On the Science of Calculating the Advance

A client of mine is in the wonderful position of having a bidding war on his hands. This means that his agent pitched his book to several publishers, all of whom are interested, and presumably his deal will go to the highest bidder.

What kind of advance are we talking about for a first-time author? How is it calculated?

I read a formula once but have never seen anything like it be able to explain any advance I've ever seen, so I won't print it here. I did find a great article in the New York Times from a year ago called "The Greatest Mystery: Making a Best Seller," by Shira Boss, that sums up what I've experienced over the last decade.

The advance payment to the author is often an estimate of the first year’s royalties, usually 10 percent to 15 percent of expected sales. The advance is a liability for the publisher because it is a fixed cost. It doesn’t have to be repaid by the author if it turns out to be an overestimate, which it usually is. But when earned royalties exceed the advance amount, the author is paid more.

Calculating the advance accurately would be a prized skill, but no editors claim to have a scientific handle on how a book will sell. Instead, they emphasize the role of intuition and say that while big unexpected losses and gains do happen, somehow it all works out.

But results are not spectacular, for an industry that had $34.6 billion in net revenue in 2005. Net profit margins hover in the mid-single digits for the $14 billion trade segment, which covers adult, juvenile and mass market titles, with an estimated 70 percent of titles in the red.

When it comes to advances and what might be a best seller, it's really all about being a good guesser. Several books I was not at all excited about ended up being best sellers, and the books of my favorite clients didn't do that well. I was frankly shocked that at least one best seller did so well, and doubly shocked that a certain timely book by an expert didn't do so well.

There are many variables at play, and the most anyone can do is do their best during each phase of the process and consult experts to help with the tasks that they don't have a lot of experience in. There are no guarantees, but completion of a book and getting it published is no small feat, and should be considered a significant achievement no matter what happens when the book hits the shelves.