If you're a small publisher, landing a national distributor will seem like reaching the Promised Land. Your book will now be available in the national chains, independent bookstores, and giant wholesalers. You've MADE it! For many small publishers, however, landing a national distributor means that you're rolling the dice on a much higher level than ever before. The potential rewards are magnified tenfold, but so are the risks. You need to make sure you're ready for the leap. How do you fare in the following categories?

Product: Most distributors do not want publishers with fewer than ten titles, or at least plans for ten titles within a reasonable period of time. The set-up cost for them is just too high to make any money on a one-book publisher. They also want to know that you have a steady, though modest, publishing schedule and you will not suddenly go on hiatus for two seasons, leaving them without product to sell.

Printing: Distributors want to know that you are producing your books via offset printing, not digital, and they do not want to get involved with "on demand" titles. There is, to be honest, no good reason for this, other than needing a benchmark of quality to separate the sheep from the goats. As a general rule, distributors also don't want to deal with weird bindings - shipping, storage and packaging become that much more difficult and expensive. "No comb bindings" is another way for distributors to ensure that they are getting "real" books.

Print Quantity: If you are going to make the leap to the big-time, 500-copy print runs is not going to make it. No distributor wants to bust their butt selling your title into the accounts, then find out that you can't print to meet the demand. Be prepared for 2,000 - 5,000 copy initial printings.

Deadlines: Distributors have a firm schedule of when they expect you to have all your ducks in a row. For instance, a title that is going to be published in September 2007 might have the following schedule:

The best way to work a distributor's schedule is to figure out when books will be available and work backwards from there. This means that if it is May, and you still have not figured out the book's subtitle, you are either going to be late or you are going to pay extra fees to have your book's metadata (i.e., the "official" title information that is sent to accounts) corrected after the fact. Although it may be hard to believe, it is indeed true that it takes a large publisher 12-18 months to get the book from manuscript to retail floor. The initial sales meetings ("pre-sales") generally take place about ten months before the publishing season begins. So books for the Fall 2008 list will have their pre-sales as early as November 2007. By that time, you are expected to have a more-or-less final cover, as well as a good estimate of your first printing and a preliminary marketing plan.

Marketing: Any distributor worth his salt will ask to see a well-constructed and detailed marketing plan. While it is the distributor's job to sell your title into accounts, it is your job to convince the consumer to go to the bookstore and buy the book. Your marketing plan will include all your plans for author promotion, print advertising, media publicity, website and blog advertising, etc., as well as a budget to facilitate your marketing efforts. The distributor will be interested in knowing whether your author has a "platform", i.e., a pre-existing audience that is primed to purchase the title, once they know it is available.

Systems: Few distributors send printed reports anymore. You are expected to go on-line and pick up the reports from the distributor's website. While the reports have most of the detail you need to effectively manage your inventory and sales, they are often not the most user-friendly, and additional conversion and/or manipulation will be necessary to turn the reports into something normal people can understand. Further, the distributor may expect you to upload cover images, author photos, metadata, reviews etc. to their server. You may need to upgrade your systems in order to comply with the distributor's requirements.

Discounts: In the trade, bookstores generally get a 45-50% discount and wholesalers a 55-65% discount. This means that if your list price is $15, and you give a 55% discount, your actual amount received ("net") is $6.75. If you're used to selling copies for full price off your website, this can be quite a shock.

Distribution Fees: Distributors generally charge for their services one of two ways: either by taking a discount from the published price, or taking a percentage of net sales. For example: let's say you're selling a book that retails for $15. In the discount from published price model, if the distributor pays you 40% of the retail price your "net" on that book is $6. In the net sales fee model, assume the distributor gives a 50% discount to the bookstores, then takes 25% of "net" as their selling fee. So the distributor will take in $7.50 per book, and give you $5.625 per book (i.e., $7.5 less their 25% fee or $1.875). Either way, $6 or $5.625, that's a far cry from your $15 published price.

Returns: The bane of the publishing industry is returns. Based on a business model that harkens back to the Great Depression, bookstores that "buy" books may return them to the publisher for full credit with no penalty. Returns in the publishing industry typically run 30-35%. Many of the books that are returned are also damaged (usually with a torn cover) and cannot be resold unless they are refurbished first.

Extra Fees: In addition to the distribution fee, it is likely that there will other charges arising out of your distribution agreement. Among these charges could be: freight charges; returns processing fees; inventory storage fees; fees for credit checks, order processing and credit card processing; re-palletizing; special shipping cartons if your books are not standard size; and charges for data entry correction/computer time. These fees could add up to 5% of your net sales in additional to the distribution fee.

Cash Flow: The industry gives generous terms to its bookstore customers, usually 90 days net. To help their own cash flow, customers sometimes "pay" their bills by sending back massive returns (I'm sure we've all heard the horror stories) in order to claim credit against outstanding invoices. Your distributor is subject to this nightmare as well, and since they can't afford to pay you until they actually collect from their accounts, the cash flow is lousy. Typically, a distributor will pay you 90-150 days after the book is "sold", minus the current returns. Some distributors also hold a reserve against future returns. All in all, you can go months at a time without receiving any cash money from your distributor, even though you are selling books.

House Accounts: Your best bet for financial success is to have a stable of "house" accounts, which you will keep for yourself and not turn over to your distributor. (This will be the subject of some negotiation with the distributor, who may want to be your exclusive distributor for all accounts.) You will need to have a well-developed network of non-trade accounts, for two reasons: Special sales accounts tend to buy non-returnable, and to pay for shipments 30 days after delivery. Having at least some accounts that pay promptly will be essential to your cash flow. Second, many distributors do not have sales reps that really work the non-trade venues, so any sales in these areas will probably be the result of your sales efforts, not theirs. So why pay your distributor a fee for work you've done yourself? (See Why You Need a BackUp Warehouse.)

Capitalization: So, all in all, what are we looking at? We're looking at a situation where you are undergoing a second start-up, and you need to know that you have the capital to make it work. For instance, let's say you're going to start working with a distributor who charges a 25% distribution fee on net sales (or 10% of gross sales, whichever is greater), plus a 10% returns fee, holds a 20% reserve for returns, and pays you 120 days after the book is sold. You're going to print 3,000 trade paperback copies, at $1.75 apiece, of a book that retails for $15 and is sold at $7.50, a 50% discount. Look at your cash flow for a single title:

What this shows, is that while you do eventually receive the revenue for book sales, it doesn't come until nearly a year after you printed the books. You've received a total of $5,344, with $4,275 being held against future returns. And you are out of pocket $6,750 for plant and printing, so you haven't yet broken even on the book. Meanwhile, you are still paying your monthly operating expenses, paying pre-production expenses on upcoming titles, and printing your next list. Multiply this by 4 titles per season, and you can see the kind of capitalization you'll need to make the transition to national distribution.

By all means pursue that distributor you've been eyeing for the last two years. But pay attention to these keys to success when making the leap:
1) sufficient capital to get you through the cash-flow crunch
2) meticulous inventory management
3) a drop-dead marketing plan

Good luck!

Additional Articles

To learn more about book distribution, read What's the Difference Between a Distributor and a Wholesaler? For instructions on how to create a single-title Profit & Loss Estimate, see Five Steps to a Productive P&L.

Deirdre and Gary Smerillo are the owners and founders of Smerillo Associates, a consulting firm focusing on the business and financial needs of small and independent publishers. Based outside of New York City, they can be reached via .