When the book printing house takes the final decision on fixing the price and print quantity, the fixed costs have already been incurred and cannot be changed. On account of the uncertainties of estimating demand, a prudent publisher favors a higher price and a lower quantity rather than a lower price and a higher quantity. If the actual demand for the book is less than expected, a price on the high side may still return a profit, whereas too low a price could lead to substantial loss. The great dangers are underestimating costs, overestimating demand, and under pricing. This leads not only to a loss on the individual book, but also can wipe out the profit on others. Successful books can always be reprinted, but at a price and quantity which again are chosen to avoid loss. If a book is likely to be added to the backlist, there may be an argument for accepting a lower than usual gross margin on the first printing, on the grounds that a reprint will have a much healthier margin. The first printing of a school textbook may attain no profit, but the hoped-for second and subsequent printings should move it into profitability. Also hardbacks can perhaps tolerate a lower gross margin, since the follow-on paperback will not have the production fixed costs to bear.
Poster Printing
Brochures Printing
Other factors affecting the pre-publication decision concern the level of investment at risk, for example very high advances or a large investment in a major textbook, and its duration. Several combinations of price and print run may be tried out, including worst case scenarios, and the break-even may be calculated. A project break-even point is the minimum quantity that must be sold to cover the production costs and the advance or royalty. Also included might be a proportion of the overheads. On some proposals, if the break-even is considered attainable, that may inspire sufficient confidence to go ahead. Some publishers calculate the cashflow and the interest incurred over time. From the outset to after publication, the publisher usually endures a net loss before the income surpasses the outlay. The estimated income is derived from the sales forecasts broken down over time.
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