Tuesday, August 14, 2007

Contracts 101: Advance

As requested, I’m going to start a contract workshop. Now and then I’ll do a post explaining some (probably not all) contract terms that you might want to be aware of. And what they mean. Since this is our first day of class I want to break you in easy and begin with the advance. While most of you should know what an advance is, I’m often surprised by how few know what it really means.

An advance is NOT what you are getting paid for your work. It’s not like working a job and getting paid $100,000 a year. In other words, it’s not at all intended to reflect your “value.” An advance is just that, it’s an advance against future earnings. Think of it this way: if you went to work and your boss knew you were having hard times and offered to give you a $10,000 advance on your salary, he’s not saying you’re worth only $10,000 to him. No, he’s saying that he has faith that you’ll complete the work you need to complete for him, successfully, and he’ll gladly dock your future pay to help you out. That’s an advance.

With most publishers an advance usually reflects your book’s earning potential the first year it’s on sale, less costs to the publisher. What does that mean? Traditionally when publishers run those elusive numbers they try to figure in how many copies a book will sell it’s first year in print, then they try to figure out how much it’s going to cost them to make that book—design the cover, pay for paper, printing, and shipping costs—and then they will figure out how much you might make on the book based on your royalty percentage. And that’s your advance. It’s your share of the book’s profit its first year in print. Of course the publisher (and you) hopes you far exceed that number and that first royalty statement blows the advance out of the water.

Advances are usually paid out in segments. Ideally it’s half the payment on signing of the contract and half the payment upon delivery and acceptance of the manuscript. The key word there is "acceptance." Just because you delivered the book on May 2 doesn’t mean your payment is put through on May 3. No, your payment will be put through when your editor has finally had time to read the book, write a revision letter, received your revisions and approved your revisions (in other words, found time to read your book again). Sometimes (ideally) you can get a time frame written in on when acceptance needs to happen by. Oftentimes, you cannot.

Nowadays, though, the ideal is changing. It seems that more and more publishers are dividing payments into thirds, or more. Partial payment on signing, partial on delivery and acceptance, sometimes partial on the delivery and acceptance of proposals for any other books, and the dreaded partial payment upon publication. I hate that. Authors hate it. Agents hate it and publishers love it. It’s becoming standard now at most houses, so complain all you want, you’re not getting out of it, no matter how small your advance is.

My advice on how to handle a really small advance? Negotiate the hell out of it. And if that doesn’t work, prove them wrong. Sell so many copies of that first book that they will have to pay you a ton on the next.