When running a publishing project, one of the important questions you have to answer is what quantity of books you're going to print.
You need to produce enough books to meet demand, so knowing what kind of demand there is for the title is an important starting point. For established voices (whether an author or not) with an existing platform this is generally easier, as you can predict that perhaps 10% of their engaged followers will pick up a copy of the book, and you can plan from there. For an unknown author it's a little harder, as you possess no basis for sales projections.
If you're putting effort into promotion, then this is a good second measurement. While your author may not yet be well known, if you know you're putting advertising in front of 5,000 people or 50,000 people, and if you know something of their engagement patterns, then you can again predict a rough quantity to begin with.
As you produce higher quantities, the cost per-piece naturally goes down. The lower the print cost, the higher the margin left over for profits, so taking on a measure of risk and printing more books is often a very enticing proposition. Built into this factoring of costs and profit margin is the sale price of the book (and subsequently the wholesale price of the book), and any other extraneous costs you have to recoup as the publisher (or self-publisher). Here's how the project calculations worked for us when we printed The Invitation:
Admin, ghostwriting, editing, cover design, interior layout, ebook layout = $4540
Print production (2000 copies, 72 pages) = $2408
That means we as the publisher need to recoup $6948 in real costs on this book, before we've even spent anything on marketing or publicity. A small book like The Invitation sells for $7, which means retail stores will expect to buy it for $4.20 and distributors (who supply the stores) will expect it for perhaps $2.50.
Based on the author's existing platform, we can expect to sell 5000 copies within a couple of years. 5000 copies * $2.50 (income from sales to distributors) equals $12,500 gross income. We'll subtract from that income the $6948 in costs we incurred, leaving us with $5552. We've only actually paid for the printing of 2000 books so far though, so we need to remove another $2900 or so for another 3000 books, and we're left with $1940 NET profit. That amount will then be split between the publisher and the author according to their royalty agreement. All our authors earn at least 50% royalties. As you can see, there's actually not a lot of money on offer here, not while the retail price is so low ($7) and such a high cost was incurred in the writing of the book.
In the above, we projected to print 5000 copies, but we only actually printed 2000 to begin with since it was our first book project. If we had printed the entire run of 5000 copies in one shot, then the total print production cost would have been around $3600. Notice that this is only incrementally more than the $2400 paid for 2000 copies, or the $2900 we could pay for 3000 copies. If we had gone with 5000 initially, the NET profit would be closer to $4360, a significantly better take.
But... sometimes books don't sell and you're left with a huge pile of pulp. And sometimes you miss an embarrassing typo, meaning... you are left with a huge pile of pulp. Sometimes you don't have enough capital to outlay for the larger quantity, even though it would mean higher profits. All of these considerations have to go into your decision on how many books you're going to print. All our Catch The Fire Books inventory is stored in a warehouse full of countless boxes of mostly useless, unsalable PAL DVDs (manufactured by a former administration) that serve as a constant reminder to us: only print what you will certainly sell. In fact, print less than that. Better to have smaller profits that are all but certain, than to have a room full of pulp.
The digital printing revolution has given publishers and authors another powerful option in this discussion, which is print-on-demand. Instead of relying on a large offset press to print books in large quantities, modern digital presses can spit fully bound books out of the end of what looks like a large office copier. And you can print as few as 1 copy if you like. The trade-off is in cost per piece. A single unit of The Invitation (when offset printed in quantities of 2000) costs us $1.14. A single unit of the same book when done print-on-demand costs $2.80, so your margin for recovering your costs and making profit is much less. Still, this can be very useful to have as an added option, especially since you can often find POD printers overseas, allowing you to print locally rather than ship vast quantities around the world. (Believe it or not though, sometimes it is actually cheaper to print larger quantities and ship, instead of print locally.)
We are almost at the stage where all of our titles are available print-on-demand as well as in traditional offset print format, so we can leverage the flexibility of one with the price competitiveness of the other, whenever we need to. There's no reason really why not, when POD printers like Lightning Source or Create Space are so easy to use.