Trying again is not going to change the outcome. The market has not shifted greatly since the last time I tried. That suddenly this is a different product. Or if it has shifted somehow, do you need to rebrand then to fit a different niche? That may be a new sub genre that’s opened in the time since you wrote this book and now, but now your cover trope doesn’t match anymore or your branding and some of, or your blurb needs to be updated or [00:48:00] something else needs to happen.
Christ, so I’m thinking, for example, Paranormal Women’s Fiction came out as a genre which was urban fantasy for the 40 plus year old heroine. There were previous urban fantasy books that had older main characters, but they were weird side books because, that’s not a thing. Now suddenly there was a genre for them, but what worked for urban fantasy with a 25 year old and her skimpy crop top and her glowy hands magic, didn’t work with this mature woman story.
with the same magical elements and there was a very particular genre convention for that when it was launched. So maybe rebranding is a way to hit a trend when you have a book that suddenly is now in the genre that didn’t exist before. Or when monster romance was separated out from sci fi romance and PNR, monster romance became a different sort of thing.
Again, you might have had something that was a, off center book in a previous genre but now with this new subgenre [00:49:00] you could be hitting more closely. Then yes, then it might be time to re retest those waters. But if nothing’s changed and you’re just trying to, what’s Einstein’s phrase, the definition of insanity, doing the same thing over and over again and expecting different results.
Nothing’s changed, then nothing’s going to change.
Michael Evans: I agreed completely. Yeah, no, it’s. It’s a great point. And one thing too, is that I think there’s one big thing that won’t change, which is, I think a good reminder to end off on, which is that, one of my core anxieties getting this all started and why I thought I had to move quickly, why I thought that profit first, isn’t it is sales above everything is because I thought I was in one competition with other authors to, to, to a certain level before it became infinitely harder.
There was this idea that We knew that this wouldn’t last forever and that it was going to become infinitely harder to be an author in the future. [00:50:00] So you might as well go all in today and make it now because now is the chance. Now is the window. And I have to say, after seven years as industry, I don’t know if it’s gotten any harder or easier.
I think it’s Obviously, like we can say the market’s gotten more crowded, but it’s also gotten bigger. I won’t pretend, I definitely don’t think it’s been easier for a second, but I think there’s, new platforms like tick tock, there’s, the opening up of, opportunities beyond Amazon, but also still continue to grow within Amazon where you can see, opportunities and things like whether it be direct sales, whether it be, something like COBO plus something like remote, we’re doing a subscriptions and beyond, right?
There’s more opportunities now. I think it’s more complicated for sure. I think it’s way more complicated getting started, but I also don’t think that there’s still constantly new authors breaking in and it feels weird when I meet authors who are like doing so well now and it’s like, when did you get started?
It’s oh, started, it’s like I, I felt [00:51:00] ancient by that time, right? So and that doesn’t take away from, me and all the other authors who are like me, who’ve been, in this industry for a very long time and haven’t seen their, quote unquote success or big break for, taken any profit yet.
I have a lot of paying myself back to do before I get to that point. That’s okay. It doesn’t take away from the fact that they’re like still and always will be. An undying need for stories and your story can fill that need for readers all over the world. And there’s no clock saying in a year, the robots are going to take over that need from you or anything like, I feel like now it’s like the new sort of craze is okay, we’ve established that the gold rush is over, but now there’s an apocalypse coming and we have to get in now.
I always feel like there’s something that like drives us to this gambling paranoia. But I don’t know, I’ve been around not forever. Far from it, but I’ve been around long enough and been around a lot of other people been around far longer than me to tell you that there’s probably no apocalypse coming, that there’s certainly no unbelievable gold rush, and [00:52:00] that, there’s no reason for you to mortgage your life literally or figuratively.
on your author career.
Erika Everest: And no amount of money is going to compensate you for ruining your health, sabotaging relationships, or otherwise sacrificing your life for that future payoff, like investing in your business, everything you have for that one more payoff. The same is true of your time, your emotional energy, be sustainable.
If nothing else, really focus on how you can do this for a long time. If you’re here for a quick hit get rich quick scheme. There are better options than authoredom. If you’re here because you want to be here, because you want this to be a career, then stop. You have to think of it long term. No one starts training to be a doctor because they decide they want to cash out by the time they’re 30.
You’re there because you spent seven years in college [00:53:00] training and then you’re going to go on and you’re going to probably be a resident, then a surgeon, and then a specialist, still being top of your field at age 50. 30 years on in your career, that’s a career, that’s longevity, that’s more than just, oh, make a big profit today and then go sail away to the Bahamas, not that there is anything wrong with taking a yacht to the Bahamas, all means, if you can afford it, do it, but, make sure that your business is working for you, not you working for your business and that’s at the root of it, what the mindset shift is about.
Michael Evans: Yeah, it’s huge too. It changes, I think everything and hopefully a way that can help people take a deep breath. And it’s funny. I think a lot of people, myself too, have said this before, the quote of authordom is not the place to get rich quick. But honestly, I’ve seen so many different industries.
I haven’t found one that is. Um,
Erika Everest: but there’s always someone selling snake oil who will tell you that this is the one.
Michael Evans: Yeah. We, I can guarantee you that this isn’t the [00:54:00] one because we know this one really well, and my cursory glances or even somewhat deep dives in other places, there’s truly there’s no quote unquote, easy way to be an entrepreneur.
And as one final note, cause I think you brought it up, but Prophet first mentions this in the book, which was a reminder for me. And it’s it’s sad, but true entrepreneurs out of any group of people in the world are the ones who have the highest depression rates and a lot of other mental health problems.
And when you throw artists, creatives and entrepreneurs together, which we all are I think that only gets exacerbated. A lot of people in this community are struggling, but you don’t have to do it in silence and. There’s one last thing that stuck with me from the book that I think I’ve also observed, which is that, as authors, we have to believe in our story.
You don’t start a story writing it thinking it’s going to stink or that no one’s going to want to read it. You write it believing the world, and that’s your superpower. But [00:55:00] the truth is that if you go walk into a room of authors And in this book, they see that the example of just a room of entrepreneurs, everyone’s going to tell you their business is doing fine.
Great. Things are going well. Right. But if you just think about it statistically, at least half the people in that room are having businesses that are performing below average. We are so scared to say the truth, which is that most of us are struggling. And you don’t see that on Facebook because again, we only share the successes.
You don’t see that anywhere. But the truth is that most of us are deeply struggling. And there’s nothing wrong with that. Hopefully you just don’t feel as alone anymore about it because, It’s not your fault. Like this is it’s not what we’re doing is hard. And there’s a beauty to that, but there’s also a responsibility to try and make it easier on ourselves.
And as you already said, cash is king. And if you’re able to, not have your business, you’re Turn into a cash eating monster, [00:56:00] then that’s at least 1 less problem on your plate. Can’t solve the rest. With that said, this has been a great podcast. I seriously love this topic. So if y’all listening want Erica to come on again for a part 2, we talked for an hour.
I feel like you could easily talk for another hour or 2 hours on this topic. So we could definitely turn it into a series, but for now,
erica has recently joined us here on the team and is now leading the Storytellers of the World Summits, which if y’all, I’m sure if you’ve listened to the podcast, you’ve heard us talk about like the for authors summit that we did.
When we’re recording it, it’s May. So we did it this month and it was really awesome. And what we want to do is do a lot more summits, but focused on bringing like incredible virtual experiences to everyone. And we’re going to be hosting four virtual summits the next year, which Erica is leading and is going to do a fantastic job with.
And a part of those virtual summits is a mastermind group of authors who want to implement all the learnings inside of those summits and bring it into [00:57:00] action real time. So if that’s interesting to you at all, the past for the summit. is open for the next week. It’s the season pass. It gives you access to all the summits and the mastermind group, a discount, and it’ll just be a ton of fun.
It’s probably like the best value summits you could find out there for authors and led by no one could do it better than Eric. So it’s going to be amazing. But just a reminder that if the past isn’t for you, you will be able to purchase later the, Individual summits a la carte. So if you’re like, yeah, I’m only interested in one of the summits, we have four discovery slash marketing one, craft focus one, a serial focus one, and a subscription focus one, and they’re going to be incredible.
But if only one of them is interesting to you, just wait for that. Because that will be open at a later date. But for now it’s just for the people who want the discounted access to everything and want exclusive access to the mastermind, which will only be for the season pass holders, which is open now for a couple more days.
So you can check it out, link down below. Until
Erika Everest: May 31st.
Michael Evans: Yeah. When this is recorded, it’s Hey, you might be listening to a pass when it’s closed, [00:58:00] which if it’s, if that’s the case. We still love you, and you are still able to join, the Storytellers of the World Sprints group, which is a free writing group we have, which is a ton of fun, and you can join any of our Facebook groups.
And we also have the waitlist that’ll be open for Season 2, if you’re listening to it in the future. But if you’re listening to it around when it’s released, then you could still get in on Season 1. Which you can join.
Erika Everest: And will you share the link below of the
Michael Evans: list? Linked below, somewhere.
Erika Everest: So you can see all the different summits and what’s, what to expect.
Michael Evans: Yes, exactly. But that’s it. Thank you so much, Erica, for being here with us.
Erika Everest: Thank you so much, Michael. It’s been an absolute pleasure.
Michael Evans: Been amazing. You are brilliant. And as always, everyone, don’t forget storytellers
Erika Everest: rule the world.
Michael Evans: You got it