The Finance Mod Guide

Update note for January 2022: Some minor details have been adjusted.

A lot of production costs have gone up in the end of 2021. This has not been a specific cost, rather, it's the sum of a lot of tiny things which add together to increase the base cost.

Specifics of this will vary depending on how your production mod is planning to source and what you are doing in your project.

Financials, basic ones, are very easy. They just demand a bit of attention to detail, and a lot of space for working.


In zines, there are really only a few main concepts to understand: breakeven, profit, and costs.


The number of copies to sell in order to break even is the total cost divided by the average profit. This makes intuitive sense, but please save it in a place you can reference. It will help.

Target # of sales = (Total costs) / (Average profit per bundle)

The average profit requires first calculating the profit of each shop offering, then applying a formula to determine the average. Using the normal method of calculating averages is fine. Now we can calculate the average profit.


But to calculate the average profit, we must calculate the profit of each shop offering. Now we are looking at costs.


There are two main types of production costs:

  • Fixed costs; and,

  • Variable costs.


Fixed costs are costs that will not change. They are things such as monthly BigCartel fees. These will never change regardless of how much is sold.


Variable costs are costs that change depending on the number of goods being made. This will be the price to purchase books and merchandise. Variable costs will always go up as part of making and selling items.


In a technical sense, contributors are also a variable cost (the cost to ship will be influenced by the weight, and their share of any profits is also usually considered a “cost”, but a “personnel cost”). However, for the purpose of modelling zine finances, we are able to ignore share of profits and assume that contributors will either be compensated at the minimum cost of book+shipping, or a maximum cost of full bundle+shipping (change this if your project's compensation model differs). Focus on the minimum compensation and the maximum compensation first to keep it easy. In-between compensations can be worked out later since they fall in the middle.


Therefore, we assume contributors are a fixed cost (at either book+shipping or full+shipping), and the only variable costs involved are in selling each individual item. Based on this assumption, the only” variable cost to produce each bundle is the sum of unit costs.


It is known to us that the more we produce, the cheaper things get, due to pricing break points. We mostly use the breakpoints 50, 100, 250, 500. Should your modelling reach these quantities, Production can enquire about them and tell you of the price. (The items which are most likely to drop in price most dramatically are the ones with a set-up fee and a low unit cost, as it means they are not as beholden to material cost. Review the table in Production.)

...There is a very quick and dirty way to calculate the breakeven that lets you ignore the last 5 paragraphs. It is to commit to producing a minimum number of books (e.g. 100) and treating the cost of that number as a fixed cost. So long as your breakeven sums out to under 100, everything past 100 will all be profits anyway. So you can just calculate the breakeven number based on costs at 100.


Why 100? Mods and contributors add up to about 35-50. Sell 40-60 copies, then sell the remaining amount during after sales. It’s about 100.


Caveat 1: If you sell less than the planned 60 after pre-orders have ended, ensure you re-calculate all finances.

Caveat 2: By using this method, it is easy to accidentally set the sales price too high. Keep an eye on the pricing to make sure it’s reasonable!

Anyway. To do it properly, the profit of each shop offering is:


(Sales price) x (Payment processor fee adjustment) - (Variable cost for item)


We use 0.92 as the payment processor fee adjustment*, and will multiply the individual cost of goods by 1 to 1.15 depending on expected volatility. For instance, eco-friendly packaging has gone up in price in 2020 by about 3%-5% due to less supply of raw materials, and at time of writing, there is still a shortage of PLA, which is a type of biodegradable plastic used for clear bags. Books are made of much paper, which means if the price of paper goes up a little bit (as it also has during COVID), there is a multiplicative ripple across the rest of the price. Some printers have already passed cost increases on to the customer @ June 2021.

PayPal increased the fee slightly as well in 2021. Stripe is marginally cheaper. We still recommend using a combination of both.


* this number comes from getting a bunch of our past sales and averaging the money. Can also use 0.915 if you like.

Another factor that contributes to volatility is exchange rates.

The exchange rate is also a supply and demand relationship. Let’s talk about USD-CNY. More demand for US goods would mean that there is more demand for USD, which the goods are paid in. Therefore USD-CNY would go up, as 1 USD is worth more CNY. However, at the current time, there is more demand for Chinese goods. Therefore the US is demanding more Chinese Yuan so they can buy Chinese goods. As 1 CNY is worth more US money now than it was before the pandemic, goods from China are now more expensive than they were pre-pandemic.


So we can now calculate the breakeven by calculating the average profit, which is calculated by averaging the profit from all offerings in the shop. We know the profit of each offering in the shop because we know how much production for each item is going to cost.

Stretch goals

Now it is getting interesting. How to calculate stretch goals?


There is a dirty way to do it, which is to include the stretch goal in the variable cost of the item. Take advantage of the fact that anything multiplied by zero equals zero, take the cost of your book, and add something like the following:


= (Book unit cost) + 3*H1


If H1 is a cell containing a 0, then there are no stretch goals. But if H1 contains a ‘1’, now your breakeven number will change. Observe the breakeven number, round it up to the next ‘nice’ number (e.g. if it's 71, make it 75), and you have a $3 budget for stretch goals as part of every book (along with a bit more extra profit).


And you can add these ad nauseum.


= (Book unit cost) + 3*H1 + 2*H2 ... etc.


And can use the same approach for other things as well.

Make it accessible to your other mods with checkboxes! (via Ray)

Napkin math

Ok so you just want napkin math numbers for because maybe you are not the finance mod, you just want quick numbers and you are running an average 2021 fanzine.


In USD:

  • Each contributor is $20 cost for an A5/Half-letter zine, or $25 for A4/Letter zine (Book + Shipping)

  • Profit is about $18 per sale *** Number has been adjusted on January 2022 due to increases in overall production costs at the end of 2021 ***

  • Pick one equation:

(Breakeven) = [(Number of contributors) x (Individual contributor cost) + 500)] / (Profit per sale)

or

(Number of contributors) = [(Profit per sale) x (Desired breakeven number) - 500] / (Individual contributor cost)


Notes:

  • The 500 is the reduced simplification of a series of complicated assumptions.

  • If you are doing a DIY zine, don't include the 500 and change profit per sale to about $10 - $15.

  • If you are expecting import taxes, use 600 (<10% tax) or 700 (11-20% tax) instead of 500.


We have testedthese numbers for zines based in a few different countries. For non-US countries slap extra 10-15% to the individual contributor cost if you sell in USD.


Being napkin math, this is dirty by default. Take as approximations only. We do not pretend these are an accurate measure of the specifics surrounding your project.


Disclaimer: This is extremely very dirty. Please use as feasibility estimates only.

Safety net

Before you get more advanced, please understand ‘why’ the dirty tricks work, and ‘what’ any caveats represent, especially if you rely on them. The more approximations and assumptions that go into your model, the more risks you agree to accept. Refer the ‘Managing Risk’ section of the guide.


Particularly for charity zines, it is advisable to also budget for a safety net, or a “minimum payment”, to ensure your project can satisfy the original objective. Seeing a charity zine provide full contributor bundles only to end up donating less than $100 is a little disheartening for buyers who purchased because of the cause, as that is a small handful of copies sold. By having a minimum donation included in the break even calculation, that’s nice.

Distributing profits

If you are doing a 100% charity zine, it is easy - send to the charity.

  • Before doing so, can see if the charity is listed in PayPal’s charitable giving page as PayPal will then take on all the fees. More money to the cause is good.


If distributing between contributors, it can be weighted or % split.

  • Weighted can be in pieces or pages.

  • % split can be equal % between contributors and mods.

  • % can also be mods taking an equal split of a set % (e.g. 20%) and contributors having an equal split of a set % (e.g. 80%).

  • There can be a combination of all of the above.


We have also seen upfront payments, commission-like ($X amount per piece paid on delivery), and breakeven zines, which instead turn all profits back into goods for buyers. P4P (Pay for production) zines are a bit different to breakeven zines; the former is listed at close to production cost while the latter allows for a deliberate profit margin with the intent of producing more (perhaps undecided) goods and/or upgrades later.

Good practice

  • If using Stripe, have the account holder create a separate bank account.

    • This will help to separate finances and save trouble later down the line, should your zine be audited.

  • If using PayPal, make the PayPal account at least one month before preorders.

    • Ideally 6 weeks, but 2 weeks is ok.

    • Verify all info and link as many accounts as possible. (Link the bank account from Stripe.)

    • Can ring up PayPal to confirm the account status is good to accept money.

  • If you are sharing card details, use a password manager.

  • Record all transactions. Screenshot and save receipts as you go, it will save auditing trouble.

  • You don’t necessarily need a balance sheet, but it is good to have one if you surpass $15k in moneys.

  • If / When paying contributors, put aside a bit of money to cover PayPal transaction fees on their behalf. They will then all receive the same amount.

“Auditors? What auditors?”

If your zine goes bad, contributors will try to audit the zine. Arguing with them never goes anywhere, why not just have some nominated contributor representatives privately receive all receipts and bank statements with personal information redacted, let them do their thing instead of speculating. Anyway, even if not, it’s good practice to keep all transactions together. Put it on your zine resume that you do this? Dunno.

Horrible technical problems

  • PayPal money holds tend to come in two types: temporary and not-so-temporary.

    • If you receive a hold email during early in preorders, we suggest waiting 2-3 weeks to see if it clears.

    • If it does not clear, you will need to contact PayPal support.

  • Be mindful of credit limits when ordering and paying for products. In the current COVID-19 situation, it could take weeks to clear.

    • It is possible to let your supplier know to modify the invoice to help with credit limits.

    • At this point you might as well check the bank to do a money transfer. A credit card fee of 3% on a $5000 transaction is $150...

Other

  • A zine does not necessarily have to wait for preorders to start ordering samples. In fact Marketing might decide it wants samples before preorders.

    • If reimbursements are needed, ensure to track them properly.

  • PayPal will hold incoming money in USD, however Stripe will not. Stripe will convert all incoming USD into the currency of the bank account.

  • If you must rely on USD and do not have a US bank account, you may have to stick with PayPal only.

    • For suppliers which do not accept PayPal, you can try to use a low exchange rate credit or debit card before running reimbursements.

    • I use a “travel” credit card from my bank, but also have a “borderless” debit card which has a referral program for free credit if you want my referral code

  • I am not an accountant and will not offer tax advice. But there are plenty of helpful people in zine making Discords (try Zine Town or Mod Event Network) who will probably help to answer how they do taxes.

  • Don't forget to add sales tax to your quotes if you are in a place like the US and sales tax is added on top!

Additional material

Visit Production for our breakdown for how much things would (relatively) cost in proportion to number of units.


Luna Chai's Finances Resource

Finance Mod Finance Formulas by Spy

More guides for people who are stuck with numbers

How to Suck Less at being a finance mod by @iwantcandy2_ - breaks down everything a finance mod does

The Basics of Finance and Production by @charlsteas - has some formulas and examples of how to calculate prices

Budgeting guide by Slumber - covers controlling costs, revenue generation, decision making advice, and has a cost projection template

Case Studies

GIRL SCOUTZ RULE (DIY fanzine, 2021)


- send in a link if you have a zine breakdown not listed here!