Indie is a Startup: A Big Number Times a Small Number

by Rich on July 3, 2011

This is the first in a series comparing indie publishing to technology startups. I’ll follow up with more posts looking at the lessons indie publishers can learn from the tech world.

Indie publishing is awash in pricing discussions. Joe Konrath and his outstanding blog have been a primary venue for the issue. John Locke selling a million books launched another million posts. Dean Wesley Smith tackles it from (among others) a highly instructive by-the-numbers perspective. One of my favorite blogs, The Passive Voice takes it on in a couple of posts (the last also includes a shameless plug, which makes PG’s blog no less awesome).

Indie publishing is an entrepreneurial venture. It gets represented as a lot of emotional or philosophical things, but it boils down to a writer saying “I’m going to be responsible for the success of a book in the marketplace” rather than choosing to rely on a traditional publisher with all of the hard work that comes after the hard work of writing. And just like every indie author dreams of being the next Stephen King (or whichever huge success you pick as your target), every startup dreams of being the next Google (or whomever).

My daylight home is in information technology, which is no stranger to entrepreneurial activity. Like writing, there are no guarantees of success, but technology ventures as an industry are about as mature as anything based around “let’s try something new and see if we can make money at it” can be. Technology ventures have a lot of lessons for indie pub.

Investors in tech startups tend to want to talk about the team and their histories (author brand), the problem the startup is trying to solve (emotional impact of your story), competition and barriers to entry (market and subject trends), customers (readers), marketing (sorry, it’s still marketing), and how much money you need. Successful entrepreneurs can answer these well, because these are the questions on which a tech business lives or dies.

Unsuccessful entrepreneurs (who can become successful after learning their lessons) often focus on underlying technology rather than solving problems (publishing mechanics rather than what to write) or the potential hugeness of the market.

That last one is how I see some advocates framing their pricing arguments. In startups, many tend to argue, “There are millions of potential customers. If we can get just 2% at a low price, we’ll be rolling in dough.” That’s true, and no one smart ever invests in them. If the way you define your market is so broad you can only be good enough to win 2% of it, you’re not making a good enough product, or your defining your market wrong. 98% of your marketing effort and expense will amount to nothing, you’ll never get enough traction to be credible, and you won’t make enough sales to be important in your market.

Looking at all of the buyers on Amazon, it’s easy for an indie to get pulled into the same trap. Amazon has 65 million customers every month. You could sell a book to 2% at $.99 and make a huge pile. A big number times a small number is still a big number, right?

It can be, but if the small number is small enough, the big number needs to be huge. More importantly, developing a product (or book) which appeals to a huge number of people is extremely hard and extremely unpredictable. Betting the farm on a rare outcome almost always means losing the farm.

The reasons tech investors pay attention to problems (story) and markets is because that’s where the money lives. Know your niche. If your dream is to write accounting software suitable for the IRS, you’re never going to sell it at Best Buy. If you want to write a photo sharing tool for grandparents, you’ll never sell it to Pixar. That’s OK.

Who is really going to read your book? It probably fits in some traditional publishing category, and that category has a number of readers. Contemporary mystery devotees are unlikely to snap up your werewolf on dragon paranormal romance, so was it really reasonable to count those people in the 2% you were going to snag from Amazon’s customer list?

Niche and reasonable expectations are one of the main reasons I think Dean’s approach is the right one. It’s based on success that midlist authors actually attain. It doesn’t rely on having the next DaVinci Code in order to pay off. By keeping prices reasonable, it also doesn’t prevent a book achieving DaVinci Code success.

Price is important with a product, but it’s mostly about not blowing it. You don’t want to leave too much on the table, but you don’t want to drive customers away, either. Misperceptions of your niche (target market) and prices you set too low or too high can do that.

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