This will be a little basic for many but maybe helpful to others. Authors often wonder whether the advance a publisher is offering is a fair one. There is a simple formula that can help you to judge.
Advances are, in theory, a prepayment against expected royalties. Authors are often concerned about whether their books “earn out” their advances — that is, whether royalties from actual book sales are equal to or greater than their advance against royalties. The advance represents a kind of benchmark for expectations of a title, and when actual royalties fall short of that number authors feel their titles have underperformed. There is a degree of truth to this, but it’s not the whole story. There are many factors behind the size of advances, and a book that doesn’t earn out can still be a success — the advance excess is in effect the equivalent of a slightly higher royalty percentage.
Still, authors have to do their best with the information they have, so we will assume the advance is logical relative to expected royalties. This being the case, the best way to judge the advance is to get a sense of the publisher’s sales expectations. To do this, try to find out about how many copies will be printed and about what the retail price is likely to be. Those figures will give you a sense of how the publisher is thinking about the title in terms of sales.
As an example let’s use nice round numbers for ease of calculation. Say the publisher plans to print 10,000 copies and sell them at $20 each and is offering the author a royalty of 10 percent off the full retail price. Now, many of the copies that are being printed will not be sold: copies are needed for reviewers and other purposes (among them the inefficiencies of book distribution), but we are only trying to get a ballpark figure, so we’ll ignore that level of refinement.
With that caveat, sales of 10,000 books would equal a total retail value of $200,000, of which 10 percent would be $20,000. Consequently, a logical advance for this title would be somewhere around $20,000. Woohoo, you’re rich!