Bernie Sanders, a democratic socialist, explained how he became a millionaire: “I wrote a best-selling book. If you write a best-selling book, you can become a millionaire, too.” Can you, really?
Let’s look at the economics. As you read this, recognize that it comes from working with dozens of nonfiction authors and reviewing their book contracts and businesses. I also share the numbers from Groundswell, the best-selling book I cowrote.
In the analysis that follows, my numbers are rough and approximate — obviously, your mileage may vary. But what I’ve written here is a good rough guide to the kind of money authors can expect. Bottom line: even a best-selling author should not expect to become a millionaire — at least not without a lot of hard work and some good luck as well.
Let’s define our terms, first.
What do we mean by millionaire?
What is a millionaire?
Earning a million dollars doesn’t make you a millionaire. Someone who earns $50,000 a year for 20 years has made a million dollars, but they don’t have a million dollars in the bank — they probably spent it all on frivolous stuff like food and rent.
Being a millionaire doesn’t mean earning a million dollars in a year, either. That’s pretty hard to do as an author unless you are in a very elite group. There are plenty of best-selling authors (more on that term later) who will never make a million dollars in a year.
For most purposes, a millionaire is someone with a million dollars in assets. But if you’re reading this, you don’t care if an author became a millionaire by investing in real estate or inheriting it. So I’m going to ignore non-book-related earnings and answer this specific question: can a best-selling book and the revenue that follows from it earn you enough to bank a million dollars in assets?
What is a best-seller?
Best-seller is a term that has become cheapened by the number of lists out there.
For example, you can generate a lot of bulk orders for a book by giving speeches or getting corporate buys — and if you do, you may appear on the 1-800-CEO-READ list for a month. But when we think of a best-seller, we tend to think of many people buying copies, not a bunch of bulk orders in a given month. So I don’t think that list qualifies you as a best-seller.
These days, there is also the ability to become a category “best-seller” on Amazon on any given day. One book I helped write — due to be published in May — achieved this fairly recently:
That orange ribbon means it was the best-selling new release in the Enterprise Applications category on Amazon — for a little while, anyway. On Amazon, Enterprise Applications is a subcategory of Software, which is a subcategory of books on Computers and Technology.
This is a good sales accomplishment for a book that hasn’t even been published, but it isn’t really a best-seller yet (although we have high hopes). Lots of books briefly get one of these orange ribbons. Being at the top of a small category for a short time doesn’t match up to what I think of as a best-seller.
No, by best-seller, I mean a book that gets onto a New York Times or Wall Street Journal or USA Today or Washington Post best-seller list for a major category like “self-help and advice” books.
That’s much harder to do than getting on the 800-CEO-READ list or getting an orange Amazon ribbon, but even that isn’t enough. It turns out, you can hire people to buy books from what appear to be a whole bunch of different sources and manipulate your way onto the list for a single month. (This can be expensive, on the order of $50,000, and doesn’t always work because the lists are on the lookout for it.) If you do that, you are technically a “best-seller.”
But to have any traction, you need to get on the list for multiple weeks. You make the list repeatedly because lots of people are reading your book and talking about it. I don’t count somebody who paid enough to trick the New York Times into believing they are selling a lot as a best-seller, and somebody like that almost certainly isn’t generating a million dollars from their book.
So for the purposes of this analysis, I’m looking at people who made it onto a major list in a major category at least twice.
So, do best-sellers become millionaires?
Let’s do a some rough calculations, shall we? I’m going to look at two sources of book revenue: books royalties and speeches.
A best-selling book is likely selling at least 40,000 copies a year. Given the front-loaded nature of book launches, such a book would like sell at least 5,000 copies a week for a couple of weeks, which would likely earn it a spot on a best-seller list.
Given that level of sales, we make a few assumptions.
First of all, we can ignore the advance. The advance is just an up-front payment of future (hoped-for) royalties. If you are a best-seller, you are going to “earn out” the advance. So the size of the advance doesn’t matter, the royalties do.
Second, we can ignore the royalty ramp. Hardback royalties start at 10% of the list price and ramp up to 15% after 10,000 copies. Since we’re selling so many copies, let’s just assume approximately 15% royalties for the whole run.
For hardback book with a $25 to $27 list price, that amounts to $3.50 to $4.00 per copy.
I’m also going to ignore a few things that drag down the rate up or down. For example, eBooks often make less because they’re cheaper even if they have a higher royalty rate, audiobooks can make less or more depending on how they’re priced, and paperbacks make less. And there are ancillary payments for things like foreign translation rights.
If you have an agent, they’re taking 15% of every dollar you make, in exchange for having put you in the position to be a best-seller.
But roughly, roughly, you can assume you’re getting $3.50 for every copy of the the book that’s sold. So those 40,000 book sales per year are earning you $140,000.
You’re also giving speeches. At that rate of sales, you’re probably well-known enough to give 20 speeches a year at $10,000 per speech. So that’s another $200,000 per year.
Congratulations. You’re earning $340,000 per year as an author! That’s going to give you a very nice standard of living.
But how much will you be able to put away on that living? Well, you have to pay taxes. You probably have a mortgage. You have plenty of other expenses. But if you don’t live too extravagantly, you might be able to sock away $100,000 per year.
Of course that book is almost certainly not going to stay on the best-seller list for ten years. If you’re lucky it will hang around for two. So you’ll clear $200,000. Add some lesser amounts as it drops off the bestseller list and you might sock away $300,000.
You’re a certified best-seller. But you’re no book millionaire.
The economics of Groundswell
My book with Charlene Li, Groundswell, sold 150,000 copies. It made the now defunct Business Week best-seller list once and the 800-CEO-READ list several times. (So I don’t quite qualify even under my own definition, but trust me, those were legit sales, we didn’t manipulate the lists.)
Those 150,000 copies generated about $500,000 in royalties.
I also gave 180 speeches. Some were unpaid, but those speeches probably generated about $1.8 million in fees.
So, did I take home $2.3 million?
I did not. My deal with Forrester Research, which supported me to write the book, paid me only a portion of royalties (I’m not permitted to go into the details). They got all the speech revenues. Of course, they paid me a salary, too. In any case, most of the sales and speeches were over a five-year period. I made some very good money, but I certainly didn’t clear a million dollars in book-related earnings.
(In case you are wondering, Groundswell still sells about 500 copies a year, mostly to poor college students who are required to purchase a 10-year-old book on social media.)
How to be a book millionaire
Can you sock away a million dollars from writing a best-selling book? Sure. Here are some ways to do it.
The easiest way to do it is to start famous. If you are an actor or a politician (like Bernie Sanders) who already has established national presence, your book will sell. You could even pay somebody else to write it for you and still clear a bundle. Somebody like that will also be getting a lot more for speeches. But they’re not really book-based millionaires. They are famous people who use books to make money along with all the other things they can get paid for.
Assuming you are not already famous, you can still build a lucrative business based on your best-selling book. If you are really good at speaking, you can increase the demand for your speeches — you might then make $20,000 per speech and do 40 speeches per year. That’s $800,000 per year. Do that for a few years and you’ll sock away a million dollars, unless you’re frittering it away on things like college tuition for your kids.
You can build a business based on your expertise. Maybe “Smart Author Inc” becomes a consulting business that earns a few million dollars a year. Even if you turn that into a business that spins off a million dollars in a few years, I don’t know if it’s fair to say that happened just because you were a best-selling author. It happened because you built on that author/expert platform and worked really hard to make it into something.
You could clear a lot more per book if you self-publish it. No more need to pay off agents and publishers — just grab a huge percentage of every book sale, right? Of course, without a publisher behind you pushing your book into bookstores, it’s a lot harder to reach that best-seller threshold.
Finally, you could be not just a best-seller, but a big bestseller. Let’s imagine that your book is excellent. Now it doesn’t just sell 40,000 per year, it sells 80,000. You give 30 speeches a year at $15,000 each. Now your book is generating $730,000 a year or so. At that level, you can be a millionaire in a few years. You can write another book that will continue to generate similar revenues, because you’re a hot commodity. Maybe you can turn your book into a movie, like Moneyball, or a TV series, like Game of Thrones. Now you’re making real money.
How many nonfiction authors reach that threshold for the first time in a given year?
Maybe a dozen or so. Most of the people on those best-seller lists have been there before. There is only room for a few newcomers who are not famous already, and most of the newcomers don’t hang around on the list long enough to hit that “big bestseller” threshold.
That’s a big dream. Thousands of people have that dream every year, but very few will become millionaires from it.
Dream a little smaller. Writing a book can help your visibility, your business, and your speaking career. If you’re successful enough to hit the best-seller list, it can generate hundreds of thousands of dollars. But it probably won’t make you a millionaire all by itself.