In the Mel Brooks Comedy, “The Producers,” Leo is told the Two great rules of being a Producer on Broadway: “Never put your own money in the show, and NEVER PUT YOUR OWN MONEY IN THE SHOW!!!” The point that was being impressed on this would-be Producer is simple- Creative ventures are not “investments,” as much as they are gambles and should be entered into realizing that money spent on such things often doesn’t hit the break even point…

Comics publishing is a lot like producing a play- while it costs money to do, considering it an “investment” is really a misnomer. The money you put into such things is rarely recouped… but that is often as much a product of poor accounting as it is of crappy comics.

Today’s lesson in the Economics of Failure is: There are 100 pennies in a Dollar.

Now, before you get all huffy and think that I am insulting your intelligence by telling you something that every Kindergartener should know, I need you to think about why understanding the penny is so valuable. Since we have 100 pennies to every US dollar, it makes the concept of percentages that much easier to grasp. The percentage, however, dooms more small businesses than any other factor.

How so?

Well, there are 2 very basic things that get forgotten in the flow of business and both are germane to why comic book people fail at their business endeavors at a greater rate than the small business population at large.

1: There is only ever 100% of anything.

2: ALL 100% has to be accounted for.

Let’s start with the second point for a moment: For the sake or argument, I would like to assume that you have $1000 dollars to start your comics business. We will also, for the sake of argument, say that your printer is charging you $500 to print 1000 copies of your comic.

Now for the lesson in percentages: How much does your comic cost, and how much should you sell it for?

While you think about that for a moment, let me divert your attention by telling you a story about point #1….

A few years ago, I was at a 2 day comic convention and the person at the table next to us was selling mini comics. While there are an almost infinite number of ways that mini comics can be printed and sized, this person’s comics were made from 2 full sheets of 8 ½ x 11 paper, printed on both sides, cut in half, folded over and stapled. He had 3 different types, which he sold for .50 each, and by the end of the first day he was completely sold out. I asked him how many books he sold, and he told me the number was around 300 for the day.

The second day he came back and had 100 more copies, which were all but sold within a few hours. Toward the end of the day, the owner of a local comic store talked to him and wanted some of his mini comics for sale and offered him 50% of cover for them. He agreed and told the shop owner he would mail the books to him later in the week.

I then asked him how much the books cost him, and he told me, “Usually nothing.”

When I asked him further, he told me that most of the time, he runs his books off “at work,” but that this last batch he had to run off at Kinkos. “That’s okay,” he said,” because it only cost me $60 for the hundred books and I made $200 this weekend.”

When I asked him how he “made” $200, he said, “I went home with $150 yesterday and $50 more today.” He was, of course, talking about raw sales.

When I mentioned to him that he also SPENT $60, he looked at me and said, “Oh yea, well then I made $140 which is still good…”

Now- all moral issues aside, let’s break down the money that our mini comics friend “made” and see where he was wrong. First there are the obvious facts- we know that his books were made from 2 double sided pieces of paper, and that he sold his books for .50 each. We also know that he must have sold in the area of 400 books based on his claim of “making $200.” We know that because of simple math- 400 x .50 = $200, right?

Furthermore, we also know that he went to a copy place such as Kinkos and had the pages printed which made up 100 books, and that this cost him $60. What that says is the photocopy costs for printing 100 books are .60 a book or .15 a single side of paper. Again, if you do the basic math: 100 copies x 4 sides of paper (2 double sided sheets per book= 400 copies)= $60 or .15 each (400 x .15= $60). THAT means that while he sold his books for .50, the “legitimate” cost per copy was .60, right?

Well… almost.

What about the cost to cut the pages in half and staple them? While if YOU did the labor end of it the cutting doesn’t have a labor cost involved if you are willing to do that for free. The staples, no matter how you look at it, DO cost money. The scissors or paper cutter you use for that also cost you something, as does the stapler.

Then you have to get your books to wherever they are ending up- in this case, we know that our mini comics maker was mailing the books to a store. That means paying for postage. And an envelope. And probably some kind of cardboard to keep the books from being destroyed in shipping. How much does all that cost? I wouldn’t know exactly, but the key is that it isn’t “free.” Let’s say, for the sake of argument, that the staples, stapler and scissors cost you a nice round $20, and let’s say that you could have cut and staples 1000 books with those supplies- again, basic math gives you .02 to add to your cost. NOW- it IS true that you don’t need to absorb all of a fixed cost durable item (such as a stapler) in 1 batch of books… but the point I am getting at is that the money has to come from somewhere, and the cost of those items does effect the true cost of goods because without that stapler you can’t sell the book.

Are we done? Well, on top of all that, think about the setting of the comic show. Did the table cost him money? Mine cost me $100 for the weekend, so I can assume his did too. Did he eat? How did he get there? Where did he park? Did he give anything away, even to friends? All these things cost money too- that cost doesn’t always get reflected in the cost of goods, but it has to come from somewhere.

 If we forget about those other costs of doing business for a moment and go back and add everything up, we find that our book which was being sold for .50 has a real cost of .62 each. That would mean that, had our friend paid for his printing, he would have spent $248 to take home his $140, and that was before he spent $100 for his table or for gas, tolls, parking and lunch.

Now, if we assume that our friends real break even point is .62 a copy, aside from knowing he is losing .12 a book when he sells the book directly for .50, what else do we know?

If you mentioned the Comic shop owner buying copies, you hit the nail on the head!

Comic shops will, as a general rule, pay about 50% of whatever the cover price is for a book, and for independent books they expect YOU to foot the bill for getting those books into their hands. How much does that cost? Well, postage depends on size and weight, but the more books you ship the less it costs per book. Like printing a book, though, you also have to think about boxes, packing tape, labels and anything else you use to pack and ship your books. Even if you reuse newspaper inside the box as padding- if that newspaper cost you $1 originally, that adds cost to the shipment. Whatever that number is, you have to be able to absorb it within your sale price. While there are many ways to do that, the easiest way is to estimate that and add it to your cost of goods. Again, for the sake of argument, let’s just pick a number that sounds in the ballpark of reality- for a mini comic, including postage and packaging, let’s assume that it will cost you .10 a copy to mail a book out, which makes the cost of goods .72 each.

One may ask at this point, “If I am not going to sell ALL my books to stores, do I have to add the distribution costs into my figures?” To that I would ask you to consider how you intend to sell your books. Are you selling your books at shows? Shows have associated costs. Are you selling your books on the internet with PayPal? Don’t forget that PayPal takes money from every transaction. Are you working with a third pary to get your books out there? That person or persons will want a cut.

While you will never capture every cost variable, what you have to do is figure out what your most common “hidden costs” are, and base your figures on those costs spread out among the number of copies you have to sell. Yes, you will make more money in some cases and less in others, but the idea is that in the end you will hit your average target.  And for the record, good business people do this all the time- and they also review the real costs Versus the estimated costs and change their pricing accordingly…

So, how much SHOULD our friend have charged per mini comic? Keeping in mind that our books cost .72, if he tripled the current .50 cover price and asked for $1.50 a book he would “make” a grand total of .03 a copy selling them to a store. Not enough? Of course it isn’t! Truthfully, most businesses consider themselves successful if, after all costs, they bring in 100% back on their investment. THAT means that, in the case of our mini comics friend, if the books cost him .72 a copy he should try to pocket an ADDITIONAL .72. That means selling the book to a store for at least $1.44 at his 50%, and THAT means putting a $2.88 cover price on the book…

Would those .50 mini comics SELL at $2.88?

Doubtful.

But here’s the key- if he wants to stay in business, then he has to find a way for all the math to work out. Sometimes, it’s not as simple as adding up the costs and finding out that you have to charge more than the going rate for books. Sometimes, you have to find ways to cut your costs.

Maybe there is a cheaper printer. Maybe you are paying too much for packaging. Maybe you have to print MORE copies- Setup charges are usually the largest part of a print job so the more copies you print, the more your spread out those charges and the less you pay per copy.

Whatever the costs are, you sometimes have to also look at what you feel you can get for your book and look to see how you can cut your costs to make your cost equal 25%  of that…

Now, back to the original $1000 question- HOW much do the books cost? More than .50 a copy, that is for sure. How much SHOULD you charge for them cover price? More than $2.00…

Why? Because you stand to lose money otherwise, that’s why. Don’t forget too- everything I mentioned is living life in a vacuum. There are ALWAYS unexpected costs, rising costs, people that don’t pay you and situations beyond your control. It never hurts to have more money than you “need,” because in business, you always need it eventually.

And that’s that. Live by percentages or die by them- it’s your choice. Even a kindergartner knows how many pennies are in a dollar, after all. You should too…

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