How I Made $1.3M with Amazon KDP
Summary
TLDRIn 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
- πΌ The speaker, Dorian, built a profitable KDP Empire earning over $1.3 million, demonstrating the potential of KDP for authors.
- π° Even after accounting for advertising costs, Dorian still makes a million dollars, emphasizing the importance of considering advertising costs in profitability calculations.
- π 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.
- π« 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.
- π If an author is not making a profit after a few months, they need to reassess their strategy and control their spending.
- π 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.
- π Dorian advises tracking six key numbers monthly: KDP royalties, book production costs, contractors, ad spend, other marketing costs, and time spent on the business.
- π The speaker uses a simplified profit and loss (P&L) spreadsheet to track and analyze the financial health of the KDP business over time.
- π By tracking these numbers, one can identify trends and make informed decisions to improve profitability, such as increasing royalties and minimizing book production costs.
- πΉ 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.
- π 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
π° 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.
π 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.
π 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.
πΌ 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.
Mindmap
Keywords
π‘KDP
π‘Profitability
π‘Royalties
π‘Advertising Costs
π‘Organic Sales
π‘Book Production Costs
π‘Contractors
π‘Ad Spend
π‘Other Marketing Costs
π‘Profit and Loss (P&L)
π‘Valuation
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
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