UPDATE September 9, 2023: I’ve changed all our books on IngramSpark from “Returns=Yes-Destroy” to “Returns=No”, after reading Lisa Chavari’s April 2023 post, “Why my books are no longer returnable through Ingram“.

Once you’ve written your self-published paperback book, how do you choose a list price for it? How much will you make per book? How will book returns affect how much you make? And what about the list price in different countries, with different currencies?

This post covers my attempt to answer those questions for myself, printing and distributing a paperback book through IngramSpark. Please come along for the ride!

TL;DR: Scroll down to the final section, titled “The Short Version“.

WARNING: This post covers my own experience and my own calculations, which may contain errors and omissions, and may be out of date by the time you read this post. You are solely responsible for your own calculations.

I’m going to use simple Algebra to come up with a couple formulas for a List Price, based on the Royalties I want to make per book, the costs of each book, and the cost of book returns.

Factors that Affect My Royalties

Royalty is what IngramSpark pays me per copy of my book that they sell. IngramSpark calls this my “Publisher Compensation“.

Everyone in the chain from the customer to me gets a piece of the List Price. My Royalty is what’s left over after everyone else is paid.

List Price is the price a bookstore charges a customer for my book (ignoring taxes).

I choose the List Price for my book. I plan to choose the List Price in each IngramSpark Market.

Wholesale Discount is how much less a bookstore pays for my book than a customer pays.

Ingram sells my books at a discount to bookstores, who then sell those books at List Price to customers. It’s how bookstores make their money.

IngramSpark recommends a standard 55% Wholesale Discount, which means booksellers buy my book for 45% of the List Price (1.00 – 0.55 = 0.45).

Print Charge is how much IngramSpark will charge me per copy of my book that they print and sell.

This charge depends on the dimensions of the book, number of pages, black & white vs. color, and several other factors. Happily, IngramSpark provides a Publisher Compensation Calculator, which calculates my Print Charge per book as well as estimated Publisher Compensation (that’s my Royalty per copy, ignoring Returns).

The Print Charge is different for each IngramSpark Market.

Market is IngramSpark’s term for an area of the world that they sell books in. As of this writing their Markets are the United States, United Kingdom, European Union, Australia, Sharjah, and Global Connect (IngramSpark’s printing partners around the globe).

Exchange Rate is the value of one currency (for example USD, one United States dollar) in another currency (for example, EUR, one European Union Euro).

IngramSpark generally shows prices, estimated costs, and royalties in the local currency of the Market, such as AUD (Australian Dollars) or GBP (British Pounds). I use the current Exchange Rates to convert foreign currencies into US Dollars.

Exchange Rates get a little complicated when I am actually paid by IngramSpark, but for estimating a good List Price I’m going to use the published Exchange Rates at the moment. For example, as I write this post, 1 USD = 0.95 EUR and 1 EUR = 1.05 USD.

Exchange rates can vary a lot over time, which is why I plan to examine and update my book’s List Price in each Market from time to time.

Return Rate is the percentage of purchased copies of my book that are returned.

Book returns is a topic worthy of its own post. IngramSpark recommends, in their pricing tutorial, that I accept returns. In their experience bookstores don’t buy a book that is not returnable.

Because I accept returns I will lose money each time a book is returned by a bookstore. My calculations will factor in my guess (estimate) at the bookstores’ Return Rate for my book: how well I think my book will sell.

I’ve found published estimates of Return Rates from 20% to nearly 50%, with recent estimates of 30%.

I plan to choose the “Return-Destroy” option so IngramSpark doesn’t return books to my door and so they don’t charge me for shipping those books to my door.

I plan to avoid Amazon returning books to IngramSpark by publishing my paperback through both KDP and IngramSpark. My plan is that Amazon will sell the KDP paperback to consumers and IngramSpark will sell the paperback to bookstores.

Calculating My Royalty Per Book

As I said above, my royalty (per copy of my book) is what’s left over after everyone takes their cut of the list price. From the List Price, the bookstore gets its 55% discount, IngramSpark gets their Print Charge, and I get the rest.

Putting that into a formula:

R = L - (D * L) - P

Where R = my Royalty, L = List Price, D is the Wholesale Discount, and P is the Print Charge.

That is the formula that IngramSpark uses in its Publisher Compensation Calculator.

In the above example, I’ve entered all the little details of my paperback book, then entered my chosen List Price, Wholesale Discount, and Market, and the calculator has produced the per-copy Print Charge of $5.96, and my per-copy Royalty (Publisher Compensation) of $0.34.

Let’s double-check that my formula agrees with IngramSpark’s calculation:

L = $13.99
D = 0.55 (55%)
P = $5.96 (output by IngramSpark's calculator, above)
R = L - (D * L) - P

R = $13.99 - (0.55 * $13.99) - $5.96
R = $0.3355

That result is close enough to IngramSpark’s calculated Royalty of $0.34 to show that the formula is correct.

The Cost of Returns

When a bookstore returns a book to IngramSpark, IngramSpark refunds them the price that the bookstore paid for the book in the first place. Then IngramSpark charges me that refund price.

This arrangement lets bookstores stock their shelves without risk of getting stuck with books that don’t sell. It also means IngramSpark isn’t impacted by returned books either.

Unfortunately this arrangement means that I alone take the financial risk of returns.

My Royalty for a returned book, RR, is the original Royalty IngramSpark paid me for the sale, minus the Wholesale Discount Price that they refunded to the bookseller and charged to me:

RR = R - (L - D * L)

Substituting the earlier formula for R, we get:

RR = (L - D * L - P) - (L - D * L)

This equation simplifies to:

RR = -P

So regardless of List Price and Wholesale Discount, Each copy of my book that is sold and then returned ultimately costs me the Print Charge of that book.

The Impact of Returns on Royalties

My original Royalty calculation won’t show me what royalties I will have left once I’ve paid for Returns. Let’s fix that shortcoming.

To make a formula, first let’s do an example of selling 100 books with 30 being returned; a 30% Return Rate (100 * 0.30 = 30).

So 70 books are not returned (100 – 30 = 70).

My Net Royalty, NR, will be my Royalty, R, on 70 books, plus my returned book “Royalty”, RR, on 30 returned books:

NR = 70 * (L - D * L - P)   +   30 * (-P)

That equation simplifies to:

NR = 70 * (L - D * L) - 100 * P

To find the average Royalty per copy of my book sold, RPB, allowing for returns, divide the above formula by 100:

RPB = 0.70 * (L - D * L) - P

Plugging in the numbers from my earlier example

L = $13.99
D = 0.55 (55%)
P = $5.96

We get an average Royalty per book, after I’ve paid for returns, of:

RPB = 0.70 * (13.99 - 0.55 * 13.99) - 5.96
RPB = -1.55

That is, in the long run, with a 30% return rate and a list price of $13.99, I would lose $1.55 per copy of my book! This is why it’s important to allow for returns in my royalty calculations.

Choosing a List Price

So how high would the List Price have to be for me to make any money at all with a 30% return rate on my book?

With a little Algebra, we can solve for L given RPB:

RPB = 0.70 * (L - D * L) - P

RPB + P = 0.70 * (L - D * L)

(RPB + P) / 0.70 = L - D * L

(RPB + P) / 0.70 = (1 - D) * L

(RPB + P) / (0.70 * (1 - D)) = L

L = (RPB + P) / (0.70 * (1 - D))

One small improvement to make: 0.70 in the equation is 1 minus the Return Rate. Filling in the names of the other parts, the complete equation is:

List_price = (Desired_Royalty + Print_Charge)
              / ((1 - Return_Rate) * (1 - Wholesale_Discount))

Armed with this equation, I can choose what Royalty I want, my guess at my Return Rate, the 55% wholesale discount, and see what List Price I need to make that average Royalty.

For example, suppose I want to make $2 per book, allowing for a 30% return rate, a Print Charge of $5.96 and a Wholesale Discount of 55%:

L = ($2.00 + $5.96) / ( (1.0 - 0.30) * (1.0 - 0.55) )
L = $25.27

That List Price seems a little high for my book. I’ll try plugging in List Prices below $25 in the Royalty Per Book equation I wrote above:

RPB = 0.70 * ($25 - 0.55 * $25) - 5.96
RPB = $1.91

RPB = 0.70 * ($24 - 0.55 * $24) - 5.96
RPB = $1.60

RPB = 0.70 * ($22.99 - 0.55 * $22.99) - 5.96
RPB = $1.28

So if I set my USA List Price to $22.99, and see a return rate of 30%, I’ll still make $1.28 per book. That sounds pretty good, and is a whole lot better than losing $1.55 per book I sell.

List Prices in Other Markets

Notice I said “my USA List Price”. Two things change for each IngramSpark Market:

1. The Print Charge is different, and in the local currency
2. The List Price needs to be entered in the local currency

For example, let’s use IngramSpark’s Publisher Compensation Calculator for the UK Market.

As before, I entered all the little details about my book: the size, page count, etc. I then selected the United Kingdom Market, and entered a List Price of £1. I entered this tiny List Price because all I want from this calculator is the Print Charge for my book in the UK. I don’t care what Publisher Compensation the calculator says, because I have a different formula for my Royalties, that accounts for book returns.

The calculator says my Print Charge in the UK will be £4.97.

To use my List Price equation, I need to enter my Desired Royalty in British Pounds (£). Searching the web today for “1.28 USD in GBP” tells me that my desired Royalty of $1.28 USD is equivalent to £1.07

List_price = (Desired_Royalty + Print_Charge)
/ ((1 - Return_Rate) * (1 - Wholesale_Discount))

List_Price (£) = (£1.07 + £4.97) / ( (1 – 0.30) * (1 – 0.55) )

So I should set my United Kingdom List Price to = £19.17

I’ll probably make that UK List Price £19.49 or £18.99 because I’ve heard people recommend choosing prices ending in .49 or .99

I can then do the same exercise for each of IngramSpark’s Markets, keeping in mind that some Markets’ currencies are in local Dollars ($), not to be confused with US Dollars.

The currencies in each IngramSpark Market are

• United States: USD, $, US Dollars
• United Kingdom: GBP, £, British Pounds
• European Union: EUR, €, Euros
• Australia: AUD, $, Australian Dollars
• Sharjah: This Market is not available to me, so I don’t know.
• Global Connect: IngramSpark shows me USD; you might see your local currency instead.

The Short Version

Here is the result of all that math: my formulas for calculating my IngramSpark Royalty and choosing a List Price.

WARNING: Again, this post covers my own experience and my own calculations, which may contain errors and omissions, and may be out of date by the time you read this post. You are solely responsible for your own calculations.

Simple Royalty per book, ignoring cost of returns:

Royalty = List_Price * (1 - Wholesale_discount)
    - Print_Charge

This Royalty is what IngramSpark’s Publisher Compensation Calculator outputs as Publisher Compensation.

For example,

Royalty = $15.68 * (1.0 - 0.55) - $3.44
Royalty = $3.62  ..but see below for my actual royalty.

“Royalty” (cost) on a returned book, assuming “Return-Destroy”

Return_Royalty = - Print_Charge

For example, a Print Charge of $3.44 means I ultimately lose $3.44 per returned book.

List Price formula, allowing for the cost of returns:

List_price = (Desired_Royalty + Print_Charge)
     / ((1 - Return_Rate) * (1 - Wholesale_Discount))

For example,

List_Price = ($1.50 + $3.44) / ((1.0 - 0.30) * (1.0 - 0.55))
List_Price = $15.68

Average Royalty per book, allowing for the cost of returns:

Royalty =  List_Price * (1 - Return_Rate) * (1 - WholeSale_Discount) - Print_charge

For example,

Royalty = $15.68 * (1.0 - 0.30) * (1.0 - 0.55) - $3.44
Royalty = $1.50

Different Prices per Market

To use these formulas in a Market other than the United States, Input all prices in the formula in that Market’s currency. The results will also be in the local currency.

For example,

List_Price = (£1.26 + £4.97) / ((1.0 - 0.30) * (1.0 - 0.55)) List_Price = £19.78

The currencies in each IngramSpark Market are

• United States: USD, $, US Dollars
• United Kingdom: GBP, £, British Pounds
• European Union: EUR, €, Euros
• Australia: AUD, $, Australian Dollars
• Sharjah: This Market is not available to me, so I don’t know.
• Global Connect: IngramSpark shows me USD; you might see your local currency instead.

Questions? Comments? Corrections? Join the conversation about this post, on Instagram.

Featured Image: "Book Cover" (detail) by an Italian (Sienese) Painter (dated 1343). Courtesy of the New York Metropolitan Museum of Art.

References

• Ingram’s Help Page on book returns: https://www.ingramspark.com/blog/making-your-book-returnable
• The IngramSpare Pricing Tutorial: https://vimeo.com/564185576/531e301fbe
• A Publisher’s Weekly story from 2016, which reports average return rates at that time.
• Another Publisher’s Weekly story about returns, again from 2016.