Our detailed profit and loss show where we spent money and where we received money in year one and two. I’ll focus on year two, our busiest of years.

Our biggest costs are unsurprising:

£33,813 on direct costs of all things publishing - mostly book printing, unsurprisingly

£21,467 more on printing books and merch and pens and paper and all that good stuff

£5,091 on travelling (this was the year we sold copies of The Last Days of James Scythe in venues across the UK as well as having events and book fairs to attend)

£4,365 on posting books to customers (though they do mostly pay for postage so we recoup a lot of this)

£2,767.35 isn’t listed but we’ll be paying this in corporation tax by May 2019.

£1,887 on sundry costs - this could be anything in the day to day running of the company.

£1,539 on accountancy - because you really need to get experts to do the number crunching.

And the rest should be self explanatory! We’re starting to know how to have some fun, check out that huge £549 spent on ‘entertainment’. (Usually just some scran while we have meetings or treat our authors to a drink or two)

But for all those costs, we received £4,164 from various funds (Creative Scotland and Publishing Scotland mostly), which always help in our operations and connections.

So, taking away our costs from our turnover, that leaves us with that £11,398 profit to carry on to our third year, 01/08/18 - 31/07/19.

The bitty nitty gritty

Those P&Ls only offer so much insight and there’s a lot more to it than the above which makes finance look way too easy. So why not chat a bit about the royalties we give, the money that goes to directors and staff and where exactly our sales go? The cash flow helps with laying that out for me as it keeps a record of everything coming and going.

From 01/08/17 - 31/07/18 we paid…

Royalties to authors: £17,097

Directors Laura, Heather and Publishing Assistant Mika: £5,356 (total, not each)

Freelancers (cover designers, editors etc): £3,475

Authors for events: £3,078

As you can see, at that point we were still paying a small amount to ourselves, to help with rent, bills etc while still working freelance. Freelancers include cover designers, editors, proofreaders, photographers, generally anyone who contributed to our books in their creation.

Royalties are what we’re most proud of, making sure that our authors get the best deal that we can possibly offer while still being tiny. We try to offer double the industry average for royalties, and that can really start to pay off when sales take a jump upwards. We send our authors royalty statements in June and and December every year, and pay them (usually) within one week of the accountancy period so they have the money they’re owed ASAP. This may become more difficult in future as cash flow becomes more challenging with large expenditures on the horizon but it’s always top priority at 404.

But what are the challenges associated with book sales?

Breaking down the slices of a book cake (mmm) will help. Note that for the below, I’ve had to round up a lot and make some averages so this is not reflective of every book by a long shot, but it’s the most common example of how sales work for an average title.