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How Do You Know When Your Comic Is Making a Profit?

gamalhennessy Community • Jan 7, 2021
Most comic creators want to sell as many copies as possible of their work, but they might not know when or if their book is profitable or not.

To answer this important business question, it helps to understand the financial condition of your book before and after it goes on sale.

The three basic economic questions you need to answer for each of your comics are:

1. How many copies do you need to sell to make back the money you put into it?
2. How do you know if your comic is profitable?
3. How can you keep track of your comic’s financial performance?

Answering each of these questions involves understanding a few basic definitions and formulas that I’ll try to walk you through here.

How Many Copies Do You Need to Sell to Recover Your Investment?

Recoupment means to regain or recover. In the context of your comic, you can’t make a profit until after you have recouped the money you put into making it. To determine that threshold, you need to understand your book’s break-even number. To calculate breakeven, we need to walk through a couple of necessary definitions and examples.

Fixed Costs
Definition: A fixed cost is a cost that does not change with an increase or decrease in the number of goods or services produced or sold.

Translation: For independent publishers, fixed costs include overhead like legal fees, marketing, and advertising, IP registration fees, and freelance creative costs. No matter how many copies you sell, your fixed costs remain the same.

Example: If Bruce is publishing comics and spends $5,000 to set up his company, get contracts drafted, set up his website, and attend conventions and another $5000 to pay his artists Clark and Diana, then his fixed costs are $10,000

Variable Costs

Definition: A variable cost is an expense that changes in proportion to production output.

Translation: For independent publishers, variable costs include printing costs and distribution costs.

Example: Bruce pays $2,000 for printing 2,000 copies of his Crisis comic. The variable cost in this case is $1 per copy or $2,000.

Break-even Number

Definition: A break-even analysis tells you what level an investment must reach to recover your initial investment.

Explanation: The break-even point is calculated by dividing the total fixed costs of production by the price of a product per individual unit, less the variable costs of production.

Formula: (Breakeven = Fixed Costs/ Price per book - Variable cost per book)

Example: In Bruce’s case, if he sells his comic for $10, then the breakeven number is 1,111 copies ($10,000/9 ($10-1))

Note that if the comic was $5, he would have to sell 2,500 copies to break-even ($10,000/4 ($5-1), which is more than his initial print run of 2,000 copies.  Also, keep in mind that the current publisher revenue for selling $4 comics through Diamond is $1.60. That would make the breakeven point in this example 16,666 units (10,000/ 1.60-$1), which is far more than Bruce printed. This indicates that Bruce couldn’t break-even just from his initial print run of direct market comics. He might need multiple revenue streams to break even.

Multiple Revenue Break-even:
Because independent publishers can release their books across multiple distribution channels, the break-even formula can be more complex to take into account multiple revenue streams.

Formula: Multiple Break-even = (Fixed cost / Average price - Average cost)

Example: Bruce’s Fixed Costs are still $10,000. He decides to sell Crisis as a print graphic novel for $10 at comic shops, $8 at conventions, and $5 as a digital comic. This makes the average price per book $7.70 ($23/3). The average cost per book is now $.66 ($1 +$1 + $0 for the digital issue). This means the multiple break-even number is 1,420 (10,000/ $7.04 ($7.70- $.66). Every unit sold after the breakeven amount contributes to profit.

How Do You Know If Your Comic Is Profitable?

Profits

Definition: Profit describes the financial benefit when the revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the business.

Translation: Independent comics see a profit when the total revenue generated from the book is greater than the total expenses to publish and distribute the book

Formula: Profit = Revenue - Costs

Example:  If Bruce paid fixed costs of $10,000 for Crisis, and had printing costs of $2000, then his total costs are $12,000. If he then sold all 2,000 copies of his $10 book, his total revenue would be $20,000. The profit on Crisis in this example would be $8,000 ($20,000 - $12,000). If Bruce changes the price to $5, then selling out the initial print run would create a net loss, where expenses are greater than income.

How Can You Keep Track of Your Comic’s Financial Performance?

You can keep track of income and expenses by using a Profit and Loss statement

Definition: The Profit and Loss (P&L) statement is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a fiscal quarter or year.

Below is a list of comic book potential profits and costs If you decide to recreate this, keep in mind that it will work better in a spreadsheet program like Excel or Google Sheets than as a text document.

Title
Cover Price

INCOME
Digital Income
Webcomics
Digital Single Issue
Digital Trade Paperback
Digital Graphic Novel
Advertising Revenue
Crowdfunding
Sponsorships
Patreon
Affiliate Marketing

Print Income
Direct Market Single Issue
Direct Market Trade Paperback
Direct Market Graphic Novel
Book Store/ Library Trade Paperback
Book Store/ Library Graphic Novel
Convention Single Issue
Convention Trade Paperback
Convention Graphic Novel
Merchandise
Other

EXPENSES
Labor Costs
Editing
Cover Art
Line Art
Flatting
Coloring
Lettering
Production Design
Legal
Accounting
Marketing
Distribution
Printing
Advertising
Sales

Marketing Costs
Competition Research
Website Costs
Social Media Costs
Email List Costs
Comic Shop Event Costs
Book Store Event Costs
Library Event Costs
Convention Costs
Target Market Events Costs
Influencer Costs
Marketing Subtotal

Distribution Costs
Single Issue Print Costs
Trade Paperback Print Costs
Graphic Novel Print Costs
Single Issue Shipping Costs
Trade Paperback Shipping Costs
Graphic Novel Shipping Costs
Crowdfunding Costs

Sales Costs
Storage Costs
Distribution Subtotal

Advertising Costs
Review Copies Costs
Advertising Creative Costs
Digital Advertising Costs
Sponsorship Costs
Print Advertising Costs
Advertising Subtotal

When developing a P&L for your publishing, there are several things to keep in mind:

• Not every source of income or every expense applies to every comic. Relevance is dependent upon your goals, your market, your team capability, and your investment level.
• Not all expenses occur at once. Pre-production expenses can be stretched out over time and the investment to pay for them can be collected over time.
• Not all income comes in at once, Sales can continue over time after the initial costs are absorbed.
• Keep costs down to raise the profit potential.
• Work with your accountant to deduct expenses from taxes and reduce the initial financial impact.
• Remember most comics and most businesses run at a loss, especially at the beginning.

Next week, we'll talk about some of the ways you can make money from your comic without ever selling it.  Until then...

Have fun with your comic.