This episode was originally published here
Podcast: Play in new window | Download | Embed
Subscribe: RSS
There is one moment in the movie The Lion, the Witch, and the Wardrobe where a rhinoceros charges at the White Witch during the climactic battle. Before the rhinoceros can get to the Witch, a little gremlin cuts off the charging rhino at the ankles, causing it to crash uselessly to the ground.
Often when writing a book, we are like that charging rhino. We are so focused on the writing that we don’t see the little gremlins that can cut us off from success. Helping you spot those gremlins is what the Novel Marketing Podcast is all about.
Sometimes the gremlins are marketing challenges. Sometimes they are business-related. Ignoring the business side of writing is like ignoring a dirty diaper: it doesn’t make it go away. It only makes it worse.
So what are the common business mistakes that trip up authors? Let’s talk about it. But first, I have an announcement.
June 2022 is Patron Appreciation Month
I have a special gift for patrons this month. It is my course, the Tax and Business Guide for Authors. This is a special course that I recorded with my dad, Tom Umstattd CPA. He has been helping authors with taxes for over 35 years. He is the kind of CPA the other CPAs go to when they have questions. This course normally sells for $99 but all Novel Marketing Patrons get this course for free.
Not only that, but this month’s patrons-only Q&A episode will be a live Q&A with Tom Umstattd CPA. So if you have a tax or business question, this will be a great place to get it answered.
You can become a patron for as little as $4/mo and you can support the podcast for as little or as long as you would like. Patrons get exclusive discounts on courses and a special bonus episode every month.
The Tax and Business Guide for Authors course is yours to keep regardless of how long you stay on as a patron. So yes, you could become a patron for one month, cancel, and keep the course. My hope is that you find the podcast valuable and will want to continue supporting the show. I couldn’t keep making these episodes if it were not for the support of listeners like you.
You can become a patron here.
Now let’s get on to the mistakes.
Mistake #1: Ignoring Taxes, Business, and Paperwork
Some authors insist on acting like artists who don’t care about the money. Invariably these authors get terribly taken advantage of. The most tragic thing is that they not only lose the money but also their control over their art. So the authors who don’t care about the money end up having neither art nor money.
How this works is that unscrupulous people in the industry tell you exactly what you want to hear. Your book is amazing! You are amazing! I’m going to make you a star!
Then, they give you a contract. The hope is that you are so excited about finally making it, that you won’t read the contract carefully. They hope you care more about looking like you understand the contract than you do about actually understanding the contract. Sometimes the contract gives control over both the art and the money to the flatterer.
Contracts can be tricky and some of them make it hard for you to escape. For instance, if you are always getting paid now, for work in the future, you have to keep committing to more work in the future in order to pay the bills. Or perhaps they keep rights to derivative works. So all sequels must be published through the original publisher.
Read the Fine Print
So, become the kind of person who reads the contract before signing it. Ask questions. Educate yourself about taxes, business, and money. The school of hard knocks is not the place you want to learn these lessons.
Do Your Own Research
Getting a literary agent can help protect you from predatory publishers, but it is not a silver bullet. Why? Because some agents are con artists. Anyone can call themselves a literary agent. So that person presenting himself as an agent may not be a “real” literary agent. Other agents are good-hearted but also not very talented or not a good fit for you.
Reputable agents publish (or are willing to share) their client lists. If you are offered a contract from a literary agent, reach out to some of their authors and ask if they would recommend their agent to you. Some agents are absolute gems and that is the kind of agent you want to work with.
As Tim Ferriss says, “A person’s success in life can usually be measured by the number of uncomfortable conversations he or she is willing to have.”
If you can’t find a happy author on your own, don’t sign any contracts. This goes for both agents, publishers, and printers.
Beware the Hybrid Publishers
If you are indie published you won’t be working with an agent but there are a lot of companies who will “make it easy for you to get published.” These publishers will make indie publishing sound nearly impossible to do without them. They will then offer various services to help.
But here is the thing. Self-publishing directly through Amazon is not hard. Millions of people have done it and many of them are not as bright as you are. The companies offering to make it easy are typically just offering to take most of the money. In some cases, they just add additional steps and a layer of frustration between you and Amazon.
Going with a hybrid publisher can make sense if you only plan to publish one book. But if you want to become a professional indie author, you need to learn how to actually independently publish.
If you need help, I have a lot of episodes and articles for you.
Here are a few to get you started:
- 10 Decisions Every Indie Author Needs to Make
- How to Publish Your Book Independently
- 7 Kinds of Indie Authors
Mistake #2: Not Keeping a Budget
Many people believe that “doing things on a budget” means spending as little money as possible.
That is not what a budget is.
A budget means deciding how to spend your money before you spend it. It also helps you determine when you can afford something. For some, this means taking the money they make each month and putting it into different envelopes; for others, it means a spreadsheet. For others, it means using a website like Mint.com or YNAB.com.
The key is that you think through your income and expenses in the calm of your own home and not across the table from a pushy salesperson or in the aisle of the store.
Find Your Best Option
One benefit of keeping a budget is that it keeps you away from the question “will spending money on X help my writing career.” The answer is almost always yes, but the real question is which choice will bring the best return.
“Should I put this money in the advertising envelope or in the training envelope? Which is more helpful for me right now?” The answer to that question depends on where you are in your career. The earlier you are in your career, the more money you want to spend on training, and the more books you have published, the more you can afford to invest in advertising.
Keeping a budget forces you to think through that question with all the options in front of you.
Save Your Marriage
Another benefit of keeping a budget is that it can help with your marriage. Your writing a book requires a lot of sacrifices from your spouse. You will be around less as you write your book, and you will need to spend some money getting your writing career off the ground. There is a reason spouses tend to feature prominently in the acknowledgments section of books.
Don’t sacrifice your marriage to write your book.
Putting together a budget can instigate helpful conversations with your spouse. If you both agree on a big picture budget you don’t need to nickel and dime your spouse with every little writing expense that comes up.
When my wife and I went through pre-marriage counseling, we had homework where we had to put together a budget. We’ve been running our family finances on that budget ever since. Sure, we have had to update. With a 3-year-old, a 2-year-old, and a baby, we spend a lot more money on diapers than I ever thought was possible.
I realize every marriage is different and I’m no marriage guru to give advice, but one thing I hear from old married couples is that communication is key to long-lasting relationships. Creating and updating a budget is an amazing tool to facilitate communication. The real benefit of the budget is the conversation it strikes. In some ways, the budget is just evidence that a beneficial and specific conversation took place.
A few episodes to help:
Mistake #3: Assuming You Are Not Eligible for Tax Deductions
You may be surprised if the IRS sees you as a business or a hobbyist. In the Tax and Business Guide for Authors, my dad breaks down the criteria the IRS uses to determine if someone is a hobbyist or a professional author. If writing is your hobby you can’t easily deduct your writing expenses. But if writing is your business you can. This can make a big difference come tax day.
Sometimes it is only a matter of a few minor tweaks to how you operate, and you can turn your writing hobby into a writing business. Writing in a more business-like manner has other benefits beyond just taxes. It can help you become a better writer, faster.
Here are some of the criteria the IRS looks at:
- Does the time and effort put into the activity indicate an intention to make a profit?
- Does the taxpayer depend on income from the activity? If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
- In other words, Are you using your writing to help pay the bills? If you need help making money now, I have an episode to help: Yes, YOU Can Make a Living as a Writer, Here’s How
- Has the taxpayer changed methods of operation to improve profitability?
- In other words, are you investing in continuing education to get better as an author?
- Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
- In other words, Are you working with a professional editor/cover designer, etc.?
- Has the taxpayer made a profit in similar activities in the past?
- Does the activity make a profit in some years?
- Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
The IRS weighs all these factors so you don’t necessarily need to check every box to take deductions.
For example, Amazon lost money for over a decade when first starting out and they were still a business. In the course, we talk about some key tax court cases of authors and artists who both won and lost on this issue. The course comes with PDFs of these court decisions which can be a great resource to look over and share with your CPA.
If your CPA is not familiar with the appropriate case law, you may not get the most helpful advice.
Mistake #4: Not Tracking Expenses
If you are indeed a professional author in the eyes of the IRS, your business expenses may be tax-deductible. This can include things like writers’ conference expenses, the laptop you write on, writing software like Scrivener and Atticus, publishing costs, advertising, and more.
In the course, we talk about 19 different tax-deductible expenses authors can take advantage of, but you can’t take advantage of an expense you are not tracking.
If you are not yet a business in the eyes of the government, you will still want to track your expenses to see if you are staying within your budget.
Mistake #5 Not Keeping Work Separate
If you commingle your business and personal financial activity you are making a mess for yourself to clean up later. For many authors, the mess is so overwhelming that they just don’t bother with it, and end up paying far more than their fair share in taxes. This means less money for marketing and promotion, fewer book sales, and ultimately less influence on the world.
So if you want to preserve your influence, keep work and play separate.
One tool to make expenses easier to track is to have a separate bank account for your writing business. I recommend that you have one bank account for writing income and expenses, and use a different bank account for paying for the groceries and for the salary from your day job.
This second account doesn’t need to be at a different bank. Many banks will let you add an additional account at no additional cost. Just make sure the new account comes with its own debit card so you can easily pay for writing expenses with that debit card. You also want to make sure you can transfer money between accounts without being charged a fee.
It typically only takes a few minutes to set up a new bank account, especially if it’s with the bank you already use. These few minutes can save you dozens of hours of stressful hassle down the road. Having a separate bank account for the expenses is a good idea even if writing is still a hobby.
Mistake #6: Waiting Until the Last Minute to Form an LLC
Most authors end up with an LLC to protect them from liability and to help keep business and personal finances separate. This is true for both traditionally published authors and for indie authors. Every single New York Times bestselling author I’ve worked with has had at least one LLC or similar entity.
It is also common for foreign authors to create a US-based LLC to receive and spend US dollars. This can save them on tariffs, taxes, and exchange rates.
Indie authors often have to form LLCs the soonest because they have earlier exposure to liability. They are also spending more money more often, especially in the early days of their careers.
Like insurance, it helps most when you get it before trouble strikes.
So don’t wait till you get sued to form an LLC. There are ways to expedite the process, but they are expensive, stressful, and unnecessary. So save yourself time and money and get your LLC ready to go before you need it.
That said, you may not need an LLC yet. We talk a lot about LLCs in the Tax and Business Guide for Authors, and I also have an episode you can listen to called The Author’s Guide to LLCs.
Mistake #7: Not Having a Business Plan
Authors who fail to plan, plan to fail. A good plan will help you avoid costly and expensive mistakes. The kind of mistakes that can torpedo your career.
A business plan can call for you to lose money during the startup phase of your career and then to make money later on. This can help satisfy one of the criteria the IRS looks at and can help you set realistic expectations.
Most professional authors have net losses during the first 5-10 years of writing. As they learn how to write better and faster, income overtakes expenses and some of them make a lot of money once they get established. This “sow now to reap later” approach is fairly common in business.
Writing is Not a Get-Rich-Quick Profession
It takes time to build a platform and develop your craft. So make sure your plan accounts for that.
If you are traditionally publishing, your book proposal is basically a business plan without a budget. Most of the pieces of a business plan are there. So if you copy and paste your budget into your book proposal you have a rough draft of a business plan. Now you just need to adapt the plan to focus on your writing generally rather than a single book. Once you make those changes you should be good to go.
But, if you are indie publishing, it can be easy to ignore this crucial step. If you want to be a professional independent writer, taking a short break from your Work In Progress to write a business plan could save your career before it even starts. It doesn’t take long and it will give you a new focus and vision.
Here is a quick overview of what goes into a typical business plan.
Executive summary
A quick summary of the plan, write this last.
Company description
This is where you describe what the company is and what it does. Remember, you are a company. Your books are your products.
Market Analysis
This is where you talk about your customers and competitors. Who will read your books? Who else writes books and makes entertainment for your target readers?
Team
It takes a team to publish a book. You may need a cover designer, an editor, a narrator, an assistant, and a literary agent (if you are traditional). You don’t need to know their names necessarily. You also don’t need to hire them full-time. If you are publishing traditionally, a lot of your team will be paid by your publisher.
Products & Services
This is where you talk about the kind of books you plan to write. This is also where you will specify your genre. If you want your book to sell like crazy, determine the genre before you write the book. Genre is not something you tack on at the end.
Some authors supplement their income by offering services like:
- voiceovers
- consulting
- editing
- assisting
One of the best ways to supplement your income is to be a Virtual Assistant for another author. With this, you can make money while you develop your skills. It’s a win-win.
Marketing and sales
This is your marketing plan. How do you plan to get strangers to want to buy your book?
Funding
How much money do you need to get through the lean years before you start making money?
Financial Projections
How much do you plan to make as an author? I have an episode all about this which you may find helpful. It is: Yes, YOU Can Make a Living as a Writer, Here’s How.
Final Thoughts
Your business plan does not need to be fancy, and if you need help with it, I have a whole module on it in the Tax and Business Guide for Authors. I go through each section and give you tips and advice on what to include.
Tax & Business Guide for Authors & Live Q&A
Don’t forget we have a patrons-only Live Q&A with my dad, Tom Umstattd CPA, on June 30th, 2022. So if you become a patron before then, not only do you get access to the Live Q&A Webinar, you also get a free copy of my $99 course The Tax and Business Guide for Authors.
In the Tax and Business Guide for Authors you will learn how to qualify for tax deductions for your writing-related expenses (not all writers qualify) and about 19 tax deductions authors can take advantage of. You will also learn how to start making a writing income even before your first book comes out. You will also learn business fundamentals like when and how to form an LLC, how to create a business plan, and how to reduce your chances of being audited by the IRS.
You can become a patron at AuthorMedia.com/patron
For those of you listening in the future, if you become a patron, you can get access to a recording of that Q&A session and a discount off the price of the course. If you are listening in June 2022, it is much better to get the course for free and attend live.
Featured Patron
Jennifer Lamont Leo, author of The Rose Keeper
During the Great Depression, a spoiled socialite must suddenly find a way to support herself and her child. Can she turn a homemade recipe for skin tonic into a livelihood?
Family Update
Our baby is learning to crawl! He gets up on his hands and knees and then flops forward. Instead of focusing on how poor his form is or how much his chin hurts, he is thrilled by the ability to move forward on the ground, even if only by a little.
So much in life is like this. Focus on the next step and celebrate the small victories rather than focusing on how much more you have to learn. You will learn faster and be much happier this way.
The post 7 Business Mistakes That Ruin Author Careers appeared first on Author Media.