Are you an avid book lover with a passion for the written word? Have you ever dreamed of being at the helm of a thriving business that brings great stories to life? If so, starting your own book publishing company could align perfectly with your interests while also being a potentially lucrative business.
While a deep love for books and an eye for storytelling are undoubtedly important in the book publishing industry, starting a successful publishing company requires more than just these particular interests. To help you get started, our guide is here to walk you through the process!.
Book publishers acquire authors’ manuscripts, edit them into finished books, design visually appealing covers and layouts, and handle printing, marketing, warehousing, order fulfillment, and distribution. A book publishing company is like a bridge between writers and readers.
By taking on authors and producing their work, the publishing company makes money through royalties from the sales of physical books, eBooks, and audiobooks.
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 or online 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 specialize in textbooks and specific course materials for schools and universities.
- Self-publishing services or self-publishers. This model supports an author in publishing 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.1
- Professional publishers are creating reliable and widely accepted information and standards databases for professionals such as doctors, architects, and lawyers. Because of the constant updates of standards and guidelines, most of these books have now moved online.
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According to the Association of American Publishers (AAP), the US book publishing industry generates over $28 billion in annual revenue across approximately 2,000 companies. Major publishers include the “Big Five” – Penguin Random House, Hachette, HarperCollins, Macmillan, and Simon & Schuster.2
While the industry saw a slight 2.6% revenue decline in 2022 compared to 2021, total sales remained 8.6% higher than pre-pandemic levels in 2019. This suggests resilience even with economic challenges. The 5-year industry growth rate from 2018-2022 was a steady 11%.
The largest category is trade/consumer books, at $17.4 billion in 2022 sales. Other key segments are higher education, PreK-12 materials, professional/scholarly books, and religious presses. Trade and education books drive most industry revenue.
Online retail makes up the biggest sales channel, now surpassing physical bookstores. Direct publisher sales to buyers and intermediaries like wholesalers are also major channels. Print formats continue leading, though ebooks and digital audiobooks gain market share.
Current shifts include consumers buying more books online, publishers enhancing ebook catalogs, authors utilizing social media marketing, and mergers/acquisitions for growth. Self-publishing also disrupts the landscape.
Steps To Start A Book Publishing Business
Step 1: Choose a Niche
The first step of starting a book publishing business is to decide what kind of books you want to publish. This is important for several reasons:
Differentiation: The book publishing industry is a crowded and fiercely competitive space. Each year, thousands of books are published, making it increasingly challenging for new publishers to make their mark. By specializing in a particular genre or theme, you can differentiate yourself from larger, more general publishers. This helps attract authors and readers who are specifically interested in your niche, increasing your chances of success.
Marketing effectiveness: Targeting a specific niche simplifies your marketing efforts. Instead of trying to reach a broad and diverse audience, you can create targeted campaigns that resonate with your niche audience. This improves the effectiveness of your marketing activities, as you can focus on channels and messaging that appeal directly to your target readers. This research also helps you when calculating whether you are entering a market with enough potential customers.
Niche expertise: Depending on the niche, by operating within a specific sector, there can be an advantage of being known as a go-to publisher in that area. This opens up opportunities for collaborations, partnerships, and industry recognition, further enhancing your reputation and credibility.
Choosing a niche at the beginning of your journey becomes the strategic decision that sets the tone for your entire business.
Step 2: Develop a Business Plan
Starting a book publishing company is a big step, and after narrowing down your niche, the next thing you need is a good business plan. Think of this plan like a guidebook. It tells you where you want to go and how you plan to get there. Let’s talk about why this plan is so important.
First, a business plan helps you see the big picture. What kind of books do you want to publish? Who will read them? What are your main goals? Writing this down makes your ideas clear and keeps you focused.
Then, there’s money to think about. Starting a business costs money, and you’ll need to know how much it will cost to start and how you’ll make it back. This helps you see if your publishing company can make money and keep going in the long run.
Also, if you need money from others to start, a business plan is important because investors or banks will want to see your plan. They want to know that your publishing company is a good bet before they give you money. Your plan should show that you understand the market and have a solid strategy to market your authors.
Related: How to write a business plan
Step 3: Secure Funding
The next step in starting a book publishing business is to make sure you have the funds to launch and sustain the business. Here are some ways in which other founders procure the capital needed to start their book publishing business.
Personal savings: Given the low start-up costs of a basic office infrastructure and manuscript inventory purchases, many founders self-fund their business using their own savings. If personal savings aren’t enough, outside sources will be needed.
Friends & family: One outside source is borrowing start-up capital from friends or relatives. This can be a good option, but consider the risks related to personal relationships when borrowing money.
Credit cards: Using credit cards to fund the first few years of a book publishing company is an option for entrepreneurs. However, this method should be approached cautiously, as high-interest rates can quickly accumulate substantial debt if they aren’t paid back quickly.
Home equity loans: Borrowing against existing home equity is another option for entrepreneurs looking to fund their book publishing company. This usually offers a better interest rate and may be a better option than using credit cards or personal loans, but your property will act as collateral.
Bank small business loans: Traditional bank loans, or small business loans backed by a Small Business Administration (SBA), are an option for financing a new business. Although it can be a bit of a hassle to apply for these loans, they can be a common option to secure the capital required to start a book publishing company.
Angel investors: Wealthy individuals who have an interest in supporting book industry ventures provide capital in exchange for an equity share. This is a good option if the entrepreneur can find an angel investor with the same vision and goals for the book publishing company.
Crowdfunding: Another, though difficult, option to successfully pull off unless tapping into a very passionate niche is to use crowdfunding. If done effectively, crowdfunding can create a community of followers and buzz around the book publishing company.
Step 4: Register the Business
The next step is to take care of the necessary tasks to properly register your business and ensure legal compliance. Here are some suggestions to guide you through the process:
Choose a business structure: The first task is to choose a business structure. The four common options are:
- Sole proprietorship: Offers simplicity and lower startup costs, but the owner is personally liable for the business.
- General partnership: A business owned by two or more individuals who share profits and liabilities.
- Corporation: Provides limited liability protection and separates personal and business assets, but are the most costly and complex.
- Limited Liability Company (LLC): Offers liability protection and flexibility, combining features of both corporations and partnerships.
Related: Comparison of business structures
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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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Obtain business licenses and permits: Every state has different requirements, but in general, a book publishing company will likely need general business registrations, such as a local business license, EIN (Employer Identification Number), and state sales tax number.
Intellectual property rights: As a book publisher, it’s important to understand copyright law and protect the works of your authors. Familiarize yourself with the basics of copyrights and how to obtain copyright protection from the U.S. Patent and Trademark Office (USPTO).
Step 5: Set Up the Production & Distribution Process
After your business registration is complete, it’s time to set up the production and promotion process for your new book publishing company. A few points to consider:
First, establish clear workflows for each step of the publishing process, including editing, designing, transmitting to printers, converting to ebook formats, and archiving source files and past versions. This will help streamline operations and ensure efficient collaboration between the different departments, team members, and freelancers involved in the book production process.
Understanding your sales channels is another part of this phase. This means knowing where your target audiences discover books. It could be online retailers, physical bookstores, libraries, and so on. By knowing where the books are going, you can understand the process of getting them there effectively.
Finally, developing a book promotion plan is next, which involves deciding on the marketing tactics you’ll use, such as social media marketing, email marketing, public speaking events, or advanced review copies. A clear and precise promotion plan can help streamline your marketing efforts and ensure that your books reach the right audience at the right time.
Step 6: Prepare to Launch!
Starting a book publishing company involves a series of steps, and once the core ones are completed, there are several additional tasks that need attention. These tasks will vary depending on individual needs and the specific nature of your publishing business, but a few to consider include:
Business insurance: For a book publishing company, common types of business insurance include general liability insurance, which protects against everyday risks, and professional liability insurance, which covers claims related to errors or negligence in publishing. These insurances safeguard your business against unforeseen circumstances.
Setting up bookkeeping: Establishing a system for handling daily transactions, taxes, and financial statements is important. You can either hire a bookkeeper or use accounting software to keep your financial records organized and up-to-date.
Obtain an ISBN: Each book published by your company needs an International Standard Book Number (ISBN). This unique identifier is crucial for the distribution and sale of your books in the global market.
Check contracts and agreements: Have properly drafted contracts for author agreements, distribution agreements, and other key documents. It’s a good idea to have these documents reviewed by legal counsel to ensure they are thorough and legally sound.
Opening a business bank account: Setting up a dedicated bank account for your business helps keep personal and business finances separate and makes financial management more straightforward.
Common Questions When Starting A Book Publishing Company
How much does it cost to start a book publishing company?
Starting a book publishing company involves various costs that potential business owners should be aware of. While the exact expenses can vary depending on factors such as location and the scale of operations, a rough average cost to start a book publishing company can range from $10,000 to $50,000 or more.
Location: When considering the location of your publishing company, one of the decisions is to open a physical office or run the business from home. To save on expenses, you can easily start your business from home and use a remote team to conduct operations. If you would rather meet with clients in person and employ permanent staff, an office space will be needed, which will come with deposits and any office setup expenses. Initial deposits can range from $2,000 to $5,000, assuming a modest space in a moderately priced area.
Equipment and software: Basic office equipment (computers, printers) and software (publishing and bookkeeping software) can cost between $1,000 and $3,000.
Business insurance: As a rough estimate, you can expect to spend around $500 to $2,000 for your initial insurance premium.
Marketing: This includes expenses like designing and printing business cards, creating a professional website, and developing initial marketing collateral. In total, you might spend around $1,000 to $5,000 on your initial marketing efforts.
Obtaining an ISBN: On average, you can expect to pay around $100 to $500 for a block of 10 ISBNs.
Book production: The production costs for initial titles, including editing, design, and printing, can vary. For a small batch of books, expect costs between $5,000 and $10,000.
Business registration: Registering your business, including filing fees for your chosen structure (LLC, corporation, etc.), can cost between $50 and $500.
How profitable is a book publishing company?
The profitability of a book publishing company depends on various factors such as the number of titles published, the number of units sold per title, the selling price of each book, and the costs associated with publishing.
Assuming a publishing company sells 10 titles per year, with 1,000 units sold per title, the total number of books sold would be 10,000 units. If we assume the selling price of each book to be $20 (a typical price for a new paperback novel), the total revenue would be $200,000 (10,000 units * $20/unit).
The costs associated with publishing a book can vary widely, but for simplicity, let’s consider the main costs: printing, author royalties, and overhead costs.
– Printing costs: If we assume a cost of $2 per book, the total printing cost for 10,000 books would be $20,000 (10,000 units * $2/unit).
– Author royalties: Typically, authors receive a royalty of around 10% of the retail price of a book. In this case, the royalty per book would be $2 ($20 * 10%). For 10,000 books, the total royalty payment would be $20,000 (10,000 units * $2/unit).
– Overhead costs: These include costs for editing, marketing, distribution, and general administrative expenses. Let’s assume these costs amount to 30% of the total revenue, which would be $60,000 ($200,000 * 30%).
Adding these costs together, the total cost would be $100,000 ($20,000 + $20,000 + $60,000).
Subtracting the total cost from the total revenue, the profit would be $100,000 ($200,000 – $100,000). This is a simplified example, and actual profits can vary based on several factors.
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?