3-Year Update: A Financial Analysis of My Book’s Unit Economics

It has now been 3 years and 3 months since my book Building a Second Brain came out in the U.S., and I’ve just received word that it has now earned out its advance!

That probably doesn’t mean anything to readers, but to me as an author, it means a ton. It means that the “loan” of $325,000 the publisher gave me to create this book has been “paid back,” which means the project as a whole has turned a profit, at least from the perspective of the publisher.

I wanted to take this occasion to determine if it’s also been profitable for me as the author, and to evaluate the holistic financial picture of my book-writing endeavors.

First, the numbers for my book Building a Second Brain:

144,018 total copies sold in the U.S. across all formats$352,246 in total earnings to date (or $10,674 per month on average)On average, I earn $2.45 per copy sold, but that varies by format: $3.69 per hardcover sold, $2.70 per ebook sold, $1.41 per audiobook sold, and only 58 cents per paperback sold. I make 6.3 times as much money for each hardcover sale compared to a paperback!The breakdown of sales by format has been 38.5% audiobook, 32% ebook, 27% hardcover, and 2.5% paperback. This is surprising to me, as I would have expected the ebook version to far outsell audio, since I put so much emphasis on saving digital highlights.My advance was actually earned out around October 2024, or 2 years and 4 months after the book’s release

My second book, The PARA Method, also earned out its (much smaller) advance in this period:

33,779 total copies sold in the U.S. across all formats$63,664 in total earnings to date (or $3,350 per month on average)That amounts to $1.88 per copy in royalties (about 23% less than the first book), and varies between $2.43 for hardcover, $2.25 for ebook, and 94 cents for audiobookThe breakdown of formats has been 40% ebook, 32% audiobook, and 29% hardcover (so the ebook was more popular than the audiobook for this title)The advance was earned out around September 2024, only 13 months after the book’s release

Considering these books as complementary titles within the BASB ecosystem, they’ve sold 177,797 copies together in the U.S. and earned $415,910 in royalties for me as the author. If sales continue at the current pace, ongoing sales of these two books should continue to earn me about $5,300 and $1,900 per month, respectively, or $7,200 per month combined. The rest of this analysis only takes into account Building a Second Brain.

I was curious how much my U.S. publisher, Simon & Schuster, has earned from my book so far. Working with ChatGPT and some reasonable assumptions, I estimate they gross about $9.95 per copy sold on average, and after their costs, net about $8.61 per copy sold (which is 3.5x higher than what I make). At 144,000 copies sold to date, that means they’ve grossed $1.05 million, netted $850,000, and paid me $352k, or 41% of it. This doesn’t include their overhead costs, however, which probably dramatically lowers their overall profitability. 

One thing I take away from this analysis is that the common idea that publishers are raking in the dough while paying authors a mere pittance is mistaken. Under this model, my share seems to represent over 40% of the publisher’s earnings on a per-unit basis, and would probably be over 50% or even more if their overhead costs were taken into account.

Comparing to a self-publishing scenario

Working again with ChatGPT and conservative assumptions, I wanted to model what it would have looked like to self-publish my book on Amazon, knowing everything I know now.

Starting with the hardcover, I would have used Amazon’s KDP Print service. With a list price of $30, the printing cost would have come out to around $6.50. Amazon’s take would have been 60% of the list price, or $18, leaving me with $11.50 per copy sold as my royalty.

For the paperback, also via KDP Print, a book with a list price of $18 would have cost $3.50 to print, and after an Amazon take of $10.80, I’d be left with $7.30. Selling the ebook version for $15 would leave me with $10.35, and the audiobook $8 via ACX.

Assuming I sold the exact same number of copies via the self-published route, I would’ve netted:

$447,959 in hardcovers (versus $143,469 I made via traditional publishing)$476,969 in ebooks (versus $124,498)$443,832 in audiobooks (versus $78,492)$26,200 in paperbacks (versus $2,069)

All of these together would have totaled a net of $1.39 million in self-publishing royalties, which is 3.95x as much as I made with a publisher. In other words, assuming the number of copies sold stayed the same, I missed out on about a million dollars. That includes, on a per-copy basis, a self-pub royalty that is ~3x for hardcover, ~13x for paperback, ~6x for audio, and ~3.8x for ebooks.

However, this is based on the following assumptions:

The biggest one is that I would have somehow managed to sell just as many copies through my own efforts as I did partnering with a publisher which I think is extremely unlikelyThis calculation doesn’t take into account the considerable amount I would have likely spent on marketing and promoting the book on my ownI’m also confident the mix of formats would be much different with self-publishing, including far fewer hardcovers and far more paperbacks, which would result in a less favorable comparison

Using a more realistic scenario of what I would have managed to sell on my own, such as 70% as many copies sold and a more typical mix of formats, results in a self-publishing grand total of $934,510. That’s still 2.6x what I actually made, meaning I missed out on $582,000 instead of a million. Another way of saying this is that I would have only needed to sell 37,926 self-published copies, or 25% as many as I did, to make the same earnings as I’ve done through traditional publishing. 

Including foreign translations

If I include foreign rights and translations, however, the picture changes considerably. To date, I’ve made $276,000 from 225,000 foreign copies sold via 24 foreign publishers. That means I make $1.23 per foreign sale, versus $2.45 on average for U.S. sales, or only half as much. 

But I doubt more than 2 or 3 of those would have happened if I had self-published, which means the differential would have only been around $306,000. In terms of raw numbers of copies sold, U.S. sales have accounted for only 39% of total global sales, and I expect that number to keep going down as new foreign translations continue to be released.

All of this boils down to a simple distinction: traditional publishing still wins when it comes to overall reach plus foreign rights; self-publishing wins when it comes to overall per-copy economics. 

Worldwide, across all formats, I make $1.70 per copy sold. Via self-publishing, I would have made $9.27 per copy sold, or 5.5 times as much (though limited only to the U.S.)

Projecting into the future

If I assume that my book is at the midpoint of its lifetime sales as of now, and will go on to sell another 369,000 copies worldwide, then I can expect to make another $627,540 in earnings through traditional publishing, in contrast to another $2.4 million via a hypothetical self-published route. 

If that comes to pass, that results in a grand total, lifetime earnings number for this book of $1,255,000, versus a hypothetical $4,789,000 via self-publishing.

Including the business upside

What really changes the whole picture, of course, is factoring in the additional revenue we’ve made in the business as a result of the book.

First, there is the difference in timing between receiving a large upfront cash advance, which was used to fund a variety of long-term efforts such as our YouTube channel, versus having to wait to receive that money over a period of several years. That YouTube channel is now the main marketing channel for the entire business, responsible for 36% of our overall sales, so it’s difficult to put a value on it.

Second, we can estimate more or less how much of our product sales happened because of the book by looking at our purchase surveys, which have been completed by over 7,000 customers since the start of 2023, about 6 months after BASB came out.

Based on that data, 34% of all our sales have come from people who first heard about me through my books. With total sales (after refunds) over this time period of $3,541,715, that implies $1.2 million in sales as a direct result of my books. That more than makes up for the lower economics of traditional publishing. However, a self-published book would have also produced a significant upside in product sales.

This also allows me to calculate that each book I sell needs to generate $7.57 in net referred product revenue on average to equal the economics of self-publishing. Or taking into account our approximately 50% margins, each book needs to produce $15.14 gross on average. 

Considering that our average customer lifetime value is $720, that means I need 1 out of every 95 book readers to convert to a paying customer of our courses/products in order to break even with self-pub. In other words, a 1% conversion rate more than makes up for the gap.

My best estimate is that at least 3,859 customers have come in through my books, which is a 1.05% conversion rate! Or approximately 1 in 96 readers so far. This means the traditional model is just barely surpassing the overall economics of self-publishing when downstream products are included.

This also means that my total earnings to date from the book and related sales are $1.85 million, 66% of which is from product sales. That sounds great, except if I had gone self-pub and made 70% as many sales, with the same conversion rate to products, I would have ended up with $6,743,072, or almost twice as much.

Projecting all this into the future, assuming my book is at the midway point of its sales potential, continues to convert 1 in 96 readers to customers, and our customer lifetime value stays the same, the full lifetime earnings outlook for my book should be $6.82 million, over about 7-8 years. That’s an astonishing figure by any measure, and shows that there is still a path to profitability for first-time authors under the traditional model.

Traditional publishing maximized reach and credibility, giving me $6.8 million projected lifetime earnings. Self-publishing might have doubled that number, but with much higher risk and effort. 

The right path depends on whether an author values distribution or economics more.

My overall takeaway is that the two pathways to publishing are different animals: they are optimizing for different things, display different strengths and weaknesses, and make sense for different authors depending on which capabilities they bring to the table, or are interested in developing.

In retrospect, I think it was a smart move to start with traditional publishing, since it gave me:

Authority and credibility I didn’t have beforeReach and exposure far beyond my small, niche online followingThe upfront cash to hire a team and build new marketing channels like YouTube 

My first two books have been clear home runs under the traditional model, but I’m also interested in exploring self-publishing and hybrid models in the future to fully capitalize on the credibility, reach, and marketing footprint I’ve built through these endeavors over the last 5 years.

My next book, on the practice of annual life reviews, will be the true test of whether I’ve succeeded in building a sizable readership that will keep coming back to read my books. You can sign up here if you want to be the first to hear about it when it’s ready.

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