What I'd like to see more of is articles about how to evaluate our businesses, to look upon our activity as authors and publishers just as if we were a small factory.
What that means is being able to ask questions like these:
- Is our business model sound?
- Is it improving over time?
- Is it covering all of our costs, including those not specific to individual titles?
- Are we actually making a profit, and how long should we expect that to take, after starting the business?
It's not just a matter of counting our sales at the end of the year.
What's the point of financial analysis?
An Income Statement isn't just a tedious document that old-style businesses put together — when done right, it's vital and important information to help you direct your spending and efforts.
I've been a Chief Operating Officer and a Chief Financial Officer for several small-medium businesses, both public and private — all of them young (1-10 years old). I'll use accounting terminology from the USA business world, but all countries do similar things though the terms may vary.
I'll focus on three ways to look at our businesses, and the data we need to support that.
1. Gross income — your business model
When we start as indie authors, we generally focus on the creation of work to publish (I'll call that “books” or “titles”, whatever you may be writing), and the delivery of that work to distribution and retail publishing channels.
Over time, many of us develop additional ways to earn income. As an example, I have the following channels today, in various stages of maturity:
- Creation and sale of 24 titles (my own books)
- Publication of titles for others (publishing work, several imprints)
- Consulting work for colleagues
- Speaking engagements
Each of these is a “line of business”, with its own costs and income. Some are relatively predictable while others are not, but all can be grown by marketing, if that seems like a worthwhile investment.