When and How a Small Publisher Should Work with a Book Distributor

Recently, I have been asked by several of our publishers about the advantages of working with a distributor. The more I spoke with them, the more I realized that there is a lot of confusion about how and when they should work with a book distributor. In this blog entry, I have focused on smaller publishers because the initial conversations I had were with friends who have only published a few titles. In a later blog entry I will address the larger publishers and when the economics work for them.

Many authors think that after poring their heart and soul into a book, once it is listed on their website and sites like Amazon, it will automatically sell. The truth is that marketing and selling a book is one of the most difficult parts of publishing. In fact, it is so difficult that the marketing and sales plan should really be developed before the book is written.

For example: If you are planning to work with a distributor, they will be deciding which titles are going to be listed in the fall catalog by the end of January.

It is the author’s responsibility to create buzz around their new book. No matter how the author goes about doing that, it takes hard work. A number of ways an author can generate buzz around their book include:

• Giving interviews
• Speaking engagements
• Book signings
• Establishing a web presence
• Using social media tools
• Sending out review copies
• Obtaining blog reviews and getting bloggers interested in the book

Many people dream that if they could only get their book into the retail chains, it would sell hundreds of thousand of copies. That sounds great, but it is also too good to be true. For that plan to work, the publisher would need to work with a great distributor.

The fees charged by a full service distributor will generally run between 20 to 30% of the sales price, but can be as high as 35 to 40% depending upon the distributor.

The question becomes: can you afford to get into the retail market and can you make any money doing it? The way the math works, a general rule of thumb is that the publisher ends up receiving about 35% of the suggested retail price of the book. This 35% needs to cover the time writing the book, the production costs, and any out-of-pocket expenses incurred for marketing the book. When selling into the retail trade, the normal discount rate is 45 to 55% off the suggested retail price.

For example: A hardcover book with a suggested retail price of $20, the trade discount will be $10 and the distributor fee will be $3.00. This leaves $7.00 for the publisher to cover royalties, production, marketing expenses and profit.

It’s quite obvious that production cost will change the view of this type of arrangement, depending upon the cost. Print-on-demand would be out of the question because the costs are higher – in the area of $5 to $6 per book. On the other hand, if you’re printing 2,500 copies of a 280 page hardcover book for $3.50, the story is different. The question becomes, is the $8,750 investment in the books worth the publishers risk and time? What would be the return on investment? To make this model work, the production costs cannot be higher than 15% of the suggested retail price of the book. Otherwise, it is almost impossible to make this model profitable for the publisher.

In summary, working with a distributor can make good business sense if certain benchmarks work for you. Remember, as the publisher you will end up receiving only 35% of the book’s retail price to cover royalties, marketing expenses and production cost. Therefore, production cannot exceed 15% of the retail price for this model to work. As with any investment, careful analysis and prudent planning are a must.