How I Made $1.3M with Amazon KDP

Summary

In this video, Dorian shares insights on building a profitable KDP business, emphasizing the importance of understanding profitability beyond just monthly royalties. He highlights the misconception of spending heavily on advertising for organic sales and stresses the need for cost control. Dorian outlines key financial metrics to track, including royalties, production costs, and ad spend, and demonstrates how to use these in a profit and loss spreadsheet. He concludes with advice on business valuation and offers a free PNL template for viewers.

Takeaways

• 💼 The speaker, Dorian, built a profitable KDP Empire earning over $1.3 million, demonstrating the potential of KDP for authors.
• 💰 Even after accounting for advertising costs, Dorian still makes a million dollars, emphasizing the importance of considering advertising costs in profitability calculations.
• 📈 Achieving $110,000 a month in royalties is a significant goal, but it's crucial to understand that high ad spend doesn't equate to profit.
• 🚫 A common misconception among KDP authors is that losing money on advertising is necessary for eventual profit, which Dorian refutes as a false belief for the majority.
• 🔄 If an author is not making a profit after a few months, they need to reassess their strategy and control their spending.
• 📊 For a healthy KDP business in 2024, it's recommended to spend about one-third of royalties on advertising to maintain a healthy return on investment.
• 📈 Dorian advises tracking six key numbers monthly: KDP royalties, book production costs, contractors, ad spend, other marketing costs, and time spent on the business.
• 📋 The speaker uses a simplified profit and loss (P&L) spreadsheet to track and analyze the financial health of the KDP business over time.
• 📊 By tracking these numbers, one can identify trends and make informed decisions to improve profitability, such as increasing royalties and minimizing book production costs.
• 💹 The business's valuation can be determined by calculating the average monthly profit and applying a multiplier (30-40 times), which is useful for potential sales or investments.
• 🔗 Dorian offers a free P&L template for viewers to analyze their own business and mentions coaching services for those seeking to improve their KDP profits.

Q & A

What is the total amount of book sales represented by the $1.3 million figure mentioned by Dorian?

The $1.3 million represents over $3 million in book sales.

What is the significance of the $110,000 a month in royalties mentioned in the transcript?

The $110,000 a month in royalties is a fantastic goal for KDP authors to aim for, and it is achievable with effort.

Why is it a misconception to spend $110,000 a month on ads and expect to make $10,000 per month?

Spending $110,000 a month on ads would result in a net income of zero per month, as the advertising costs would consume the entire income.

What is the recommended advertising spend as a percentage of royalties for a healthy KDP business in 2024?

For a healthy KDP business in 2024, it is recommended to spend about one-third of your royalties on advertising.

What is the importance of understanding profit margin, a costs, and the ratio of organic to paid sales in KDP business?

Understanding these metrics allows KDP authors to control costs and make money instead of spending it all on advertising.

How often should a KDP author track their business numbers according to the transcript?

A KDP author should track their business numbers every month.

What are the six numbers that Dorian suggests tracking every month for a KDP business?

The six numbers to track are KDP royalties, book production costs, contractors, ad spend, other marketing costs, and the time spent on the business.

How can a KDP author calculate their estimated royalties for a month?

A KDP author can calculate their estimated royalties by going to their KDP account, clicking on reports, then royalty estimator, choosing the previous month, and looking at all books.

What is the purpose of creating a profit and loss (P&L) spreadsheet for a KDP business?

The P&L spreadsheet helps to understand the business's financial health over time by showing revenue, expenses, and net profit.

What is the typical investor valuation for a KDP business based on the transcript?

Investors typically buy a KDP business for between 30 to 40 times its average monthly profit during 12 months.

What is the value of time spent on the business and how is it calculated in the P&L spreadsheet?

The value of time spent on the business is calculated by multiplying the number of hours spent by the hourly rate of the individual's time, representing the opportunity cost.

Outlines

00:00

💰 Building a Profitable KDP Empire

The speaker, Dorian, introduces his successful Kindle Direct Publishing (KDP) business, which has generated over $3 million in book sales. He clarifies that even after accounting for advertising costs, his profits exceed $1 million. Dorian emphasizes the importance of understanding profitability and challenges the common misconception that spending heavily on advertising is necessary for eventual profit. He advises that publishers should aim to spend only about one-third of their royalties on advertising to maintain a healthy profit margin. He also recommends tracking key financial metrics to control costs and ensure profitability.

05:01

📊 Understanding KDP Business Metrics

Dorian provides a step-by-step guide on how to track essential KDP business numbers, such as royalties, book production costs, contractor fees, ad spend, and other marketing costs. He explains how to extract these numbers from KDP reports and ad consoles. The speaker then introduces a simplified profit and loss (P&L) spreadsheet to help publishers visualize their business's financial health over time. He illustrates how to fill in the spreadsheet with monthly revenue, expenses, and net profit, including an example with made-up numbers to demonstrate the process.

10:02

📈 Analyzing Business Performance Over Time

The speaker uses a hypothetical publisher's financial data to illustrate how business performance can vary throughout the year. He shows how the publisher initially made a small profit in January but experienced losses in subsequent months due to high book production costs and ad spend. Dorian points out the importance of minimizing expenses, especially during the early months of the year, to avoid financial risk. He also notes that ad spend typically increases in Q4 to capitalize on the holiday season, which can compensate for earlier losses.

15:03

💼 Valuing and Scaling Your KDP Business

Dorian discusses the process of valuing a KDP business, mentioning that investors often buy KDP businesses for 30 to 40 times their average monthly profit. He calculates the average monthly profit for the example publisher and suggests that the business could be valued at $70,000 based on this multiple. The speaker offers a free P&L template for viewers to analyze their own KDP businesses and mentions his availability for one-on-one coaching. He also hints at an upcoming course to help publishers improve their KDP profits and grow their businesses.

Keywords

💡KDP

KDP stands for Kindle Direct Publishing, a platform by Amazon that allows authors and publishers to independently publish their books directly to Kindle stores worldwide. In the context of the video, KDP is central to the speaker's narrative as he discusses building a profitable business through this platform, emphasizing the importance of understanding KDP's economics and strategies for success.

💡Profitability

Profitability refers to the ability of a business to generate more income than it spends, resulting in a profit. The video emphasizes the importance of profitability in KDP publishing, with the speaker sharing his experience of building a $1.3 million KDP Empire and discussing the common misconceptions and strategies related to making a profit on the platform.

💡Royalties

Royalties in the context of book publishing refer to the payments made by the publisher to the author for each book sold. The video script mentions 'royalties' as a key component of the author's income, and the speaker advises tracking royalties monthly as part of managing a KDP business.

💡Advertising Costs

Advertising Costs refer to the expenses incurred in promoting products or services. In the script, the speaker discusses the importance of controlling advertising costs when running a KDP business, highlighting that many publishers overspend on advertising with the false belief that they will recoup losses through organic sales.

💡Organic Sales

Organic sales are sales that occur naturally without paid advertising or promotion. The video script touches on the myth that spending heavily on advertising will lead to organic sales, which the speaker refutes, arguing that publishers should focus on controlling costs and achieving a healthy return on advertising spend.

💡Book Production Costs

Book Production Costs include all the expenses involved in creating a book, such as hiring writers, editors, proofreaders, cover designers, and formatters. The speaker in the video advises tracking these costs monthly as part of managing a profitable KDP business.

💡Contractors

Contractors are individuals or agencies hired to perform specific tasks. In the video, the speaker includes contractors in his monthly business tracking, such as those who secure reviews or manage book production, emphasizing the need to account for these costs in a KDP business.

💡Ad Spend

Ad Spend refers to the amount spent on advertising. The video script discusses the concept of ad spend in the context of Amazon ads, and the speaker provides a method to calculate this spend from the KDP account, which is crucial for analyzing the business's financial health.

💡Other Marketing Costs

Other Marketing Costs include expenses for promotional activities outside of Amazon ads, such as social media advertising. The speaker in the video script encourages publishers to track all marketing costs to understand the full financial picture of their KDP business.

💡Profit and Loss (P&L)

A Profit and Loss statement is a financial report that summarizes the revenues, costs, and expenses incurred during a specified period, reflecting the financial performance of a business. The video script provides an example of creating a simplified P&L for a KDP business, which helps in understanding the business's profitability and areas for improvement.

💡Valuation

Valuation is the process of determining the worth of a business or an asset. In the context of the video, the speaker explains how to value a KDP business based on its average monthly profit, which is useful for potential sellers looking to sell their business on marketplaces like Empire Flippers.

Highlights

Dorian shares insights on building a profitable KDP Empire with over $3 million in book sales.

Emphasizes the importance of profitability over high royalty earnings, considering advertising costs.

Advises that spending $110,000 a month on ads does not equate to making $110,000 per month in profit.

Dispels the misconception that high advertising costs are necessary for eventual profitability.

Points out that many KDP authors are misguided about the relationship between advertising and profit.

Recommends spending about one-third of royalties on advertising for a healthy KDP business in 2024.

Introduces the concept of profit margin and A costs as essential metrics for controlling costs and making money.

Encourages tracking six key numbers every month for a successful KDP business.

Provides a step-by-step guide to calculating royalties and ad spend from KDP accounts.

Introduces a simplified profit and loss (P&L) spreadsheet tailored for KDP businesses.

Explains the significance of tracking book production costs, contractors, and other marketing costs.

Discusses the importance of valuing one's own time and the concept of opportunity cost in business.

Illustrates how to fill out a P&L spreadsheet with example numbers to analyze business health.

Shares a hypothetical business story showing profit and loss over a year and the impact of book production costs.

Advises on the risks of high upfront costs and the importance of minimizing expenses for new publishers.

Mentions the potential of outsourcing repetitive tasks to a VA (virtual assistant) to increase profits.

Provides an example of how to calculate the valuation of a KDP business for potential sale.

Offers a free P&L template for viewers to analyze their own KDP business.

Announces availability for one-on-one coaching and an upcoming course for KDP authors.

Transcripts

I'm going to talk about something that

people don't usually talk about in

KDP and this will show you how I built a

profitable $1.3 million KDP Empire so my

name is Dorian let's get this out of the

way this is one of my KDP accounts as

you can see it's a real account and that

1.3 million uh that represents over $3

million in Book

Sales and another thing I want to say

about that is I still make a million

even when you take into account

advertising so whatever I made minus the

advertising costs it's still well over a

million

bucks so this is something that a lot of

Publishers get wrong about profitability

and we're going to look at it really

closely $110,000 a month in royalties is

a fantastic goal and if that's your goal

I encourage you go for it it's doable

it'll take energy to get there and I

know you can do it I've done it so I

know you can but I want to point out

that if you're spending $110,000 a month

on ads you're not making 10,000 per

month you're making zero per month this

is a really big misconception that a lot

of KDP authors seem to have I've spoken

with a lot of people in the three months

since I started my channel and I've been

really surprised at how much people

spend on Advertising there seems to be a

common misconception that you need to

lose money through spending a lot on

Advertising um in the hopes that

eventually you'll start making it back

through organic sales there may be a

tiny grain of Truth to that for some

people but for 90% of the Publishers out

there this is a false belief I'm here to

tell you that's just not true if you're

still losing money after a few months

after launching your book then you've

got a problem and you need to change

what you're doing and you really need to

control your spending for a healthy KDP

business in

2024 you probably want to be spending

about onethird of your money on

Advertising onethird of your royalties

on Advertising so if you make $10,000 in

royalties you probably want to be

spending around 3,000 or a little more

on

Advertising preferably less right you

want to have a high uh return on

Advertising spent but even this even if

you spend oneir then at least you're

getting a 2:1 row as which is healthy

for KDP so how do you get to this point

where you're only spending onethird of

your money on ads well that's on the

book level so you need to know your

profit margin your a costs the amount of

money it takes to make a sale through

advertising the ratio of organic sales

to paid sales and a couple other numbers

and if you do that then you can control

your costs and actually make money

instead of spending it all on

Advertising so I actually talk about

this in a video here on my channel this

is the video right here it's uh KDP

economics and if you haven't already

seen that I highly encourage you to

watch that I explain everything and

after watching it you'll know exactly

what you do to control your cost and

make a profit from your book now getting

back to the business level you need to

keep track of the numbers in your

business and there are six numbers that

you need to track every month so this is

something that I do and this is my

secret for how I grew a profitable

business on the first day of every month

I sit down and I take five to 10 minutes

and I jot down six numbers these are the

numbers I write down my KDP

royalties I also note my book production

costs now that's hiring a writer editor

proofreader cover designer formatter

anything that goes into the cost of

making a book I put here in this bucket

contractors so anything that I paid to

my vas who do things like get reviews

for me manage the people that are making

books for me or anything else that a

contractor or VA does for me that's not

already accounted for in book production

I put here and then there's ad spend and

what I mean by that is how much I'm

spending on Amazon

ads and then there's other marketing

costs so that could be things like Tik

Tok or Facebook ads or any other kind of

promotion that you're doing that costs

money you put into this bucket right

here and then the final number is the

time that you spent on your business so

if you are doing this as a side hustle

and you spend two hours per day five

days per week then you're spending about

40 hours per month so you just make a

note of that so here are some realistic

numbers I made these up these are not my

numbers but they are reasonable numbers

based on my experience in KDP you know

you could be making this much you might

be spending this much on book production

costs might be spending this much on ad

spend etc etc so there are two numbers

here that I want to show you how to get

the first is your royalties and it's

really easy you go to your KDP account

you click on

reports click on royalty estimator click

on the date range choose a date and you

want to choose last month presuming that

you're doing this on the first day of a

new month right and then make sure that

you're looking at all the books not just

compare

books and then that'll give you a number

and this is your estimated royalties but

that's good enough for what we need

right now this obviously is a madeup

number 1 two 3 4 well we're going to put

that here and never mind that it's a

different number the second number you

need to get is going to be your ad spend

and the way to get that is you go to

your ads console you click here on the

date range you choose last month

apply and then make sure that you've got

the right date range make sure also that

you're not filtering anything down here

because you want to show all of your ads

for that month and then your spend is

the number that we're going to work with

you're going to find that either up here

or down here in the column headers so

what do we do with these numbers it only

took a couple minutes to get them well

we put them into this spreadsheet this

is a p and l also known as a profit and

loss this is a pretty standard business

spreadsheet that your accountant or an

investor or somebody would look at uh to

see a picture of their business health

and to see it over time now I've

simplified this for a KDP business and

it's really very simple and all this is

is your revenue and your expenses and

then your net profit so everything up

here is your Revenue everything here

this is your expenses and then down here

this is your net profit and then we look

at it through time so we got January

February March Etc until the end of the

year so let's start filling this out and

you'll see exactly what I mean so let's

say that our royalties in

January were this number right here now

I know that when I showed you how to get

these numbers it showed August but don't

worry about that we're just going to put

these numbers in January because it's

easier to show we put this number here

and if there's any other income from

other distribution or other KDP accounts

we put that in there too book production

cost put that here contractors put that

here add spend and put that

here uh other marketing costs well that

goes here and then the time that you

spent we're going to put that here now

you notice that there are a couple of

extra rows one of those is software my

software costs tend to be around $300 a

month yours might be $20 a month I don't

know but I put in 150 here so software

could be things like Microsoft Word

Adobe Photoshop or other products pubby

canva helium 10 those are some of the

things that I use and there may be

others that you include in there as well

and this tends to be the same every

month so it doesn't vary a lot if at all

so I just leave it here and it's stable

and that's why that's not number that I

try to you know look at every

month okay now there's one other number

that we need to put in here and that's

the value of your time how much is your

time worth per hour when you're making

money so if during your job or during

your other business or whatever activity

that you do to make money besides kyp

how much do you make there that's the

number that you would put in here a lot

of the people that I talk to I kind of

get the feeling that they're probably

around the $50 per hour mark in their

other activities so I put that here as

an example but some people are way

higher some people are lower just

whatever your number is you can put that

here and what that does is it'll take

the time that you spent and multiply

this number to arrive at your

opportunity cost or the dollar value of

the time that you spent because your

time isn't free and it's non-refundable

so you might as well account for it and

so that's where this goes and then

finally there's one more row and that's

the cost of replacing you in the

business so if you so for anything

that's repetitive you can turn that into

a process and a process is something you

can give to somebody else so there's a

term for that it's called sop standard

operating procedures and so if you have

those things you can give them to a VA

and there are countries in the world

like in the Philippines and some other

places where the cost of living and the

strength of the US dollar is such that

you can pay them $10 an hour and that's

really at the top of the range of what

they could expect to get for a job there

so you're paying them very well

according to how things are in their

country that's what a lot of people in

this business do and it's a really great

way to Outsource things that you don't

need to do so this number here is what

you would spend if you were Outsourcing

a lot of these tasks that you're doing

to someone else and by the way this is

what an investor would look at they

would not look at your cost they would

only look at what it would cost to

replace you in the business and that's

how you would arrive at evaluation and

I'll show you that later on so let's

look at the story of this business we

already put some numbers in for

January and in January we made a slight

profit of $528

and then in February we made less money

and we had the same amount of expenses

almost and so we made a loss so anytime

you see red here that means that we lost

money and in this business we lost a

fair amount of money mostly during the

early months of the year when we were

making books so if we look at this we

can see that we spent $1,500 a month so

that's one book produced every month for

the first first six months of the year

that's pretty typical of a lot of

Publishers they'll produce a lot of

books in the first half of the year and

then spend a few months optimizing those

books so that in Q4 when the big

Christmas wave comes that they can cash

in and make a lot of money hopefully so

likewise ad spend goes up in November

and December and it's also pretty high

in January whereas it's pretty low for

the rest of the year at least that's

what I've seen in my business my my

multiple accounts and other people's

accounts uh this tends to hold true it

really depends on the niche depends on

your business but this is a pattern that

I've noticed so the results of all this

is that by the end of the year this

publisher made about $5,000 in profit

now that's accounting for $24,000 of

getting paid for his or her time right

so like they already got paid and on top

of that they made a $5,000 profit but if

they had turned their business into a

system and they outsourced a lot of the

repetitive tasks to a

VA then they would have made a lot more

money so instead of a $5,000 profit they

would have made an outright profit of

about

24,000 so this is what this looks like

in a chart and this tells a story of the

business made a little bit of money in

January lost some money in February lost

more money lost more more more then

started making money and then in

December made a bunch of money which

compensated for the losses and ended up

giving us a profit so what did we

learned from this well we learned that

there are several months where the

expenses were really kind of high

compared to the royalties so to me this

is not a good picture to me I would want

to increase my royalties really maximize

them and I would try to look for ways to

minimize book production in other

expenses primarily book production so

this is kind of expensive for someone

who's just starting out or who's making

not very much in royalties if we take

that book production out of the picture

then we're doing way better right so let

me replace that all this shows is that

this particular publisher really put a

lot of money up front in the year and

lost a lot of money and was taking a

risk

because if they didn't make up for it at

the end of the year then they would have

been out of pocket which is not a

situation that you want if you're just

starting out and you don't already have

good cash flow from KDP then you got to

find a way to minimize how much you

spend to make books so that you can kind

of climb the ladder and keep increasing

your profits so if you're making healthy

profits then you can spend more money to

make more money but if you're just

starting out and you're spending a lot

of money and you're at a loss then that

can be risky that's all I'm saying it

can be risky and you know it's up to you

what you do but um I wouldn't do that

okay the last thing I want to mention

here is the valuation so today you can

go to a website like Empire flippers or

Flippa or some of the other marketplaces

and you can see KDP businesses that are

up for sale and people are buying them

and typically investors will buy a KDP

business for between 30 to 40 times its

average monthly profit during 12 months

so for this business we calculated the

average monthly profit based on what a

VA would have cost to replace you and so

that's these numbers here and the profit

was 24,000 by the end of the year and so

the average monthly profit was 2,000 so

if we take the exact middle of valuation

multiples so that would be 35 times the

average monthly profit then this

business would be worth

$70,000 that means that you could list

your business for maybe a little bit

more than that and it would sell for

maybe about this or maybe a little bit

less than this and that's a pretty

accurate valuation of a KDP business and

it's based on good data and not only

does this data give you evaluation but

it helps you understand where your

business is going and where you need to

focus your attention to turn any losses

into profits so that at the end of the

year you end up with a ton of money if

you'd like a copy of this pnl so that

you can analyze your own business I put

a link in the description below and I'm

happy to give this to you for free

there's no obligation just let me know

you want it and you'll get it this is

the same p&l that I use with my coaching

students and we're already having

fantastic FC results using this so I'm

in the process of turning around

multiple accounts and also improving and

optimizing several other accounts so

that my students make more money this is

a super effective tool I hope that you

got something out of this video if you

would like my help to coach you so that

you can make more money with KDP either

to turn your business around or to

improve on the profits or simply to

teach you the fundamentals so that you

know what to do for the next few years

so that you can grow your business to

your goal then reach out to me I'm

available for onetoone coaching I also

have a course that I'm working on that

should be out pretty soon so that'll be

another opportunity to work with me in

that course thanks again for watching if

you want to subscribe hit whatever

buttons you need to and I'll talk to you

later