The Finance Mod Guide
Update notes for June 2022: Zine finances has gotten more complicated because of taxes and fees and cost increases and other things.
The approach of this page is to lump some elements of finances into "advanced" finances. For first time finance mods, just focus on as much as you can until you feel more confident. It's ok to make assumptions, and it can be normal to feel anxious. The vast majority of problems can be solved by planning buffer money in advance.
These days, there are a lot of people who can check over your work if you would like more confidence!
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 when introducing more complicated concepts.
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.
Put this one in "Total costs" in the orange equation.
Variable costs are costs that change depending on the number of goods being made. This will be the price to purchase books and merchandise, or your Cost of Goods Sold. Total variable costs will always go up as part of making and selling items, but, the per unit cost will go down.
Because the orange equation uses "profit per bundle", this already assumes we took the total unit costs into account.
In a technical sense, contributors are 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.
Add the contributors cost to the "Total costs" in the orange equation and watch how the required number changes..
Later in the guide there is: (1) a way to estimate roughly how much you might need to put aside and (2) suggestions on how to manage if you are unable to meet this.
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 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.)
In summary, what numbers to put in "Total costs"?
Use the following as a base:
Expenses (e.g. Any fees from a shop service, equipment)
Cost to ship from your suppliers to your shipping mod (if not put into the unit cost)
Packaging costs (if not put into the unit cost)
Buffer money (if using an overall buffer here. You can also put a buffer into unit cost)
Note, buffers come with a risk of accidentally overpricing bundles. See stretch goal calculation method #2 for more info.
Then your breakevens are:
To deliver the minimum product: Identify if there are any minimums, e.g. MINIMUM 25 books must be printed. Put this total cost into "total costs" and apply the orange equation. *** Remember to take out the book cost from the unit costs or you will count it twice!
To deliver contributors minimum compensation: Assuming book+shipping is minimum compensation, add (contributors+mods) x (book unit cost) x (average shipping cost) to "total costs" in the orange equation.
To deliver contributors maximum compensation: Add (contributors+mods) x (full bundle unit cost) x (average shipping cost) to "total costs" in the orange equation.
Note, you can optionally subtract the shipping cost to the shipping mod, since they already have the product.
Note 2, add any free copies into the number for "contributors+mods".
...There is a very quick and dirty way to calculate the breakeven that lets you ignore a lot of the details. 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 target number of sales 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.
There's no reason your item cost has to be exactly the cost which was given to you via quote.
After all, the spreadsheet you are making is simply a planning tool to help you understand how the money will look like. In other words, it's making a budget for each item.
That is why you can plan for risk using a volatility multiplier when budgeting unit cost, OR, you can use a buffer i.e. add a fixed amount per item.
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.
June 2022 update: There is a slight reversing of this due to the current economy in China. Also, China is simply being used as an example. There's more manufacturers in the world and you can check the exchange rates accordingly as a part of your plans.
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.
Different finance mods will use different ways to find average profit. Some use a weighted average, of assuming a sales ratio of 40% zine only, 40% full bundle, and 20% average of all other bundles.
Add-ons and merch à la carte:
From a math side, these can be considered as tips/extra profits.
One of our zines made all digital sales (including digital add-ons) guaranteed to charity.
The maths was done by ignoring all digital items and add-ons. (= just treat as extra money)
Actually, in practice, add-ons and a la carte options are more closer to marketing questions. Factors such as high shipping, too many options, and/or preferring to buy an a la carte option instead of a bundle - all of these affect the adoption rate.
After understanding it might vary, you can add it to finances by assuming something like a 25-50%.
There is more on what Finance can offer in pricing bundles, contribute to other marketing factors, etc, later on this page.
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 your modelling accessible to other mods with checkboxes! (via Ray)
The long stretch goals explanation (intermediate finances)
Stretch goals is a whole topic that can deserve its own page, because it's so invariably linked to marketing, production, so many other areas. It's a philosophical question, which is why this guide skims it.
What makes a good stretch goal?
From a purely finance perspective, good stretch goals are items which are at optimal cost for the stretch goal breakeven number. (See "Deciding what to produce" in Production.)
From a marketing/social media side, the stretch goal is something which gives you more sales and can let you keep socials active with less trouble!!
There are three main ways to calculate stretch goal costs, in order of easiest to hardest. They can be mixed and matched! (Just consider how you might organise your spreadsheet )
Include in the base cost
This method tends to be used for "fake" stretch goals. A low-cost add-on or upgrade which can be part of the base item cost. An example could be for foil prints. Perhaps the prints were always intended to be foiled, but for marketing purposes, the "foil upgrade!" is one of some "unlockable" items in the list.
Pros: No new calculations are required.
Cons: Base breakeven cost is higher, bundles might be priced more expensively than they need to be.
Recommended for: Stretch goals at 60 and below (for the same reasons as the quick and dirty way to calculate breakeven)
Over-estimation
This method is the one written as "the dirty method", where the stretch goal cost is directly added to the base cost. It is the easiest way to calculate stretch goals and the lowest risk. This is because, at scale, there is already a cost buffer built into what you are producing (this will be explained in #3).
Over-estimation is also the mechanism behind all the previous advice in this guide til here. Definitely try to understand the compounding effect it has when pricing items.
Pros: Allows for more choices in items. Lower risk due to included buffer.
Cons: Might not reach the goals. Required unlock amounts will be higher than they need to be. Might accidentally price too high due to multiple layers of unknown buffers.
Recommended for: Larger/expensive stretch goal items (at this point you are funding new merchandise, rather than slipping something in)
Be mindful about overall package weight. Larger stretch goal items will mean you will either need to charge a higher amount of base shipping or you will be paying the extra shipping cost!
Calculating the difference of production costs
It is known to that the more we produce, the cheaper things get, due to pricing break points. The differences in cost can be substantial for items with high set-up cost (for example, books) and this difference can be used as extra funds to produce stretch goal items with. As a specific example, say that we have an item which is $7/ea @ 50 copies and $5.50/ea @ 100 copies. Thus, at 100 copies, there is $1.50 extra which can be put towards funding stretch goals.
Method #2 would have continued to assume that the book still costs $7 at 100 copies before adding the stretch goal item's cost on top. Then, the $1.50 is inherently included as a buffer without extra work involved.
Pros: More accurate calculation of stretch goals leads to less costs behind calculating bundles, i.e., bundles can be offered more cheaply in the shop.
Cons: Lack of buffer can be more subject to fluctuations in production cost. Mitigate this by consciously planning known buffers, i.e., do it all intentionally.
Recommended for: Accurate break-even numbers and full awareness of how much money is required for the project
How to plan the buffers yourself? They will most likely put in the fixed and/ or variable costs.
Maybe use dedicated cells if mixing methods. Otherwise, the sheet can get hard to read...
Napkin math
Last revised: August 2022
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 $20 per sale
Pick one equation:
(Breakeven) = [(Number of contributors) x (Individual contributor cost) + 200)] / (Profit per sale)
or
(Number of contributors) = [(Profit per sale) x (Desired breakeven number) - 200] / (Individual contributor cost)
Notes:
The 200 is the reduced simplification of a series of complicated assumptions.
If you are doing a DIY zine, don't include the 200 and change profit per sale to about $10 - $15.
If you are expecting import taxes, add 100 (<10% tax) or 200 (11-20% tax) to the 200.
Alibaba suppliers now charge import taxes.
We have “tested” these numbers for zines based in a few different countries. For non-US countries except the UK, slap extra 10-15% to the individual contributor cost if you sell in USD. (countries similar to the UK with cheap printing costs and cheap shipping costs can also avoid the extra %.)
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. (You can look up what a balance sheet is)
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...
Please be mindful that bank transfers can be harder to reverse than credit card transactions.
Chargebacks against suppliers would hurt them as much as a chargeback on you would hurt your project, and it can ruin your business relationship. This is a question of how much you trust your supplier to do the right thing by you.
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.
It appears there may be some exceptions to this in the Stripe documentation, if you are a non-US based project charging in USD, you can research it.
Non-US projects using USD: If you must rely on USD and do not have a US bank account, and you believe the marginally higher transaction fee on PayPal will offset the fact that some payments will go through Stripe's currency conversion, you may have to stick with PayPal only.
For projects with both Stripe and PayPal enabled, the usage split is about 50/50. (From a buyer's perspective, some countries don't accept PayPal or Stripe, some people prefer to pay with an existing PayPal balance, some people prefer Apple Pay (Stripe), some people like that Stripe can submit a credit card and doesn't have to reveal any extra information...)
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!
US-Based Projects and the 1099-K form
In 2021-2022, the threshold for the 1099-K form was lowered to $600. This is an automated form by the payment processors PayPal and Stripe to US citizens and has meant that zines which were previously using US bank accounts suddenly had more paperwork to do.
If this applies to you, you can search up artists guides for taxes. I personally recommend doing so; though taxes sound terrible, the smart finance mod understands if there might be any tax deductions and how to prepare for setting them up if there are some.
Advanced finances
Somewhere there is a joke about being able to tell who the finance mod is based on how many times the word "but" is said, and it's somewhat true.
"But of course you'll call finances easy if you're assuming zines are going to sell 100! What about small projects? Or complicated ones?"
If you're asking this question, you might already be a finance mod. (I'm sorry... I think I am funnier than I actually happen to be funny.)
Anyway. This part of the guide goes into some approaches to calculate for the specifics of your project.
"Small projects" is used here to describe projects with few people and/or sell about 20 copies or less.
"Complicated projects" is used here to describe those large projects which have items that require prototyping phases (e.g. plush toys, ita bags)
Finances tips for small scale projects
Costs must be very carefully allocated. Thought put to how production will be done is of most benefit here. These projects benefit most greatly from a mod cutting prints.
Offering print-at-home digital merch is a good way to provide value while reducing costs.
Reuse of artwork and assets is also beneficial. Such as prints of interior art, or using promo artwork as die-cut stickers (cheap, easy to ship) or buttons (cheap, slightly harder to ship).
Grouping up with another zine is of advantage, as the other zine can help to cover some more base costs.
Finances tips for complicated projects
There will be a greater fixed costs component because prototyping fees, and there is some planning that needs to be done with timelines.
The timelines might be longer than usual, potentially spanning multiple years. Be mindful of any tax deadlines.
These can also become heavier than expected, affecting shipping costs.
Pricing your bundles (or, More On Costs)
In theory, so long as you price higher than the cost, you will always eventually make back the money which was spent.
In practice, there is a few ways that are generally used. Merch sellers at Artist Alleys will tend to use a 3x rule, where the sale price is about 3x the unit cost; this allows for funds to cover the rest of the landing cost (the total cost of the product, including fees and customs, etc) and money to cover costs such as table cost, lunch, travel, cosplay, buying your friends' merches, ...
I think, because of how zines had replaced cons in 2020, zines have tended to follow this pricing. This is the most common method.
Breaking it down further.
For zines (in their most common form), assumptions are made that there is little or no operating expenses (rent, salary, equipment, etc) (aside from sending free copies to everyone, unless your zine does not guarantee free copies, meaning you are exempted from this). There might be some exceptions like buying an upgraded version of BigCartel or using zine funds to pay for a thermal printer. Ah, you might think the mod themselves should just buy the printer, since they'll end up keeping it. But what if this is because buying the printer+a roll of labels turned out to be cheaper than a stack of label sheets? And the original assumption would be that the mod wouldn't charge the zine for ink or toner costs, only the labels (materials) fee?
Welcome to Cost-Benefit Analysis.
Some methods people use for advantageous benefits are:
Pricing bundles lower to make them more appealing. (This will make it harder to give free copies to contributors if that is what you planned)
Pricing bundles bundles higher to make them look more exclusive, and/or raise more money for profits/charity.
Pricing bundles lower/higher to make your other bundles look cheaper/more valuable. (Apple is a fan of pricing in sets of 3's, you can research this famous marketing trick)
Pricing bundles to make it easier for the shipping mod. (Less sales means less to pack. Although it can be the same amount of work for the shipping mod, if everything allows customisations...)
"Moving around" pricing, such as making shipping $2 cheaper and bundles $2 more expensive. (Shops will sometimes do this to offer free shipping. If you end up with the too heavy bundles problem combined with this, it can feel like it hurts more than usual xP)
Or anything, really. Depends on the goals of your specific project. You don't even need to follow the 3x rule if you know that selling something with a smaller margin will increase the chance of selling another item with a larger margin.
Just make sure to price items higher than the (landing) cost.
Projecting Sales Requirements
There's one reliable indicator to project sales: looking at the performance of social posts. The very nature of these projects makes them reliant on social posts and word of mouth. The performance indicator which you are trying to ascertain is specifically "how many people are going to engage with the shop when I drop a link".
(On "gaming" the algorithms and such to get more traction, that is entirely a Marketing area.)
The percentage of those who visit the shop and then make a purchase is the conversion rate. Zines conversion rates will vary depending on the type of project, the theme, the fandom, if it is niche, etc. Generally speaking, niche zines will have a higher conversion rate, closer to 10%. The more well-known the fandom, the lower the conversion rate might be. (This also affects zines which have amazing graphics cause it's attracting people clicking out of curiosity, no intention to buy.)
The conversion rate doesn't matter, toss it in this formula:
(Target # of sales) / (Conversion rate - 0.5%) = (Approximate number of views to the shop needed to reach the target)
Notes:
This formula obviously works best if preorders have already opened, but to use this formula before you know the conversion rate, assume 9.5% for niche projects, 5.5% for general projects, 3.5% for projects that are popular (numbers are courtesy of @flux_fiction Twitter, we would be interested in hearing if other zines have similar performance!)
If you know the conversion rate, the subtraction of 0.5% accounts for repeated visitors and other junk
Yes, a longer preorders period will net more visitors and therefore more sales, but it must (must) be coupled with a social media posting plan to maintain momentum
Some more numbers are on this page under "observations". Basically, more people visiting the store makes it more likely to reach sales goals.
This is not as obvious as it sounds when you're one week into preorders and wondering where all your sales have gone!
Strategies if do not reach breakeven
Some things which can be done:
Pay it yourself -- If your breakeven is about $1400, and you have about $1000 from sales, the remaining $400 might be feasible. The above napkin math formulas can help estimate this in advance.
Fundraise more money -- e.g. tip jars, crowdfund production of items which were originally stretch goals
Change the compensation model -- this is where communication soft skills come handy (lots of tips in Project Fundamentals). Can also use polls.
Let contributors buy at a discount rather than production cost -- to help raise more money for charity and/or to help cover costs for people without the means to buy their own.
Refund everyone / cancel any number of physical items in the project.
Teaching others
Finance is a great role. The theory stuff on its own is very accessible and gives more of an understanding of how cash works. Everyone has different formulas, different ways of doing estimates. I learned from another finance mod that it's not hard to export a transaction history from PayPal as a spreadsheet, and use spreadsheet formulas to make it easy to find out percentages and how much is paid exactly in fees, even use it to filter between different BigCartel shops.
Sharing knowledge will help improve awareness of what it is known and help others come up with more ideas for their future projects!
It would be nice to see if more zines publish case studies at project closing.
Closing note
This has been a page of ideas for approaching the beast which is figuring out zine finances. This page gets the most hits, hence why it's been updated a lot.
There really are lots of other ways of doing this. For example, Multi-projects is no longer as unfeasible as it used to be. Sometimes it's beneficial to small projects on a small budget.
Finances can be summed up as, "how prepared are you?"
Find a perspective that makes sense to your project and choose what gives your stakeholders (mods, contributors, buyers) peace of mind.
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!