Yesterday I mentioned the concept of “pretend profits vs. true profits.” These are terms I made up to describe the discrepancy between how much money I thought I was making selling books vs. how little money I ended up making. (In reality, what we’re talking about is “net. vs. gross” income, but I like these terms better.)

When I first began selling copies of Commodork, Lulu.com (the company that printed my copies) ran a sale. By ordering 30 copies, I could get the price of each one down to $5. I sell paperback copies of my books for $15. That price gave me a profit of $10 per book.

A pretend profit, that is.

The very first place I sold paperback copies of Commodork was at 2006’s Oklahoma Video Game Expo in Tulsa, Oklahoma. I took all thirty copies of Commodork with me to Tulsa, and between friends and family, I sold about ten of them. Wahoo! At ten dollars profit per copy, that was a hundred bucks profit!

Of course, what I hadn’t figured in was any of my expenses. For starters, I drove my Chevy Avalance to and from the show. That’s approximately 220 miles, round trip. According to my notes gas was $2.75 a gallon that summer, so the drive itself cost me $40 in gas — plus I rented a hotel room, which cost me $80. That $100 sure went quick! In addition to those expenses I had a banner printed, bought a bunch of candy, a purchased a few items for a drawing. So sure, in pretend profits, I made $100. In true profits, I didn’t even break even.

The following month, I drove to Chicago and attended the Emergency Chicago Commodore Convention (ECCC) and sold books there, too. I sold another ten books! Another $100 in pretend profits! Let’s not count the $300 in gas, among other expenses.

My hardest lesson in this came when I began selling my eBooks through Amazon. At that time, Amazon kept 35% of the profits on any book that sold for $2.99 or more, and a whopping 70% for any book that sold for less than that. I originally priced my eBooks at $0.99 each. For each one I sold, Amazon kept 70 cents before sending the remaining 30 cents to PayPal. Unfortunately for me, PayPal had a 35 cent handling fee plus 3.5%. That meant they were going to charge me a total of 36 cents to transfer me my 30 cents in profit, which meant for each book sold I was going to lose six cents. Fortunately Amazon has a safeguard in place to prevent this from happening; instead, they only sent me my money after I sold two books. Each time I sold two books for a total of $2 (combined), Amazon kept $1.40, PayPal got $0.38, and I got $0.37. For the record, this is why I raised the price of my books to $2.99 — to specifically escape from this issue.

If you’re selling books (or anything for that matter) as a fun hobby, then “pretend profits” are fine. If you’re looking to make a living doing something, you may need to take a closer look at the “true profits.”