Pub Rants

Category: advances

Money, so they say, is a taboo subject, so don’t expect fellow writers to spill financial details.

Until now. Hats off to Heather Demetrios for pulling back the curtain and being brave enough to share her mistakes in the article “How to Lose a Third of a Million Dollars Without Really Trying.” It’s considered gauche to talk about money in this industry, yet it’s probably one of the most important topics authors should be discussing.

Agents are often in a weird position when it comes to talking to our clients about money management. On one hand, we are the author’s business partner; on the other hand, we aren’t their parent. We don’t want to make assumptions about an author’s financial responsibility (or irresponsibility).

Over the years, when I have a debut author who has landed a big advance, I have asked for permission to put on my mom hat and give counsel. If the author says yes, I offer these four pieces of advice:

  1. When the advance comes in, don’t wait. Cut a check for 25% of the total that has come in and mail that check to the IRS right then and there. I’ve heard too many horror stories of authors finding themselves in real trouble when April 15 rolled around and the money was already spent.
  2. Ever heard of the adage “pay yourself first”? Most people don’t know exactly what that means. Well, in investing terms, it means immediately placing the maximum percentage allowed by the IRS for that particular tax year into a retirement account (i.e., a Roth IRA, IRA, Vanguard S&P 500 fund, or similar).
  3. If you have a mortgage your advance can pay down (or, better yet, pay off), that is worth considering. Owning your home outright can create a lot of financial freedom. If you have student loans or other debts, consider eliminating them.
  4. Connect with a financial advisor who only charges by the hour rather than taking a percentage of your investments. This is a way to gain expert advice on reasonable terms—especially for authors who feel lost in the weeds about this whole investing and saving-for-retirement thing. Garrett Planning Network is a good resource that can hook you up with a fee-only certified financial planner.

In the end, the best way to think about your advance is to take that amount and divide it by, say, three years. What would the author’s annual salary then be? For example, if an author is lucky enough to get a $150,000 as an advance (sounds fab, right?), that’s $150,000 minus 25% in taxes, which equals only $37,500 a year for three years. If that’s your sole income for those three years, that might be a bit sobering.

My client Courtney Milan once told me that a blog article I wrote a lifetime ago on authors and retirement really made a difference in how she managed her money. I wish I could find that original blog post, but chances are good the info would be outdated anyway. For more up-to-date info, here are my recommendations for retirement planning:

So thank you, Heather, for getting the ball rolling for authors to talk about money. Mentorship tends to be a key factor for success in publishing. So let’s not be shy about discussing this topic.

 

Creative Commons Credit: Ben Taylor

Before 2001, very little information was available about deals happening in the industry. No transparency, really, regarding what agents were selling and what editors were buying. Michael Cader and Publishers Marketplace changed all that. Now, a wealth of deal information is available to anyone via a monthly subscription and the click of a button.

The deals-search feature on the site is a powerful tool that helps agents quickly learn what editors have been buying. It also helps writers research who might be a good fit to represent or buy their novel.

At first glance, the deal-reporting system is fairly straightforward:

Nice = an advance between $1 and $49,000

Very Nice = $50,000 to $99,000

Good = $100,000 to $250,000

Significant = $251,000 to $499,000

Major = $500,000 and up

It’s clear cut, right? The advance falls within a particular range, which determines the announcement term used when posting the sale.

Reality is actually a bit murkier. Why? Because there is an ongoing discussion about whether bonus monies in the deal should be counted as part of the advance or not.

In several recent conversations with editors, most assumed that agents only counted the actual advance, nothing else in the deal. In conversations with several agents, most said “it depends.” Some agents just outright include the bonus monies in the advance when they report their deals. Others assess whether the deal is borderline and may count the bonus to pop the deal into the higher level. The higher the level in the report, the more foreign and film interest might be generated. So this is actually important stuff.

What about when a deal announcement doesn’t mention a level at all? What’s the subtext? There are only two reasons a money range won’t be included:

Reason 1: There was no advance (as is the case for a lot of ebook-only deals), or the advance was so small that it’s better not to mention it at all and leave it ambiguous for film and foreign interest.

Reason 2: The author is so big or well known that the deal is likely to be very high indeed. Perhaps the author’s privacy is being maintained.

Happy deal searching!

Photo Credit: MoneyBlogNewz

As featured in our April newsletter, an agent’s most important skill is the ability to negotiate well on behalf of the author client. Authors hire agents to protect their business interests in publishing. This is why a literary agent has a job.

Simply put, good agents do good deals on behalf of their authors.

So let’s discuss what I mean by “good” in terms of a deal and how that can be defined. Most writers might assume I’m talking about the level of the advance—as if how the negotiated amount is the only barometer of a decent deal. In reality I’m talking about every facet of the deal offer and the fairness and equability of the final contract the author signs.

Think of publishing as like a marriage or long-term relationship. It begins in love and happiness and for a lot of authors, the love affair lasts their whole career. But there is always the possibility of it ending in conflict and, in some cases, animosity. The point of the contract is to take the emotion out of the relationship and to clearly spell out the expectations of each party. This is why it’s imperative for an agent to negotiate a good deal and the best terms in a contract.

So just what are the negotiating tactics of good agents?

* Good Agents negotiate the advance.

A Publisher’s opening offer is not the highest advance the publisher is actually willing to give. Good agents know and understand this. It’s a bartering tool, the first give-and-take for what an agent is willing to grant and for what the publisher is willing to give in exchange. There are a ton of strategies involved here. This is just to spotlight one tactic.

* Good Agents only grant rights that are commensurate with the advance level being offered. 

If the advance is low, the agent will restrict the rights being offered to a publisher. A negotiation tool for getting a higher advance may be the willingness to offer World English or World rights in exchange for more monies up front.

Cliff notes for the types of publishing grants:

North American rights = publisher only has the grant of rights to sell the title in the US, Canada, and US territories such as the Philippines.

World English rights = publisher only has the grant of rights to sell the title in the English language around the world, including UK, Australia, New Zealand.

World rights = publisher has the grant of rights to sell the title in the English language around the world as well as to sell the licenses to have the title translated into other languages.

* Good Agents only sell World English or World rights if the subrights splits are standard. Otherwise, good agents restrict the deal to North American.

Standard splits, as defined by the Big 5 publishers, are 80% to author/20% to publisher for the UK and 75% to author/25% to publisher for translation. Some publishers (usually the smaller ones) only want to offer a 50/50 split, which is significantly less advantageous to the author than if his or her agent reserved World rights to license separately in each territory. (Remember: the author would then have to pay the agent commission on top of not receiving the standard 75% or 80% split. That’s definitely a reduction to the author’s bottom line.) I’ve also seen 60/40 (in author’s favor) offered.

* Good Agents don’t sell the publisher world translation rights or audio without reversion clauses.

If the publisher does not exploit or actively pursue the rights, the author is stuck and cannot earn money on the licensing of these potentially lucrative rights. Since part of an agent’s job is to help authors earn a living from writing, unexploited rights is untapped money potential. Publishers love “warehousing” rights just in case, but reversion clauses force publishers to actively try and license those rights or lose the ability to do so.

* Good Agents only sell rights or do deals with publishing houses that offer standard royalties or the equivalent (if royalties are based on net, which is the case for a lot of smaller publishers).

* Good Agents pre-negotiate “tricky” contract clauses in the deal memo stage so as to completely eliminate the issue at contract stage.

A favorite publishing house tactic, once the offer is accepted and contract generated, is to reply with “that should have been negotiated during the deal memo stage” as a way to say “no” to a requested change. To avoid this, actual clause language often has to be negotiated upfront with the editor during the deal negotiation. (“Tricky” clauses include the non-compete clause, the option on next book clause, the out-of-print clause, and many more).

It’s an icky strategy, as it’s not fair to the editor, who is often placed in an awkward situation. After all, they know deal points, not contract language. Sadly, this is becoming more and more standard.

* Good Agents have deal memo boilerplates that are unique to each house (and these deal memos are two, sometimes three pages long) 

Rather than use the publisher-generated deal points, which usually only cover the basics in an eight-point list and nothing else. Agency-generated deal memos cover all the tricky bits for that specific publisher, since contracts vary greatly from house to house.

* Good Agents have the editor confirm deal points memo via email before officially closing the deal.

This just came up for me recently where a deal was closed and went to contract stage, but the contracts department didn’t input the royalty escalator agreed upon during the deal negotiation. Because I had the final deal memo along with the editor’s confirmation email, it ended up being a simple non-issue, and the contract was changed. Without that confirmation, the author might have been stuck with lesser royalty structure.

Good agents could write a book on how to actively negotiate a publishing deal and contract. There are so many facets this series of articles can only touch on the highlights.

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The genesis: In January 2015, Backspace co-founder Karen Dionne and I had a conversation in which she mentioned that writers sometimes want representation so badly they are willing to sign with an average or even a below-average agent. Trust me, not all agents are equal. I replied, “Well, writers don’t know what they don’t know.”

In that moment, a lightbulb went on for both of us. Writers don’t know what a good agent does. How could you if (1) you’ve never experienced it and (2) you’ve only ever had one agent and no way to assess just how strong he or she might be at the job?

Thus, this series of articles was born.

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Archive:

February 2015 Newsletter – Article #1: Agent As Savvy Business Manager

March 2015 Newsletter – Article #2: Commanding Authority: An Agent’s Negotiation Edge.

April 2015 Newsletter – Article #3: Fearless Negotiation: An Agent’s Most Important Role for an Author

In a perfect world, every literary agent would be a fearless negotiator, working tirelessly to get the best possible book deals for his or her clients. But the world isn’t perfect. And sometimes an author’s career goes off the rails because their agent doesn’t have the knowledge, skills, or tenacity necessary to negotiate well on the author’s behalf.

Author #1 had a six-figure offer from a major publisher for the first three books of his self-published middle-grade series. He also had no agent. The publisher recommended several, and the author signed with one. Sadly, the agent did not negotiate better contract terms. This meant the author now had to give the agent 15% of the exact same six-figure deal he’d set up himself.

The author hoped the agent would earn his commission going forward by advocating for the book during the publishing process. But in time, the author realized his agent wasn’t doing anything he wasn’t already doing himself. He terminated the relationship and negotiated the next three-book deal without an agent.

As the time neared for the next contract, this author still felt he could get a better deal if a savvy agent negotiated on his behalf. He interviewed carefully and signed with an agent with an excellent reputation who was also a fan of the author’s work. The agent soon learned what the publisher hadn’t yet told the author: sales were soft, and there wasn’t going to be a third offer.

The agent pitched a new series, but the publisher wasn’t interested. Neither were the other publishers the agent submitted to because of the author’s declining sales record. He and the agent parted ways, and the author’s dream of supporting his family with his writing was over.

This author is convinced the outcome would have been different if his first agent had been a tougher negotiator—not only in regard to the size of the advance, but also in the thousand-and-one ways his agent could have run interference with the publisher to ensure that the author’s books got the in-house attention they needed and deserved. This agent may have been afraid to rock the boat, but it was the author’s ship that sank.

Author #2 was with an agent who always sold world and film rights to the publisher. Every client, every deal, without exception. Not every agency has its own foreign-rights department, nor does every agency partner with a foreign-rights co-agent in order to fully serve their clients.

In time, the author realized they had a problem. This author’s books were doing very well in the territories where they were available, but the publisher’s foreign-rights department had only sold them into a handful, and nothing was happening with film. When the author discussed the situation with their editor, the editor recommended the author get another agent—even though this meant the editor would have to work with an agent who was a tougher negotiator.

Not only did the new agent sell the film option for the author’s latest book, but the agent also made sure it was a “complete” offer, meaning that a producer, director, and screenwriter were committed to the project before recommending the deal. Previous film offers that didn’t have all these components in place were rejected because this agent was a tough negotiator who wasn’t afraid to hold the line.

Author #3’s agent got him a two-book deal with a well-known mass-market-paperback publisher. The contract included joint accounting. If you’ve been reading Kristin’s “Think Like an Agent” article series, you know that joint accounting can have negative consequences, as this author was about to find out.

When his first book published, it sold reasonably well. Meanwhile, the author was busy writing the second. To his surprise, the publisher rejected the book. The author wrote another, which the publisher also rejected. The author wrote a third book, which the publisher rejected when the book was half finished.

Are you keeping count? Two-and-a-half books written over who knows how many years in a valiant effort to deliver the second book of his contract. Meanwhile, because these two contracted-for books were irrevocably linked due to joint accounting, even though the first book was selling well, during all that time, the author didn’t see another dime.

If you’re wondering where the author’s agent was through all of this, so was I. Why didn’t the agent run interference with the publisher? Why was this author forced to spend years writing multiple books without getting paid for them? Surely there was something a savvy agent could have done.

The author wrote a fourth book, which the publisher finally accepted, only to drop the book after Borders went bankrupt. Eventually the author got the rights back to his books and self-published these novels along with the ones his publisher had rejected. All of his books have been very well received by readers, and the author is now with a small publisher with an excellent reputation. Most important, the author feels that his career is finally on track.

Admittedly, much of what determines the success or failure of an author’s career is beyond the author’s and the agent’s control. But holding out for an agent who is a fearless negotiator can be the author’s best defense in a challenging, uncertain business.

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Karen Dionne is an internationally published thriller author, co-founder of the online writers discussion forum Backspace, and organizer of the Salt Cay Writers Retreat and the Neverending Online Backspace Writers ConferenceShe is represented by Jeff Kleinman of Folio Literary Management. This panel discussion along with the full Backspace Writers Conference video archives are available exclusively to Backspace subscribers and online conference registrants. 

Because The First Thing That Comes To Mind Is The Size Of The Advance – Not.

STATUS: With New York Publishing shut down, I’m working on a UK contract and catching up on email. I think it’s going to be this way for most of the week.

What’s playing on the XM or iPod right now?  HOPE I DON’T FALL IN LOVE WITH YOU by Tom Waits

Obviously the Random House – Penguin merger is all the news in the publishing world right now. It’s a big deal. But I read this article in Publishers Weekly and pretty much snorted my tea.

PW makes it sound like an agent’s biggest concern might be the reduction in advance amounts paid for books.

I’m concerned about MANY things that might come about because of the merger but smaller advances is not one of them. It’s not even on my top 10 list of things to be concerned about.

Publishing saw the consolidation of publishing houses into smaller and smaller numbers in the early 90s. That evolved into what had been known as the “Big 6” of the last decade.

It’s now down to the “Big 5” and quite honestly, I don’t see NewsCorp (which owns HarperCollins) settling for the status quo. Wouldn’t surprise me at all to see the “Big 5” become “4” with two more houses merging in the not-so-distant-future.

Of course this all has to pass anti-trust rulings, etc.

What does fewer publishing houses mean for authors?

That answer is pretty simple. Fewer choices. Less competition. More uniformity of royalty rates (like that hasn’t happened already because houses are already more interested in status quo among themselves rather than actual competition). Narrowed vision of what is the market and what should sell (and they already have tunnel vision as any number of digitally self-published successes have recently proven). More emphasis on commercial blockbusters and less building authors from the mid list.

Getting the picture? Smaller advances? Not a main issue on my radar.

One Possible Peril Of A Multi-book Deal

STATUS: Heading out into a glorious day.

What’s playing on the XM or iPod right now? THE OTHERSIDE by Breaks Co-op

I’m pretty sure I’ve blogged about this sometime before but it could have been years since my last entry on it for all I know. One of the perils of a multi-book contract is a little detail called joint accounting or cross-collateralizing the titles.

For the record, our agency won’t do joint accounting. All the publishers know that and if they want to insist on it, then we can only talk about selling one book and any multi-book contract is nixed. I see absolutely zero benefit in joint accounting for the author. However, some well-respected publishers do like to push for it—especially for debut authors. Tor being one example. Some houses never practice joint accounting. Harlequin being one example

First off, what is it? Basically, it means that the multiple titles sold are linked in the accounting. Let’s say an author does a 2-book deal. It’s not a series so each title stands on its own. Let’s say the advance was $30,000 (15k per title). In joint accounting, the author would not see any monies beyond the advance until both titles earned out the 15k because of the linked accounting (even if book one has already earned out).

With no joint accounting, each title has its own separate accounting so once the 15k earns out for book one, the author doesn’t have to wait for the other title to earn out to earn royalties on that first title. Or vice versa. Each title is separately accounted.

That’s it in a nutshell. If you are only selling one book, this is never an issue. It’s only a point of discussion if an editor is offering for several books.

As a matter of practice, when an editor calls to offer for 2 books (or 3 or whatever), I always begin the convo with “our agency will not do joint accounting. Given that, are we talking about one book or more than one?” This establishes it before anything else so it’s not even a factor as the negotiation unfolds.

Once again, I can only speak for myself. Other agents might differ on their opinion of this. You might be wondering why any author would agree to it.

Well, if you are getting 7-figure advance for two books and the publisher insists on joint? Do you care? Interesting question, no?

The One-Book Deal

STATUS: A nice and productive day. I think I want summer hours though. Leave by 1. Play in the sunshine. I know Chutney is all for it.

What’s playing on the XM or iPod right now? DO YOU SLEEP by Lisa Loeb

Today let’s tackle the single book contract. What are the advantages and disadvantages to doing just a one-book deal? Considering what we discussed yesterday, it seems ludicrous to sell just one book!

Well, not really. Most one-book deals are for literary fiction and occasionally for what we would call the “big” commercial literary fiction. Commercial literary fiction is really just literary fiction that has a commercial hook or slant. For example, WATER FOR ELEPHANTS is a good example of commercial literary. Or TIME TRAVELER’S WIFE. Or HOTEL ON THE CORNER OF BITTER AND SWEET.

Does this make sense?

And there are lots of reasons to do a one-book deal.

1. Literary fiction takes longer to write. Sometimes it’s not feasible to write a second book on a prescribed deadline so authors will contract one book at a time. Wally Lamb (SHE COMES UNDONE) is kind of known for never selling a book until it’s written and then he sells that one book only.

2. A one-book contract can alleviate the pressure on the author. The sophomore effort can be a tricky thing. I know from experience that every author hits a stumbling block with that second novel and it really doesn’t matter the genre you write in.

3. Literary fiction—especially those that lean commercial—often get undersold initially and then break out big later. If there is a sense that that could happen, why lock the author in for a certain amount of money?

4. The author might not have a second novel to propose and he/she just doesn’t want to throw ideas at the wall and see what sticks. And the author might take 10 years to write next literary novel. It happens.

5. If the author’s editor leaves and there is just a one-book contract, it can make it cleaner for the author to follow his/her editor to a new house. One’s editor tends to be really important in literary fiction. There is a certain trust that can be very beneficial to the literary writer.

Now having mentioned these things, you can kind of see the flipside to the argument.

1. A two-book contract might be preferred if there is a lot of hype and a book sells for a lot of money and then doesn’t perform. How nice would it be to have a commitment to two books already lined up if that’s the case? A chance of redemption or getting those numbers back up.

2. A Publisher may delay acquisition of a future book until they have sales figures for the first book. Since books easily take 18 months to publish, it’s a long time to wait to get a new contract—especially if the author is trying to earn a living here.

One Book or Two? Maybe Three?

STATUS: I was “this close” to getting to everything on my TO DO list today.

What’s playing on the XM or iPod right now? MY WAY by Frank Sinatra and Willie Nelson

Last year, a fellow agent friend and I gave a workshop on doing a single-book contract versus a multi-book contract. I was a little surprised at how many writers showed up for it. Hey, maybe these would make a few good blog entries.

First Q: When is doing a single-book contract ideal and when is a multi-book contract best?

Answering this question takes into consideration a lot of different factors. Let’s start with the obvious. If you write genre fiction, it’s almost always to an author’s advantage to do a multi-book contract.

For example, if you write fantasy and the first book being sold is the first in an envisioned trilogy, well, it would be better to have the publisher commit to three books. That way the entire series has a shot of being published. It often takes several books for a series to pick up momentum. What’s important is the publisher commitment—even if in the end a series does well and it was “undersold” initially in terms of the advance.

More common case is that a series has to build over time with the subsequent books and then the books start to earn out. Besides, who wants to sell book 1 in a trilogy only to be left in a lurch if the publisher doesn’t pick up the other books? It’s not easy (read “nearly impossible) to sell books 2 & 3 to another house. If sales are sluggish, it’s really unlikely another house will pick it up.

For another genre such as romance, careers build best if an author can release books within 6 to 8 months from each other. That means really tight schedules/deadlines for the author to make that work so doing multi-book contracts make sense. It’s also best to do multi if the stories are “linked” (as in they stand alone but have characters that might have been introduced in first novel).

Is there an advantage or disadvantage for doing 2 books vs. 3 or 4? Sure. Lots of agents differ on their opinion of this so I can only speak for myself. In general for me, the number of books sold at one time depends on the author (how fast he/she can write), on the project (how many books envisioned) and whether I think the author was undervalued. What I mean by that is if the offer was initially too low for a 3 or 4 book deal or if I thought the monies should have been higher in the auction and I don’t want to lock the author in for too many books at the lower rate. Obviously, reverse is true. If the monies are good, then why not lock in for more books as the commitment is strong from the publisher.

As you can see, lots of factors at play. How does an agent know? We’ve been doing this long enough that we pretty much use our gut sense of what feels right as the offer unfolds. I’ve yet to be wrong.

I’ll talk about single-book contract tomorrow.

Does The Size Of The Advance Equal Success?

STATUS: Blogging a bit late tonight. Busy day.

What’s playing on the iPod right now? MR. JONES by Counting Crows

The answer is yes.

The answer is no.

The size of the advance paid can increase the likelihood of success as the publisher is more likely to commit significant resources toward a title that a large advance was paid for.

However, the size of the advance is not a guarantee of success for any specific title.

I remember reading an article in Publishers Weekly last year (and I wish I had saved it). The article outlined two thriller titles being released by two different publishers. Both thrillers were in hardcover and the lead titles for their specific imprints. Both titles had a solid six-figure advance. Both titles had significant resources allocated for the marketing and promotional push. Both titles were from debut authors.

One title hit the New York Times Bestseller list. The other title had, in the publisher’s own words, “disappointing sales.”

So what happened?

Quite simply, no amount of money can force a public to want and buy a book. Sometimes it happens and sometimes it doesn’t. If the publishers knew what created that ground swell to catapult a title onto bestseller lists and a million copy sell-thru, they’d do it for every book.

It’s a dangerous to assume that the size of the advance paid is the only indicator of possible success. (Or that a publisher who has paid a large advance will always pay attention to that title rather than embrace a newly bought title that might sell even better.)

And every agent I know has a story of a little book that could. The book that was a hard sell, that didn’t have a big advance, that had almost no marketing or promotional budget attached and yet defied all the odds.

A great success story that exemplifies this exactly is agent Deidre Knight’s 90 Minutes in Heaven—a book that was not sold for a lot of money and certainly wasn’t released with a lot of hoopla. Initial print run was by no means huge. The hardcover sold modestly well but then when the paperback version released, an explosion happened. The book kept gaining traction. Word of mouth. The ground swell that money can’t purchase started to happen. In the end, I don’t know exactly how long the title stayed on the bestseller list but I do know that it was for more than a year. This book has now sold millions of copies.

So does a large advance equal large success?

The answer is yes and the answer is no. All the stars ultimately have to align.

Earn Out

STATUS: Typical Denver. 75 degrees one day. 45 degrees the next. I actually wore gloves this evening while walking home from the office.

What’s playing on the iPod right now? RAIN by George Winston

Generally speaking, the statistics are rather grim when it comes to authors earning out their initial advances. Of course I don’t have actual numbers at my fingertips, so what I can safely say is this: the percentage of books that never earn out is high—over 50% of the books sold (and probably reality is more like 80% but without actual numbers, why be more depressing?).

Beyond the statistics, there are actual several factors involved with an author potentially earning out.

1. The level of the advance. After all, it’s a lot easier to sell-thru and earn out if you only received $5000 as an advance for your book than if you received $150,000.

2. The format of the book. Hardcovers have a higher price tag so an author can sell fewer books but make a higher royalty percentage and thus earn out faster than authors who are publishing initially in let’s say mass market format. (Although mass markets have a better price point and thus have more potential to sell more copies in general but I think you guys get the picture.)

3. Royalty structure. The higher your percentages are for the royalties, the easier it will be to earn out.

4. How long your book stays in print. Often authors can earn out their advance over time so long as the book(s) stay in print.

For example, just this week, I received a royalty statement for an author who just earned out the first advance for a book that was published originally in 2005. The author is solidly midlist and has consistently sold steady over the last 4 years. The advance was a nice five figures and since the book sold well over time and the title never went out of print, the author is now earning royalties.

Ah, this is how publishing is supposed to work. An advance that is representative of how much a book will sell and then grow from there. It was hugely exciting to cut the check for royalties earned and I imagine that the author was even more excited to receive it!