Excerpt

INTRODUCTION

The Profitable Writer teaches writers how to manage their writing income and expenses, so that they can make money. This book, as with the others in the Business Books for Writers series, helps writers build a financially stable business. In turn, this allows them to achieve a dream of supporting themselves with their writing.

Each book in the Business Books for Writers series is written so a writer can read the book on a weekend. After all, writers are very busy people. The books are crammed full of information, pointing the reader to additional resources for those that want to go into greater depth for any specific topic.

Several followers of the series asked for a book which would explain how to manage the financial end of their writing business. They wanted to understand the number side of their business without having to study complicated finance and accounting strategies.

These writers requested information on how to track their money using a system that was simple to use, so that they could maximize their writing time. Lastly, they wanted information on where to get cash for their businesses, discounts available for writers, and tips on tax strategies specific to writers.

This book is for all writers who want to be Profitable Writers.

Most small businesses fail, not because they don't sell things, but because the owner doesn't know how to manage the money they make from selling their work.

If your goal is to be a profitable writer, one who makes more money from the sale of their work than they spend, then this book was written for you.

If you want to learn to sell more books, well; that's the next book in the series. To be honest, a writer needs to learn how to manage the money they earn before they make so they don't lose a lot of money.

The more money you earn as a writer, the more you can use that money to expand your business by adding new ways to make money off your writing. These "revenue streams" can be combined into business models which lower risk through multiple ways of making money.

Short story magazines come and go all the time. Publishing houses are bought and go bankrupt. Conferences get canceled. Rarely does all that happen at once. Having your income spread across multiple types of sales increases the chances you will make some money, even if you don't make as much as before.

Every writer needs to understand how to read simple financial forms. Therefore, they always know how their business is doing financially. The Profitable Writer will teach you to use an income statement, balance sheet, and cash flow statement to monitor the financial health of your writing business. This book further discusses ways to get cash from funding sources to supplement your sales revenue, as well as where you can find discounts to help keep your expenses down.

Writers who are making millions of dollars and sit on the bestseller list regularly often learn the ins and outs of finance by the time they have reached their superstar status.

However, many writers become quite successful without understanding how to create a budget and stick to it. Often writers don't realize they can make a million dollars and lose money. How do you track your money, while knowing if your business is growing or failing? You read your income statement, cash flow statement, and balance sheet.

No matter how much income you are earning from your writing, if you don't know how to utilize these statements to assess the financial viability of your writing business, you'd benefit from this book.

Writers who don't know simple finance are writers who risk having a lot of lawyers, bookkeepers, and agents taking advantage of them. Financially successful writers have learned the simple lessons contained in this book, and you can learn them too. Even if you don't like to do math.

Why Do Writers Need to Know About Managing Their Money?

In her book, Accounting for the Numberphobic1, Dawn Fotopulos draws a great analogy about why small business owners need to know about managing money. She points out that an accountant is a number expert. Their role is, in many ways, like a car mechanic. A certified public accountant (CPA) calculates financial numbers for you, just like a car mechanic learns how to maintain all the gauges and parts of a car. The accountant understands the math and shows you how to meet the Internal Revenue Service (IRS) requirements. Though, your accountant is not going to manage your business any more than your car mechanic is going to drive your car for you.

Your accountant will give you the numbers, but you need to learn to read three simple financial statements. Consequently, you can take your writing business where you want it to go.

What Will You Learn from This Book?

You'll learn all the skills you need to quickly determine how your business is doing. Pinpoint when your writing business is in trouble and verify if your strategy for getting back on track is working, for this allows you to spend your time on what you love - writing.

Part one reviews how to tell whether you are making or losing money. That isn't as obvious as you might think. Many writers think that, if they have lots of money coming in, they're making money. What they don't consider is the amount of money they're spending, or the timing of when they'll to pay for expenses as opposed to when they'll get payments.

You can sell a short story to a magazine, but if you have to create a website, start buying advertising space and pay for book tours - you can spend a lot more than what is in your bank account.

This is especially true if you're an indie publisher hiring a copy editor, book cover designer, book designer, proofreader, and/or using marketing software to track your advertising impact. Don't make the mistake of assuming that if there's money in their bank account or that they're doing fine.

Before learning about how to create your money management plan, the first chapter will provide a checklist of all the financial tasks. These must be completed before starting your writing business. If you don't know what they are, then thank goodness you are reading this book! Don't worry if you haven't done these tasks yet, because there is still time.

If you've been writing for a while and you feel as if you need to learn more about managing your business' money, then you might still want to go through the checklist. Make sure you have completed all of these tasks for your writing business.

Let's Define a "Writing Business"

So, what is a "writing business"? In this book, a writer is regarded as having a writing business if they "sell and receive money for their writing." You don't have to receive a lot of money for your writing. If someone is buying your writing, then you have a writing business.

This book will help you understand how to monitor, care for, and grow that income. Don't worry. Learning the information will be painless. Don't look for any math equations, either. Your bookkeeper and accountant can do that for you. The process of reading and understanding the information that these professionals provide you will be simple, even if the thought of your business finances makes you break into a sweat. Nothing covered will cause you to lose sleep at night. What's really scary is what can happen if you don't learn this information, and we will discuss that as well.

Don't have money to hire a bookkeeper and an accountant? Don't worry. In that case, your business is not very complicated. However, consider meeting with both at least once. Going forward, you can pull together the information you will need by yourself.

A bookkeeper can save you time and frustration (and possible tax money) by helping you set up your record-keeping. Therefore, you can stay current with your financial documentation. When tax time comes, and you turn in your tax information to your accountant, you'll be glad your records are in good shape.

Meeting with a bookkeeper provides you with a backup option. This is especially helpful if you find you need to scramble to turn your latest book into your editor in April, and you haven't any time to gather tax information for your accountant. You can call the bookkeeper, asking them to come in and save the day by pulling the numbers together for you.

If you can get a bookkeeper to do your books for you, then why bother learning this information? Two reasons. First, if you know how to do your bookkeeping yourself (especially when you start out, and it is easy), you can save money. You'll want to either use it to pay the food bill or to put into your marketing or website.

Secondly, you need to be able to spot if your bookkeeper is making costly mistakes or if they're stealing some of your money.

If you don't have a bookkeeper, then knowing how to maintain your own financial records prevents you from slipping into a situation where bills creep upon you. That can result in you owing money you don't have, while either having to take out loans or losing sleep at night worrying about Big Ernie knocking at your door for his payment! The best way to prevent this is by reviewing your accounts every month.

The information in your records is invaluable in making future business decisions. Knowing how to read an income statement, balance sheet, and cash flow statement will guide you as you debate how much to invest in marketing, website improvements or upgrading your membership in a class to learn how to make more money!

A benefit of learning to manage your money is gaining the information you need to grow your business in a way which allows you to have more time for writing. Overall, it increases the income you get from the hours you put into your creative work.

When your big break comes along, you want to have the money to promote your work. You don't want impulse spending to rob you of your chance of taking advantage of a lucky break.

One fantastic thing I have learned about business success is that, when it comes, it's always unexpected. You're going along writing short stories and making a few sales a year. Or you write books for ten years, yielding enough money to barely make your rent … then … boom! An influential person goes on Twitter exclaims that your book is the best they have ever read. Suddenly, your sales go through the roof.

You get asked for interviews. You get asked to write a blog for a significant writing association. You get invited to speak at conferences. Life is everything you dreamed, but your writing time has diminished. You aren't producing as many words per day as you were before. When you started out, you wrote a book in three months. Now it's taking six.

You won't have much time to learn about managing your business' funds once your overnight success hits.

Good thing you anticipated this success and put away some money to tide you over until this significant investment of time pushes your book onto the bestseller list, right?

At that point, you'll be thrilled that you've read this book. You'll now understand the difference between an asset and a liability. As success comes, you'll know whether you are making or losing money as you look at all that money in your bank account.

If you are making $100,000 per year, your business must be in good financial shape, right? Actually, no; not if you're spending $200,000 per year. The information in this book will teach you how to determine if your business is profitable or not. Profitability is a good thing. Profitability is what will allow you to write full-time.

Chapter two discusses why you need a money management plan, along with that of which differentiates from the financial plan you wrote for your business plan.

Chapters three through five introduces the three documents that will help you manage your business: your income statement, balance sheet, and cash flow statement. Chapter six illustrates how to create and follow a budget.

By learning a few financial terms, you can talk to an accountant or bookkeeper and understand their answers! Don't worry. There is nothing scary in this book for authors unfamiliar with these business terms. Everything is explained in simple to understand terms. You won't find any financial jargon here.

In part two, chapter seven will review strategies and resources for finding the money to fund writing projects. Moreover, it discusses ways to aid disabled writers, emergency fund strategies, and tuition assistance which is available to help you improve your writing. Chapter eight covers tax strategies for writers, including what you need to know about collecting sales tax when you sell your books at book fairs, on book tours, etc. The last three chapters will provide some smart tips for handling the writer's money and resources. These will help you go into as much depth about learning more as you want, while ending with a list of software and apps that simplifies your work.

In chapter ten, there are links to two online dictionaries of financial terms you might come across during your future reading about handling your business money.

You work hard. Don't fall for the myth that a writer is only an artist if they are poor and struggling. Learn to handle the money you make. When your writing allows you to travel and meet your bills, it relieves stress and will enable you to concentrate on your craft, rather than just making ends meet. You earned your money. Now, let your income from your books help you achieve your writing career goals.

1 Dawn Fotopulos, Accounting for the Numberphobic, AMACOM. September 3, 2014.