How to Start a Book Publishing Company
Did you know that back in 1994, Amazon started selling just books? Then, its tagline was “The World’s Largest Book Store”? Today, book sales only make up 10% of its total revenue.
We remain a nation of readers! In 2021, almost 825 million print books were sold in the US. Online book sales totaled $16.7 billion, and the US publishing industry comprised over 2,600 companies. The outlook is steady.
However, to start your own book publishing company, a love of words and wordsmithing, editing, and reading and a knowledge of the different publishing models will be crucial to make this a successful venture.
Business Overview
A book publisher is typically in the business of acquiring, editing, producing, promoting, publishing, distributing and selling books.
It’s worth noting that there are various book publishing models and specific target markets. The most common ones are:
- The trade book publishers are perhaps the most traditional, creating books you’ll most likely see in a brick-and-mortar bookstore. Formats include hardcover, e-books, audiobooks and mass market paperback and cover a wide range of genres and topics aimed at the consumer readership.
- Textbook publishers and academic publishers. These publishers specialise in textbooks and specific course materials for schools and universities.
- Self-publishing services or self-publishers. This model supports an author to publish their book in print or online so that it is accessible to an audience. Typically, self-published books are print-on-demand. On average, a self-published author sells only five copies of their book.
- Professional publishers are in the business of creating reliable and widely accepted information and standards databases for professionals such as doctors, architects, and lawyers, for example. Because of the constant updates of standards and guidelines, most of these books have now moved online.
Industry Summary
Book publishing traditionally refers to the creation, marketing, and distribution of printed copy. However, consumer habits have changed, and publishers have incorporated e-book publishing to remain competitive.
According to Statista, 77.4 % of the bestselling adult paperbacks and hardcover books were sold by what is known as the Big Five publishers in the US: Penguin Random House, Harper Collins, Simon and Schuster, Hachette, and Macmillan. This is a slight decrease in market share, down from 79%, indicating that independent publishers have gained some ground.
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Industry Trends
Whilst e-book and audiobook sales had skyrocketed in the last decade, uptake has recently leveled off and even decreased in some areas (AAP). However, revenue from professional textbooks, databases, and scholarly books remains strong. According to Statista, the income from textbook sales has overtaken revenue from adult trade books. The expected increase in college students in the US thus provides this industry with an opportunity for growth. By 2025, the forecast revenue for the U.S. books market is $30 billion!
Another trend to watch is the emergence of “platforms and services designed to summarize nonfiction book content (ExplodingTopics)
Target Market
IBISWorld states that the book publishing industry is highly competitive. However, the combination of a light regulation level, medium barriers to entry, and medium revenue volatility offer a relatively safe entry into this industry. But at the same time, we recommend you gain a good understanding of market trends and support your decisions based on detailed market analysis and your expertise. This will allow you to determine the target market to aim for and what publishing model to implement.
Checklist for Starting a Book Publishing Business
There are a lot of things to think about when starting your own book publishing business. From finding the right niche to building a strong team of professionals, there’s a lot to consider. But don’t worry – we’ve got you covered. To help you get started, we’ve created this handy checklist of everything you’ll need to do to get your business up and running.
Step 1: Choose your niche
The first step is to decide what kind of books you want to publish. This will help you determine what kind of business model you need to set up, what kind of team you need to build, and what kind of marketing strategy you’ll need to use. Do some research and think about what kind of books you’re passionate about. Once you’ve decided on a niche, you can start to build your business around it.
Step 2: Develop a business plan
A business plan is an essential tool for any business, but it’s especially important for a new book publishing company. A business plan will help you define your company’s goals and objectives, map out a strategy for achieving those goals, and track your progress over time. It will also give you a clear picture of your start-up costs, your target market, and your competition. Writing a business plan will force you to think critically about every aspect of your business, and it will give you a road map to follow as you launch and grow your company.
Related: How to write a business plan
Step 3: Choose a business structure
A business structure (also referred to as a legal entity) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a book publishing business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible for repaying them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start, which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owner’s personal assets from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
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Step 4: Obtain licenses and permits
Like any business, a book publishing business owner will likely need to obtain a variety of business licenses and permits in order to operate.
Every state has different requirements, but in general, a book publishing company will likely need a local business license, EIN (Employer Identification Number), and state sales tax number. While this list is small, it’s important to make sure everything is in order before starting.
Related: Common business licenses, permits, and registrations by state
Step 5: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 6: Create a marketing plan
A marketing plan is essential for the success of any business, and a book publishing company is no exception. A well-crafted marketing plan will help you to achieve your publishing goals by providing a roadmap for success. It will also allow you to track your progress over time and make necessary adjustments along the way.
There are many ways to market a book publishing company, but some of the most effective strategies include:
1. Establishing an online presence – A strong online presence is essential for any business nowadays, and that includes book publishers. Make sure your website is professional and informative, and that you have a strong social media presence.
2. Utilizing PR and media relations – Getting positive media coverage can do wonders for your book publishing company’s reputation. Make sure you have a solid PR strategy in place.
3. Exhibiting at trade shows – If you want to reach professionals in the publishing industry, such as wholesalers and retailers, exhibiting at trade shows is a must.
4. Creating a direct marketing campaign – A direct marketing campaign can be a great way to reach potential customers with your marketing message.
5. partnering with bookstores – Forming partnerships with bookstores and other businesses in complementary industries can help you reach new audiences and generate more interest in your authors.
Related: Low-cost ideas to market a new business
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Step 7: Get business insurance
There are a few different types of business insurance that a book publishing company will need to obtain. Most of these are optional but are worth considering.
1. General liability insurance: This will protect your company from lawsuits stemming from claims of property damage, personal injury, or, most importantly, advertising injuries.
2. Professional liability insurance: Also known as errors and omissions insurance, this will protect your company from lawsuits alleging that you made a mistake in the publishing process that resulted in financial damages for the author or reader.
3. Workers’ compensation insurance: This is required in most states if you have employees. It will protect your company from lawsuits filed by employees who are injured on the job.
Step 8: Set up accounting and bookkeeping systems
There are a variety of accounting systems available, and the best one for your book publishing company will depend on your specific needs. However, some of the most popular accounting systems used by businesses include QuickBooks, FreshBooks, and Xero. Speak with an accountant or bookkeeper to determine which system would be best for your business.
Related: Setting up the accounting for your business
StartingYourBusiness.com
Step 10: Hire staff and build a team
While one person can successfully run a book publishing company, a team will help you reach your goals much faster.
Finding professionals who are experts in the publishing industry, from editors and designers to marketing and salespeople. You can find these professionals by networking with other publishers, attending industry events, or searching online job boards. Once you’ve found a few potential candidates, be sure to check their references and work samples before making your final decision.
When starting out, or even over the long-term, these positions can be freelance professionals who only work when you need them.
Step 11: Stay up-to-date on industry trends
After starting your business, it’s important to continue learning and stay up to date on industry trends.
Networking with other publishing professionals and attending conferences or events related to your niche are great ways to stay informed about the latest developments in the book publishing industry.
Additionally, keeping up with industry news through trade publications or online news sources can help you identify new trends as they emerge.
Finally, it’s important to continually expand your own knowledge base by reading books and articles related to the book publishing industry.
By staying informed about the latest industry trends, you’ll be able to make smart decisions for your business and position yourself for success.
How much does it cost to start a book publishing business?
Your budget will largely depend on your target market and what business model you decide on.
But here are a few points for you to consider when developing your budget:
– You can easily start your business from home. This eliminates expensive lease and utility costs. However, consider how you would like to meet with clients and employ permanent staff. A home office, in this instance, may not be the best option long-term.
– Each book that will be sold through a bookstore or online, like Amazon, will need a unique 13-digit number ISBN (International Standard Book Number). The ISBN is a barcode that uniquely identifies a book, and is used by a retailer to charge the correct amount and track inventory.
– You will need a solid advertising budget for your services as a business and each time you promote a book. This includes a publishing imprint and logo, web presence, a multimedia campaign, and potentially flyers and pamphlets. If you are a confident user, a social media campaign will not cost you anything. Budget between $6,000 and $10,000, depending on your skills and what area you operate in.
– Depending on what book you intend to promote, you may like to set aside a budget for conference attendance, book fairs, or readings in various locations. Ongoing monthly marketing and comms costs will typically be around $1,000 – $1,300.
– Set aside funds for editing and proofreading manuscripts, designing a book jacket, imagery, and illustrations. Suppose you were to do all that for a single book; you’d typically be looking at costs of between $4,500 and $6,500 per book. But, of course, the more books you print, the lower the costs per copy.
– If you decide on print copies, you will need to factor in the cost of printing as well as the cost of their transport and distribution. The larger your printing order is, the lower the cost per book. Understanding the target market and being able to negotiate excellent contracts will help navigate these decisions.
– If you decide to publish e-books, make sure you will not have printing or transportation costs. Still, you may need to look at digitally converting text and imagery to ensure the book is accessible on a chosen platform.
– Consider investing in specialized publishing software. Subscriptions vary widely and can be anything from free to $600, so it pays to weigh the pros and cons of the various platforms. Most of them will offer a free trial period so that you can test which one works best for your needs.
How profitable is a book publishing business?
Book publishing in the US is a sizeable business with a market share of $33.3 billion in 2002, according to IBISWorld. That said, what you earn as a book publisher depends on:
– How many books are sold. As mentioned, larger batches of print books will cost considerably less, but you will also need to be reasonably confident that you will be able to sell them.
– Your contract with the author, in particular the percentage of royalties that will be paid to the author for the sale of each book (the remaining sale amount goes to you, the publisher). Not that a standard percentage of royalties for print books is between eight and 10%, whereas royalties for eBooks can be up to 30%.
– Your overhead, which will eat into your business profits. Which skills will you outsource? Will you publish print copies or digital books?
As a rule of thumb, if you can sell 3,500 copies or more of a book and you do not have significant lease and utility costs, you can expect a net profit of around $3,000.
Are there grants to start a book publishing business?
It’s extremely rare to find a grant to start a book publishing business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a book publishing business?
There are certainly a lot of specialized skills that you can outsource. For example, the tasks of editing, book design, illustrations, or the promotion of your services and your products can typically be done by freelancers. However, that expertise comes at a cost and will likely affect your price point and profit margins.
Knowledge of the publishing industry. Having a solid grasp of the entire process and the various business models is non-negotiable. That includes finding and developing material for publication, writing, proofreading, and editing copy, design and indexing, and understanding publishing contracts and royalties.
Associations such as the Association of American Publishers or the Independent Book Publishers Association are valuable networks for resources and understanding trends in the industry. Consider upskilling with targeted publishing courses.
Good business practices. A solid understanding of accounting practices and the ability to negotiate and manage contracts will be invaluable skills. Also, consider that you may hire freelancers or employees for specific tasks, so knowledge of HR practices and obligations will be helpful as well.
Marketing and Communications. Your book publishing business will need a solid marketing and branding effort, especially during the startup phase.
In addition, your marketing and communications skills will be needed when promoting a new book, working with potential distributors, bookstores, and the authors.
If marketing is not your forte, this is a skill you can easily hire.
What is the NAICS code for a book publishing business?
The NAICS code for a book publishing business is 511130.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
Final Thoughts
Although this industry has medium barriers to entry and its outlook is steady, there are a few things to learn about book publishing before you start your own business.
At the heart of it, though, this industry is for people who are really passionate about storytelling, curious about facts and figures, and love the power of language. If that’s you, then you’ve already passed the first few hurdles to starting your own publishing company.
