I'm certainly not the first person to note that when you start to self publish, you're starting a small business. Which, like I said, is nice, because you don't have to reinvent the wheel.
You do, however, have to recognize that your small business is not really like the average small business.
The bad news: Well, if you're buying scarves for $20 and selling them for $30, and you know how much foot traffic a place gets, you can make a fairly decent estimate of how many scarves you can sell. You can talk to other scarf-sellers in similar locations; you can spy on the guy who, say, sells sunglasses in the shop next to the place you want and see how much he sells.
In other words, you can plan. In fact, writing a business plan is one of the basics of starting a new business.
If you write a book, you have no idea how much you'll sell!
Am I exaggerating? No. Look at Kristine Katherine Rusch's latest post (which is a really good one, by the way). She notes, "I have books that sell really well and books I can’t give away." Most writers say the same--some of their titles do great, some don't sell well at all.
The problem is that with your first book, you don't know where you're going to wind up on that continuum. Hence the advice to Keep Writing, even if your book doesn't do well, because the next one may do better.
Rusch's husband, Dean Wesley Smith, says to think like a publisher and to project your likely income from your books. He hedges this around with lots and lots of caveats, but honestly, I don't even think that's worth doing if you don't have a track record.
When Smith cranks out his gazillionth Poker Boy story, he's got a rough--and more important, a realistic--idea of how it's going to sell. There are X many Poker Boy fans out there, and that can help Smith decide whether it's worth it to spend time on a Poker Boy project rather than another one.
If you've never produced a book before, you can't do that. I think the temptation is to build castles in the sky and say, Oh, I'm sure to sell a bunch here and I'll sell a bunch there and I'll sell a bunch there, too! But you don't know that you'll sell a single copy.
Which is why I'm a fan of starting small--and I don't just mean by starting with an e-book. Some of the advice I've seen for new writers about handling the business side of things is just insane. I was a full-time freelancer for many years and I never:
1. Incorporated (my father was in business for 40 years and he never incorporated--he never thought it made financial sense)
2. Had dedicated bank accounts for my business
3. Bought fancy equipment for my business
4. Rented space for my business
5. Registered a business name
Why not? I didn't need to, and I would look long and hard about your "need" to, say, shell out for an office or cough up hundreds or even thousands of dollars in accountant fees because you think that means you're serious.
You're serious if you write. Everything else is just froufrou.
But I'm supposed to aim high! you cry. Again, it is very easy to confuse the trappings of success with the strategies that allow you to be successful. The trappings of success are what's so expensive.
One thing you'll get told (over and over again, by people who have not the slightest idea what they are talking about) is that, hey, you should spend lots of money on your business because you get a really nice tax break!!!
Not really. Money you "write off" when you spend on your business comes out of your taxable income. So, let's take two people, who both make $40,000 on their business.
Person A spends $1,000 on business stuff, leaving them with $39,000 in taxable income.
Person B spends $10,000 on business stuff, leaving them with $30,000 in taxable income.
Person A pays $5,881 in taxes (I'm using the 2011 tax tables and assuming they are single)
Person B pays $4,079 in taxes
Person A is left with $33,119
Person B is left with $25,921
Person B spent $10,000 to save $2,000. That is not good.
Don't let people talk you into to spending like a drunk sailor on shore leave. Spend money after you get it, not before (Smith and I are 100% in agreement on that one). The after-not-before approach means that you won't set yourself up so that if you don't make a certain amount of money by a certain date, you face catastrophe. Remember--you have no idea if you'll sell even a single copy. No idea. Don't put a deadline on your finances; save them for your writing.
Obviously if you have the means (or score big on Kickstarter), you can do what you want, but if you don't, make your book earn its keep. After-not-before means that you pay to have a paper book made after you sell enough e-books to pay for it. After-not-before means that you buy expensive custom cover art after you sell enough books with stock-photo covers to pay for it.
Does this require patience? Yes. Does it require discipline. Yes. Does it mean you'll have to ignore the people telling you that you're sabotaging your own work? Yes. If anyone gives you a hard time about you not being ambitious enough, sweetly ask them if they plan to pay for whatever it is they're insisting you do.
But don't borrow money from them.
Of course businesses borrow money all the time, but again, given the low overhead for a self-published author, there's no need to. And it tends to stress the finances.
Now, if you don't know much about venture capital, and if you lived through the late 1990s, you probably think of venture capital the same way most people think about traditional publishing--it's Santa Claus coming to your door with a big bag of money.
That's what I thought when I first became a business reporter. Imagine my surprise when I'd ask a local tech startup, "Are you looking to get VC funding?" and the owners would look at me like I'd just asked them if they were planning to raise funds by selling their own children to pedophiles.
It turns out that venture-capital funding operates with a lot of the same limitations as traditional publishing. To wit:
1. You lose control of your business. Bye-bye, you.
2. They operate on a limited time frame. In that era, the typical VC fund wanted to be able to take the company public (which means making it big and of interest to a wide swath of investors) within 3-5 years. If the company grew more slowly than that, it was trashed.
3. It is a volume game for them. Most companies couldn't possibly grow that big that fast, so the VC funds scrapped them--shut them down and sold off the parts. They made their money on the few companies that could indeed grow that fast. So it wasn't about nuturing companies, or having really good management: The expectation was that the majority of companies would be destroyed by this process.
Of course, if you sold out to a venture capital fund, you made some money--just like if you get a traditional publishing contract, you'll make some money. But it was truly selling out--if you cared or wanted what was best for your company or simply wanted the most money, you didn't do it.