Hammering out a sales plan to meet the January 2012 income goal is a lot harder than I thought it would be.
Going into this project I was fairly confident that the first $42 would be the easiest to earn, after all I’d made that easily when I was doing only model horses, right?
Well, no, not so much when I start looking at the numbers. That first month income goal is for a net amount (after costs), not gross amount (before costs) and I rarely pulled in that much from the horses due to high material costs vs. price points.
Net vs. Gross
So how much do I need to sell in order to have $42 for my own pocket?
As you remember from my previous post, I only get to keep roughly 65% of what I take in due to taxes. Another 5% goes to payment and listing fees, which may actually be higher depending on the number of sales in relation to the final profit.
So to keep $42 I need to have made $70 in profit.
The amount I need to sell in order to get that much profit depends on the time and material costs of the products I am selling.
Materials and Minimum Wage
As an example a model horse would cost me roughly $5 in materials and 3-4 hours of work depending on the color pattern. Assuming that I pay myself minimum wage ($7.25), that would be a cost of $26-34 per horse—thus I was basically working for free when I sold them for $10.
Since I’m a sole proprietor the government could care less what I make an hour (as far as I can tell by my research) so the only cost they see associated with the horse is the $5. Assuming I sell the horse for $30, I would show a profit of $25 and would need to sell three horses to make my goal.
eBooks are something else, since there are no inherent material costs everything gets counted as profit. So $70 of eBook sales, assuming there are no additional selling channel fees, is $70 taxable profit.
But I need a sales channel, if I want to reach more customers and Amazon currently offers a 35% royalty on a $0.99 eBook. Which means of that $0.99 I get $0.34 and I’d need to sell 202 eBooks to make my goal.
Serial Stories, my current mad science experiment fall under the same ‘all profit’ realm as eBooks, but none of these will roll into the ‘pay per read’ timeframe within the first seven weeks (since the first three posts and most recent four posts will always remain open.)
One-Time vs. Infinite
The other thing I have to look at when planning out those first $42 is that model horses are a one-time item and eBooks have an infinite resale value. (Also only half the horses I have for sale generally sell in a month, so I need twice as many horses as expected.)
Yeah, it might be easier to just sell three horses and be done with it, but that means next month I have to sell six. And then nine. And then twelve… and soon I run out of time and interested buyers and I’m back to making nothing.
So I need eBooks on the shelves as well as horses (and eventually serial stories), but I’m a bit stumped for what constitutes an eBook.
A Dollar of Your Time?
For $0.99 you can buy a novel, or a short story, or two candy bars.
The candy bars are easy to quantify because they are physical objects and it’s easier to assign a personal ‘worth’ to something you can hold. Most people wouldn’t think twice about handing you a dollar in this case.
The short story and the novel are both just words on a digital page and thus have a much more ethereal value. Do we value them by length or by content? Are they worth more if they are newer or older releases? At what point is a written work worth a dollar?
This is the brick wall I’m hitting when I sit down to plan out some $0.99 offerings for January.
Using the math I figured out earlier, I should be selling a roughly 20,000 word document for a dollar. The problem is that other people are offering whole novels (75-90k) at the same price point. While other people aren’t going quite that low, it still makes me worry that 20k isn’t going to cut it.
I suppose it can’t hurt to try– but I’m back to staring at the January goal and trying to figure out how I’m going to pull this off. *sighs*