I just posted this in response to a service provider who commented on my earlier post, Ebook Madness: Don't Confuse Ebook Conversion With Ebook Formatting! In his comment on that post, this gentleman said he only charges $40-50 for the typical formatting AND conversion job, and asked if he's not charging enough.
My answer was an emphatic YES, and I'm reprinting the full response here because I think both service providers and those who seek their services need to get a better understanding of the economics involved. Here's my response, in full:
Yes, you are most definitely not charging enough to either do a thorough job or earn a living wage, though I'm sure you don't realize it.
Let's assume you begin with an MS Word file containing 300pp, which is the typical length of a typical novel. Let's say you charge your higher end estimate of $50 to do the formatting and conversion.
You can take $22.50 right off the top for self-employment taxes**, leaving you with $27.50. But you still have to pay income tax on that income, and even if we assume you're in a very low bracket, say 25%, you're losing an additional $6.88 in income tax, which means you're really only earning $20.62 for the job---and that's before taking out your expenses, as you should be doing before figuring your net income.
**UPDATE - several have questioned my math on the taxes, and since I know math is not my strong suit I'm willing to defer to their judgment. But even if the taxes are only $10 per $50 you get paid as a freelancer (and I'm pretty sure they're quite a lot more than that), you're still only earning slave wages by the time you take all the expenses, weekly hours you don't have booked with paying work, and weekly hours you spend on non-paying but necessary stuff like billing and promotion into account.
Your electricity, internet access and software aren't free. Neither is the cell phone you probably use sometimes for communicating with clients. But I'm fairly certain you're not taking these items, or the taxes, into account because if you were you'd realize you're barely earning minimum wage on each job.
Getting back to those 300 pp...let's assume you spend two hours reviewing the MS Word file and making your formatting changes. Even if you use a bunch of scripts or other automated processes to do the formatting changes, you MUST at least LOOK at every single page to be sure you haven't missed anything that needs to be reformatted to be ebook -compliant. Two hours only allows your 120 minutes total for the job, or 24 seconds per page to review each page AND make any additional formatting changes as necessary. If the MS Word file you've been given is filled with lots of funky and inconsistent Styles and/or formatting, the job will take even longer but again, you have to at least look at EVERY SINGLE PAGE to know if this is the case.
At this point you haven't even done the actual conversion step, or the (absolutely necessary) step of reviewing the converted file---again, if you're doing the job right this means looking at EVERY SINGLE PAGE---yet. Let's allow another 15 minutes for the conversion, since most of that work is done with automated tools, and another 5 seconds per page to review the converted file, which comes out to 25 minutes more: a total of 40 additional minutes, or 67% of an hour.
If you find any irregularities in the converted file you'll have to go back and revisit the formatting work and then repeat the conversion and review steps, but I'm sure your $50 price point doesn't take that possibility into account, either.
So in reality, if you're doing as thorough a job as you should be (by which I mean you're looking at EVERY page both before and after the conversion), it should take you a minimum of 2 hours and 40 minutes to complete a formatting + conversion job on a 300pp manuscript of a novel. It takes considerably longer for a nonfiction book with many images, tables, figures, charts and the like.
Since I've already calculated you're only making $20.62 total for the job after taxes, and at the minimum you should be spending 2.67 hours on the job, that works out to an hourly rate of $7.72 per hour---and again, that's AFTER taxes but BEFORE expenses.
If, on the other hand, you're NOT reviewing every single page both before and after the conversion, then I'd say your work isn't thorough enough.
So if a freelance service provider says they're willing to do your ebook formatting and conversion job for $50 or so, there are only three possibilities: either that person isn't paying him- or herself a living wage, or that person is not paying his or her taxes, or that person is not doing a thorough job on your book.
(No disrespect to the commenter, I am not familiar with his work so I can't comment on it, but most of the time what's going on with these lowball estimates is BOTH that the person isn't paying taxes AND that he or she isn't doing a thorough job. Most service providers who offer such ridiculously low prices are only using automated formatting and conversion tools, and if they bother to look at individual pages at all it's only to do some minor spot-checking.)
Monday, May 20, 2013
Why You Should Be Paying More Than $50 For Ebook Formatting & Conversion
Posted by April L. Hamilton at 3:21 PM
Labels: #ebooks, #Kindle books, author services
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I'm confused by your initial calculation. In the US, self-employment tax (i.e., SS and Medicare taxes) is a maximum of 15.3%, which would mean $7.65 off the top. Am I missing something?
It's closer to 45% if you're counting EVERYTHING: FICA, Medicare, Soc. Security, and state taxes.
Remember - the employer is paying half of that stuff for W2 employees, so when you're self-employed your taxes effectively double.
"either that person isn't paying him- or herself a living wage, or that person is not paying his or her taxes, or that person is not doing a thorough job on your book."
Or… that person is actually just trying to survive as the competition from India is just freaking insane, charging as low as $50 for the conversion of a 60-page book into a fixed layout eBook (two formats) while this job requires great skills and a thorough development.
For 100-page books, they are charging as low as $30 (formatting and conversion in 3 formats). And guess what, they get all the jobs on freelance websites! And I won't mention the lying — some are writing stuff in their bio which are so technically wrong that it just can't be true if you mind googling ebooks—, the massive spamming and the violent linkedin autopromoting.
Are they achieving bad quality? In most cases, yes. Had their customers the knowledge in this field, they would never pay. But who cares, it is just about paying as little as possible. In other words, either you play this game or you'll die within a few weeks, especially if you are not “renown” —and even if you have been working with publishers and authors for a while, that doesn't really matter—, no matter the quality of the work you are doing.
Now, bad quality files impact the whole ebook ecosystem in a pretty insane way. Vendors have to manage the unmanageable (ebooks which code is so disrespectful of any rule or best practice that it won't work properly may the content be web), so they are quite skating on thin ice, can't update their apps at natural pace (otherwise they are risking 60+ % of files turning unreadable in case of a “too radical” technical modification) and must override styles.
The ebook ecosystem has a big problem, and it's time we hold India to account…
One more thing - I would never stake my life on my math skills, so it's entirely possible I'm off to some degree on the taxes. Even so, even if the taxes really WERE only $10 per $50 freelancer fee (and I'm very confident they're a LOT higher than that), remember this: yet another reason why freelancers are supposed to charge a higher hourly rate than W2 employees is that freelancers rarely achieve paid, fulltime booking status---oh sure, most of them WORK a lot MORE than 40 hours per week, but they're not actually getting PAID their hourly rate for 40 hours per week on a regular basis. They also don't get paid days off (not even paid holidays), overtime pay, employer-paid benefits, and so on.
So when a freelancer says they're charging you $50 per hour or more, that doesn't mean they're making $2000 per week. Usually, they're making FAR less.
Oh, I agree. I just wanted to clarify the "self-employment tax" error. Generally, as a self-employed, your total taxes should only rise by 8% or so (the part of SS and Medicare usually paid by the employer). As a general rule, this means the self-employed should assume about 50% of gross income will go to total federal and state taxes (although with a good accountant one can hope to get some of that back).
I'm an excellent formatter and I love doing it. I tried to break in and supplement my writing income. At first I charged $80/job since I was a newbie but no one wanted to pay that. People would come back with a lower price and ask me to match it or they would try to barter. It wasn't until I dropped the price to $40 that a few customers tried me out. Needless to say, I no longer format unless it is for existing clients. It is not enough money to justify my time.
When I asked a friend to format my most recent book for me, I paid her $50 for ebook formats and $50 for paperback. This was the friend deal--I'd never expect to pay so little otherwise. (The additional payment she received was not hearing me groan about how much I hate ebook formatting.)
When my next book comes out in October, I plan to pay her more, as a thank you and an acknowledgement that I can afford to pay more now.
The self employment taxes jumped out at me as incorrect, too. Your overall point, that charging $50 for a job that, done right, would take 2 2/3rds hours isn't enough still seems right.
However, I'd go about making that point differently. Take 8% off the top. That's half the self employment tax. The portion that is equivalent to what your employer would be paying at a regular job. Now if you divide the remaining $46 by 2.67 you get $17.22. For the time you spend doing the actual formatting job it was the equivalent of a #17.22 and hour job with no benefits. At least at first glance and without taking any expenses into account. (Whether any of those expenses are actually deductible assuming you're working out of your home is questionable anyway.) While I can't imagine living on a job that pays that little, many people do.
But what this math doesn't take into account is that you aren't going to get "paid" 40 hours a week unless you're working much more than that. Unless all these jobs are dropping in your lap I can see spending a significant portion of your time communicating and providing quotes to potential clients, billing and accounting work for the jobs you do, customer service type issues for jobs you're already done, etc. By the time all of that gets accounted for you're still in the neighborhood of working a minimum wage job with no benefits.
I just noticed you raised the issue of not working 40 hours a week *and* the lack of benefits (including sick days and holidays). I've seen a figure quoted of 30% for a typical professional level employee in benefit costs (which includes the cost of sick days, vacation, holidays, unemployment insurance, etc).
You're right. Freelancers can't bill for their time (and money) spent on administrative tasks like billing and collections, accounting work, promoting their services, maintaining a website (as most pro freelancers do) and so forth.
Add to this the fact that most of the time, freelancers are only working an average of 25 - 30 PAID hours a week per week over the course of a year, and it's easy to see why it's very difficult to make a living as a freelancer. Especially when you have lowballers undercutting your bids.
While I don't disagree with your view that $50 for formatting an ebook is way too low, I suspect the source of the downward pressure on such services is unclear. It may be that many authors just prefer a DIY approach. I know I do.
Initially I found it bewildering, but after a bit of practice and learning a few tricks, I discovered it's not difficult at all. Additionally, as a self confessed control freak, I found myself examining my finished ebooks with a fine tooth comb regardless of who formatted them. Formatting them myself doesn't take that much longer and has the added benefit of allowing fast and effortless updates when I find the odd missed typo, etc.
For me, it's not about the money. Even if someone offered to do it for free, I would prefer to do it myself.
The same thing has happened in my business: web design. I used to work with graphic designers to code websites but they now get that work done via sites like guru.com - and the vast majority of that work is done for around #5 / hour by folks in India or Malaysia. I can't work for $5 / hour, so I'm looking for a new profession - I see the writing on the wall. I have been contracted to fix those $5/hour sites for my normal rate... but for the most part they do a really good job.
As it was my comment that started this discussion initially, I wanted to comment here again. Much like R E McDermott I learned ebook formatting for my own work and found it a relatively easy activity as I am already knowledgeable in programming (though I can understand why most folk would not want to do it themselves). I started doing ebook formatting & conversion for a friend who wanted their books done and were not happy with the service provided by CreateSpace and the professional they contacted said she was too busy to meet that friends time line. I simply copied her quoted prices and did the formatting rapidly and satisfactorily a) as a favor and b) to make a little extra income on the side.
In hunting the web since, there are many who seem to charge about $50 as a base price. Of course I cannot judge their quality because I have not seen the work that results. But I have seen ebooks for sale on Amazon that were terrible with enforced line breaks mid-sentence, odd ball links that should not have been there at all, out of alignment text and odd font sizes enforced that as a reader I hated. Yet the author posted the book for sale so they either didn't care about the low quality, were not aware of it or were not aware that a professional job would not have such errors.
I took Ms Hamilton's advice to a degree and increased my prices a little in consideration of the factors that she brought up and my own but my question here is - how to get business in this field at a price that reflects the effort involved and no be undercut by someone that could afford the charge $10 is they so wished.
Is there a standards organization that one can register with so that customers can be assured of a certain level of product quality? If so I have not found it.
I am not aware of any standards organizations, and the answer to the question of how to make a living at this when offshore entities and others are so severely undercutting your fees is: you may *not* be able to make a living at this.
It's a harsh truth, but it IS a truth. When unsophisticated self-publishers who don't know enough about how manuscripts are turned into ebooks go comparison-shopping, they're overwhelmingly going to choose whoever offers the cheapest rate.
And there are plenty of service providers who either live in depressed, third-world economies (and are therefore doing just fine on $50/job) or live in stronger economies but simply haven't done the math to figure out they're not making any money offering their services so cheaply. So long as these lowballers are out there, it's very difficult for everyone else to earn a living wage while offering the same services.
Like you, I am frustrated that India and other countries have taken over the freelance marketplace. If I could afford to, I would set up a freelance site like oDesk or Guru and call it U.S.Only. At least we would be able to charge a decent rate for our services and clients would be more likely to get freelancers who speak English.
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