The key to understanding nonfiction book ROI is the business case. A business case takes the mostly financial view of the benefits expected, subtracts the costs of the project, and then turns that into a percentage return (ROI).
Having been involved in more business casing efforts than I care to admit, I’ll be the last person to suggest you need the same level of financial analysis that Air Canada might put into expanding its network. That said, without taking stock of the expected financial impact of your book, you’ll be left guessing whether your it was a worthwhile endeavour or if you would have been better investing in GICs.
So, how do you go about it? By making informed estimates about the value of the benefits you expect and collecting information about the costs you’re likely to incur.
Nonfiction book ROI: Valuing the expected benefits
The right place to start thinking about the benefits you’ll get is to start with your objectives for your book. However, there’s overlap in the metrics that various objectives impact, so you risk double-counting. For example, building your authority may generate media exposure that in turn generate leads for your business. So, we need a different model to help us think about value – REBO.
REBO is simply an acronym for Revenue, Expenses, Business Assets, and Other Intangibles, and you can group all the value that comes from your book into one of these.
R – Revenue related
The Revenue category is where you’d expect to see the most obvious, direct benefits from your book. Pulling apart the economics of your business and identifying all the underlying value drivers often uncovers surprising opportunities for how you might use your book.
Increase in Average Purchase Value ($) OR Increase in Rates or Prices ($)
Positive impact here may come from higher prices or rates you’re able to charge, or from selling more products and services in the same transaction. When you are considered an in-demand expert, both of these are common benefits.
Increase in Average Purchase Frequency (#) OR Increase in Average Lifetime Purchases per Customer (#)
Increasing your authority may naturally convince people to buy from you more often, but you can be even more deliberate in how you encourage this. A cosmetic surgeon client of ours had an explicit book objective to educate her readers on the benefits of investing regularly in a particular procedure, rather than periodically, which increased her sales from that procedure by over 35%.
Increase in Average Customer Lifespan (#) OR Decrease in Churn Rate (%)
When you're the market leader, your customers likely to stay with you longer. These two metrics are the inverse of one another. In other words, to calculate Churn Rate, simply divide 1 by Average Customer Lifespan or vice versa.
Customer Value ($)
This metric is calculated by multiplying Average Purchase Value x Average Purchase Frequency over a given period (e.g., a month) to get the Customer Value for that same period.
Increase in Customer Lifetime Value ($)
This metric turns Customer Value (which looks at a value over a specific period, such as a week, month, or year) and converts it into a Total Lifetime Value by either multiplying Customer Value x Customer Lifespan, or by Dividing Customer Value by the Churn Rate over the same period.
Increase in Customer Referral Rate (%)
Even satisfied customers can be hesitant to outright recommend service providers unless explicitly asked. Giving a book, however, is an easy way to introduce you to their network in a low-pressure way. One client, a Toronto-based growth consultant, gives his clients two copies of his book – a personalized one for them, and a signed copy to give to someone else.
Increase in Sales Conversion Rate (%)
A very common benefit that published authors see is an increase in their Sales Conversion Rate, since a book not only reduces objections related to credibility, but also tends to create leads who are more likely to convert in the first place.
New Leads (#)
Attributing leads specifically to your book can be tricky. While often, someone will tell you they read your book, the reality is that most people will have multiple touch-points (blog articles, podcast, social media post, etc.) before showing up as a lead in your CRM. Still, most readers will have spent 3-5 hours with you via your book, so it’s important to attach weight (and value) to this benefit.
Income from New, Book-related Products & Services ($)
Be sure to estimate income you expect from new business lines or new products that you create based on the content of your book, for example courses, consulting, coaching, new services, digital products and the like.
Revenue from Speaking Engagements ($)
You may choose to take on speaking engagements that don’t pay to get the exposure, but this line should only include direct revenue from paid gigs that you aren't likely to have had otherwise.
Direct Revenue from Book Sales ($)
Simple enough, but worth highlighting that we do want to measure revenue, not profit, as we’ll be backing out the direct costs in the next part.
Licensing Revenue from International Book Rights ($)
Depending on your goals and the topic and audience for your book, you might be able to generate additional revenue in other territories and languages by licensing the rights to a local publisher.
Other Revenue related
You may have other important revenue-related drivers in your business that your book will impact, so be sure to estimate these also.
E – Expense related
The expenses category of REBO captures any benefits you expect to come from cost-reduction opportunities that come about as a result of your book.
Earned Media Value ($) OR Advertising Value Equivalent ($)
Intuitively, we know that exposure (unless scandal-ridden) is valuable. Earned Media Value or Advertising Value Equivalent are metrics used to measure it. To use them, estimate how many people see a media mention (known as Impressions) and multiply that by the advertising rates for the platform where it appears, known as CPM.
Reduction in Average Cost of Acquisition ($) OR Improved Marketing Efficiency (%)
While you may not choose to alter your marketing budget, many entrepreneurs see the cost of their book specifically as a marketing investment and pay for it directly from that budget. Regardless, if used correctly, your book can reduce your average cost of acquiring a new customer.
Conceptually, consider the example where you’re spending no money on advertising, and someone buys your book on Amazon. Say you earn $10 on the sale, the reader loves your book, then contacts you and becomes a paying client. In this example, your Cost of Acquisition is actually -$10. Not only did your book advertise your core business, but the audience paid to see the “ad”.
Not a bad Marketing ROI.
Education and Training Value ($)
Depending on your topic, you may find that you can save time and money on employee training. For example, Grammar Factory founder, Jacqui Pretty wrote Book Blueprint, a book that lays out an approach to writing nonfiction that forms the basis of our editing workflow. Jacqui included reading Book Blueprint as an on-boarding requirement for new editors, both saving time and improving consistency of training delivery for new employees.
Reduction in Sales Cycle-Time (#)
When you’re seen as an authority, and the people coming into your sales pipeline are already familiar with your thinking because they’ve read your book, you’ll find the time from contact to sale drops significantly. Many times, they’ll now come to you ready to buy, rather than needing to get comfortable with you over many days, weeks, or months (depending on your business). If you have sales staff, and these improvements allow you to reduce headcount, then the value calculation is easy. But often, entrepreneurs handle their own sales, or they are aiming to grow, not maintain status quo. In that case, the way to think about quantifying this is in terms of how many more prospects you can handle with your existing sales organization before needing to bring on additional staff.
Here’s a simple example. Let’s say you’re a solo entrepreneur and you pay yourself $150,000/year in owner’s compensation. Assume you spend a third of your time selling, and you expect your book to cut your sales cycle time in half. In that case, you can handle twice the number of prospects. So you might value this benefit by multiplying your comp x 1/3 to get the cost of your current sales team (you), which is $50,000. You’ve effectively cloned the sales portion of yourself, so the value of this is $50,000/yr. Don’t sweat precision and simply make an assumption around how many years you think this benefit will last (let’s say 3) and multiply $50,000 x 3 for a total expected value of $150,000.
The finance nerds among you will be barking about the time-value of money right about now but settle down. This isn’t corporate M&A, we’re ball-parking here.
Productivity Improvements ($) AND Process Improvement Value ($)
In the same way, you may find that the clarity you develop on a topic from writing about it can have positive impacts on productivity elsewhere in your business.
Similarly, when applying the kind of focus required for writing, some business owners find that when they articulate their methodology, they think of improvements that they’d never previously considered. They then transfer these tweaks to their business operations and are able to reduce real costs in their business that fall directly to the bottom line.
Other Expense related
You may have other important expense-related drivers in your business that your book will impact, so be sure to estimate these also.
B – Business Asset related
The Business Asset category is intended to include the asset value of the book itself, any additional assets it allows you to create, and the additional value it adds to existing assets, especially brand value.
Direct Asset Value ($)
This refers to the direct value of your book itself as an I.P. asset. I’ve included this for completeness, but do NOT include any additional value here. Why? This entire exercise is about calculating the value of your book asset, so including a number here will double count the value of your book. Got it? Good.
Ancillary Asset Value ($)
What you should include however, is the value of additional assets that can be created based on the I.P. in your book. We already included the value of new, derivative product in the revenue section of REBO, but there are additional assets that can be created from the content of your book. Ancillary assets can include:
- Blog posts
- Social content
- And more
These are content and other I.P. that may not be directly monetized, but add value to your business in other, indirect ways.
Increase in Brand Value ($)
One difficulty with small businesses, and especially with service businesses, is that much of the value of the business or brand is locked up in the value of the business owner. If the owner wishes to sell in the future, unless they’re willing to stay on as an employee for the long-term (and they typically are not), there’s often not much value remaining to a potential acquirer. As a result, valuations tend to be lower than for larger businesses, where the value tends to have been embedded in systems and lower-level staff, or asset-heavy businesses where the assets themselves hold the value.
By creating assets like books and the derivative content, processes, products, and other I.P. that the book catalyzes, you transfer value from yourself to your business, increasing the value of our business brand.
Further, if your book improves customers' impression of your business, you can expect an increase in Net Promoter Score (NPS), though the benefits of this will likely have been captured already in other metrics.
Increase in Personal Brand Value ($)
Fortunately, even as you’re transferring value from yourself as owner to the business through asset creation, your own personal stock continues to rise. By building your authority and personal credibility, you both strengthen your business and build the value of your personal brand that extends beyond the edges of the business itself.
Authority opens opportunities to be personally involved in joint-ventures, to make an impact in other areas that are important to you, and should you eventually decide to sell your current business, it’s your personal brand that gives you leverage to successfully launch your next venture, whatever that may be.
Other Business Asset related
You might think of other business asset benefits that your business that your book will impact. Estimate these also and include them in your calculation.
O – Other Intangibles
Revenue benefits, expense benefits, and business asset value are all quite tangible, and while some can be harder to quantify than other, the conceptual approach to estimating their value tends is fairly easy to understand. Intangibles, by contrast, are often vague. Business owners can usually wrap their head around the fact that there is value in these intangibles, but they’re reticent to attach actual dollar figures to them. And that’s okay.
For intangibles, I recommend that you consider whether there are specific, quantifiable benefits that can be associated with each. If so, note that value. If not, instead write down the benefits you expect in qualitative terms with a sentence or two. Some of these may feel immaterial, and that’s fine. However, you may consider others, if truly realized, to be invaluable, so much so that you weight them heavily in your assessment.
Almost invariably, our authors share that their book resulted in partnership opportunities opening up, seemingly from nowhere. Someone reads their book, it twigs an idea, and they reach out to the other to propose a partnership.
Take Suni Sanchez, as an example. Suni is the author of Welcome to Parenthood, a book about blah, blah, blah. After publishing her book, she got multiple messages from potential partners, including being approached to translate her book into Spanish and travel to Central and South America to spread her message.
Impact on Business Economics
Especially for thought leadership or essay books where your goal is to change the way people think about a topic, changing minds can have an impact on the economics of your business.
As you build your personal authority, an added intangible benefit can be that you’re increasingly able to leverage it to benefit causes that are important to you. In fact, some believe that authority comes with a responsibility to use that authority for good. Whatever your view on the matter, you’ll have the ear of more people and the change to influence them take up social causes should you choose to do so.
Impact on Company Culture
A book can be a unifying message for your business and those that are a part of it, including employees, shareholders, contractors, vendors, and even customers. Your book will set a tone and lay out a way of doing or thinking. Whether conscious or not, any stakeholder who reads it is likely to view it as a mini manifesto and assume that it represents your business’ culture. If you’ve planned your book properly, it should be.
Quality of Life Improvements
A benefit that many authors experience is that their book acts as a lever, multiplying the effect of other things they do in their business. This is reflected in some of the other benefits like productivity improvements, shorter sales cycles, and the like, and it’s up to you how you reap these rewards.
If you’ve struggled to get traction in your business, and feel like you’ve been working 24x7 and that you haven’t had time to enjoy life outside of your business, taking some of this benefit and investing it in your mental, physical, and emotional well-being could be the best thing you could do for your business, yourself, and your family.
But it depends on you being intentional. It means not accepting every opportunity that comes your way. It means saying no to some prospective clients who aren’t a perfect fit with your target audience. And it means prioritizing the initiatives (both book-related and otherwise) to shape a sustainable life that serves you. What you’ll find, however, is that the decisions that build you up in these ways will also be good for your business in the long-run.
Surely, there are other intangible benefits that may realistically come form your book. At a minimum, write them down in sentence form, and if you can estimate a dollar value, by all means, do it.
Consider the metrics you identified and targets you set and attach an estimated value to the expected benefit of each, then add them up.
Admittedly, this isn’t an exact science. You may overestimate some areas, but I can also assure you that you’ll get benefits that you didn’t even consider or expect. In the end, what you want is a quantified number that you’ve put meaningful thought into and that you feel comfortable is a decent approximation. If you tend to be overly optimistic, apply a discount to that based on your level of certainty (discount by anywhere from 10-50%) to add a level of conservatism to your estimate and you should now feel pretty confident that your benefits are reasonable and achievable.
Nonfiction book ROI: Summing up the costs
How you cost out the direct costs of your book depends a lot on how you plan to write, publish, and promote it. If working with a publisher, then you’ll need far fewer line items since the publisher will handle most of the individual activities and providers as part of your agreement with them.
Rather than duplicate effort, I'll point you to an article we've already published on the costs of self-publishing. Just tally up the costs you expect to incur, and then continue on to the next step here on calculating your book's ROI.
Return on Investment (ROI)
With the benefits and costs estimated, it’s a simple calculation to subtract the costs from the value of the estimated benefits to get your expected return. Then, divide that by the costs to get your ROI as a percentage.
Estimate your ROI in advance and then rework it based on what you see to engineer your desired ROI in advance.
So, what's an acceptable nonfiction book ROI?
Traditional economics would tell us that if the ROI of a proposed project exceeds your cost of capital (or better yet, WACC, for my finance geeks) then you should pursue it. Practically speaking, especially for the small business owner, the reality is a bit more nuanced. The truth is, as entrepreneurs we don't have unlimited access to capital at any cost. Furthermore, we have limited capacity to take on projects, and the more we take on, the more we end up cutting corners, creating a gap between expected and actual ROI. Finally, as we encountered in the above analysis, there are lots of unknowns. We've made educated assumptions to fill in the gaps, but we don't have an army of business analysts at our beck and call to run down all these assumptions and tighten our estimates.
Aim for 5-10x ROI
For these reasons, I recommend that any entrepreneur planning to write a book look for a 5-10x return on their investment. This assumes that you've been holistic in your inclusion of all the sources of value your book will deliver, but also realistic about the ones you'll actually go after. If you've done that, then this level of return should be quite viable. But importantly, it leaves sufficient buffer to absorb things you didn't consider. Hopefully those things result in a better ROI than expected, but if the surprise goes in the other direction, you'll be happy you weren't green-lighting the project with a modest ROI of 12%.
Your book can deliver immense benefits, but estimating their value is just the starting point. These benefits don’t accrue the moment you finish your book. You’re still on the hook for making them happen.
But knowing that your nonfiction book ROI is positive, you can then move ahead with confidence in writing the book and executing the plans to capture the value, instead of simply hoping it will all come to fruition.