What to Do With Your Self-Publishing Royalties

What should you do with your self-publishing royalties? Decide a split before they arrive. I put about 50% toward my own pay, about 20% toward taxes, about 5% toward profit that stays in the company, and the remaining 25 to 30% toward company expenses such as covers and formatting. I use a method from the book Profit First, and below is how it works for me.

I make my video on this in the first days of a month, when the Kindle royalties and the ACX audiobook royalties have mostly come in, along with the print money. KDP pays about 60 days after the end of the month in which a sale was reported, and about 90 days for Expanded Distribution, so a few payments are always still on the way. To earn more from Kindle, see how to make money with Kindle publishing on Amazon.

Should you reinvest all your royalties?

No. If you save everything and put nothing back into your self-publishing business, you run into problems. If you put everything back in, you are in a different kind of trouble. I use a system I like, Profit First, a book I have read four or five times. It fits a small business like mine, and probably most of yours. The percentages below are the split I use in my own business. The book sets its own target percentages, which change with how much a business earns, so check it for yours.

How do I split a royalty payment?

Twenty percent is a starting point. In Norway tax is rather high, so mine is a bit higher. Check your own rate with an accountant before you pick the tax slice.

For example, say $1,000 in royalties comes in. About $500 goes to owner pay, $200 to taxes, $50 to profit and the remaining $250 to $300 to pay for covers, formatting and other costs. That is only an illustration, not a result from my business.

Why keep expenses to about 30%?

This is the most interesting part of the model for me. If you spend only a small percentage of your income on costs, you have more flexibility when times get tough than a company spending nearly everything it earns. A slow month hurts less. It does mean you grow more slowly. But what is the point of growing if profitability is low? I decided from the beginning that profit would be the priority, and it has worked well.

Where does reinvesting happen?

In the 25 to 30% for expenses. That money pays for the covers and formatting of your next books, and the training and tools that help you get more books out. Sales fund the next round, so you do not borrow against your income or savings.

How do you put it to work?

• Open a separate bank account for each slice, so the money is already sorted.
• Do the split every time royalties arrive, not once a year.
• Track production cost per book, so you know whether you are inside the 30%.
• Splitting the same way every month shows you what your books earn after costs, which is a more useful number than the royalty total.

If your royalties are lower than you want, read how book royalties work in self-publishing and getting your royalties faster on KDP. For the bigger picture, read is self-publishing on Kindle profitable.

How did your royalties come in this month, and what do you do with them? Tell me in the comments. If you want to talk through how to get your sales up, book a free 25-minute discovery call.

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