“I’m donating all the proceeds from my self-published book to charity.” Good for you… but it’s not good for you either. I would suggest simply making a cash donation to your favorite charity rather than sharing some or all of the profits from your book. Let me explain why.
Do you have enough earnings to donate?
As my self-publishing surveys in 2016 and 2018 found, approximately 73% of self-published authors surveyed earned less than $1,000 per year in book revenue. Please note that these data were collected in two separate surveys, two years apart, and from two participating populations by different authors. And this was gross income, not net income after expenses and taxes. Self-published authors most likely won’t make enough money to share the profits.
Even if you’re one of the self-published authors making more than $1,000 per year, does it make sense to give back donations as you earn more in book revenue? Let’s do some math.
The numbers you need to make a donation decision
Let’s say you’re donating all proceeds for one of your Kindle eBooks. Through Kindle Direct Publishing (KDP). The maximum royalty you can make is 70% of the sales price. For some lower-priced marketplaces and eBooks ($2.99 or less as of this writing), you’ll only earn 35%.
But there are two other percentages you must deduct from royalties: overhead and cost of goods sold (COGS). Overhead covers all the costs to run your writing business, including advertising, Internet service, website hosting, software, telephone, mail, accounting services, etc. % of their revenue, especially in very small and new businesses. Please do not say that you do not have these costs. You do! You always do it.
COGS are all the costs that go into producing each copy of your book that you sell. For Kindle eBooks, there aren’t many COGS costs, except for a shipping fee based on file size at the 70% royalty level, which could be minimal. There are no shipping charges at the 35% royalty level.
Example
As an example, let’s say you only sell Kindle eBooks, your overhead rate is 35%, and you have a COGS of 0%. Here are the percentages you’d donate to charity if you gave them all the proceeds:
70% Royalty of eBook Retail Price – 35% Overhead – $0 COGS = 35% Net Profit
35% Royalty of eBook Retail Price – 35% Overhead – $0 COGS = 0% Net Profit
In this example, it makes no difference what you charge at the 35% royalty level, since you make a 0% net profit and donate nothing.
But at the 70% royalty level, let’s say you’re charging $6.95 for your Kindle eBook:
$6.95 retail price X 35% net profit = $2.43 to charity per book
If you sell 100 books a year, which might be optimistic for many self-published titles, you’d send your charity $243 if your book is in the 70% royalty level. Given that some estimates show that self-published authors sell only around 250 copies in a book’s lifetime, that won’t amount to a huge donation to charity, even for its entire time on the market.
Is the profit situation better for print books?
If you’re sharing the profits from your print book sales, you’re likely in the loss zone once your overhead and COGS are added, even though print books typically sell for a higher price.
In some quick calculations I did with KDP’s printing cost calculator for a paperback with 250 black and white interior pages sold through Amazon at a price of $14.95, its estimated printing royalty is 34 % ($5.12) after deducting COGS printing costs. As we did with the previous example, let’s calculate an overhead cost of 35%, which would be deducted from your net royalty:
34% royalties – 35% overhead = -1% net profit (loss)
So for the print in this example, you are taking a loss, which means you are paying to publish and sell this title, which is not good, and donating $0 to charity.
These calculations are based on your print book being self-published through KDP and selling on Amazon. If you do broad distribution through KDP (sales from all non-Amazon channels like bookstores, libraries, schools, etc.), or if you use a non-Amazon desktop publishing platform like IngramSpark or Lulu, your royalties may be even less., which makes it less likely that you’re donating something to charity.
Neither of these calculations, whether for eBooks or print books, take into account any investment costs in preparing your book for publication, including editing and book cover design. You may be in the hole before you even start selling.
Tax implications of donating profits to charity
If you do in fact donate all of your net proceeds to charity, you’d better have receipts to show that they went to a legitimate charity, usually one with a verifiable 501 designation. Also, you better be able to clearly show how you calculated your donation; Otherwise, the IRS (or tax authorities in your area) could tax your income.
It has also been my experience that many authors have little or no accounting, bookkeeping and tax experience, making it difficult to calculate how much will actually go to charity.
Before engaging in any type of “profit to charity” scheme, consult your CPA or tax advisor.
The optics of donating profits to charity
How will you handle donating to a specific charity? Will it be a public donation? Most charities accept cash donations. But does this group want to identify with you? Is it a charity that your market resonates with? What if public sentiment about this charity changes in the future? With increased scrutiny of giving activities these days, it’s worth thinking about the public relations ramifications for both you and the charity.
And why are you doing this in the first place? So that your public thinks that you are so generous? Do you have a negative attitude towards publishing for profit, so you have decided to give it all away? Can’t financially support the charity yourself, so you want to convince your readers/buyers to donate for you? Are you trying to emulate the big corporations doing this even though you don’t have anywhere near the resources they do?
How long would you be willing to do this for charity? One year? Always? Once people know you’re donating all the proceeds to charity, they’ll think you’re going to do this all the time. Will they think less of you when you’re profitable again?
Also remember that books are not like other retail products with suitable substitutes. Readers won’t make any decisions between your books and those of your competition, so a return donation isn’t as differentiating as it might be in other markets. My personal feeling is that the whole “benefits for charity” trend isn’t as exciting as it used to be. Too many people are doing it (or doing it wrong), prompting a “meh” response.
Do some soul-searching to see if you’re just doing this for the “optics” and how it might affect the image and PR of your writing business.
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