How many books sold warrants a sequel?

My second and third books are priced higher and make more money than the first, though not by much now because I raised the price to $3.99.  I have about a 35% conversion rate from those that buy the first book to those that buy the second.  Almost everyone who buys the second, buys the third.  I've sold about 500 copies of Clutch since October.  But if I didn't have the second and third books out already, that's about 250 books I would've never sold in that period of time.  It makes a huge difference in your bottom line, especially if you price them higher. 

If I had waited to see if people would like Clutch I'd probably never write the sequel, let alone finish the five book series.  It's a weird book and really, it's not the best one of the series.  Pretty much everyone who reviews all three, says so and I agree.  My fourth book is written, book 4.5 is a novella and I finished that tonight both are on track for publication before June, and this series will be complete with book five this fall. 

That means if a reader picks up the first book and enjoys the series, I'm almost guaranteed to keep that reader for five more sales (including the novella which will be priced at $2.99).  Meanwhile, the next series on on track and it's like a continuous cycle that's pretty much self-sustaining.

I say write the sequel if it's a story you want to tell.  You will find fans, how many isn't guaranteed - but that's never guaranteed. 

I agree with those who say it's more a matter of whether you have a story to tell, not how many people have bought it. That being said, at some point there are diminishing returns for adding more books to a series.

Using Dalya's 1000 figure...let's say you sell 1000 copies of the first book, and maybe 350 copies of the second. I understand that sell-through tends to be higher from the 2nd book to the 3rd book than it is from the 1st to 2nd book, so let's then say that you had a 35% sell-though at first (JanneCo's conversion rate), but then it becomes a 60% sell-through (once people are invested enough to read the second book they tend to invest themselves in the series). But that's 60% of the 350, or 210. Even if there's a 75% conversion rate for the 4th, then that's only 157 people buying the 4th.

Anyway, my point is that by all means you should write the 2nd book if you feel you have more of a story to tell. (But not simply for the sake of having a series.) And you'll likely trigger a resurgence of sales of the 1st book once there's a second book simply because some people don't bother with books until they see there's a series. In fact, you'll likely see an even great resurgence of sales of the 1st book (and 2nd book) once the 3rd book is out, because some people don't want to bother with a series until there's at least 3 so they can marathon them.

But at that point you should definitely ask yourself if it's worth it to continue to add to the franchise. If sales warrant it (and by that, I mean you're making back your investment and then earning a profit), then go for it as long as you're still enjoying it. But if you're not seeing the series take off by the 3rd book then it might not ever take off, in which case continuing down that road might not be the best use of your time...unless you truly want to continue with this series.

I can't speak to how you should decide whether or not a sequel is prudent, but I can tell you how I decide to continue a series. It's really not an artistic decision for me at this point; it's a business decision. I'm the sole income earner in my household. I just can't afford to prioritize my personal (totally arbitrary) concept of artistic integrity.

So here are a few of the factors I consider:

I know about how much it costs for me to produce a novel. I also know how much money I need to make off of all of my books combined in a month to "break even" on life and business expenses. So, generally, my new book needs to not only sell enough to cover its own production costs, but improve the sales on older titles, so that I hit this magical break even number.

I know how many people are on my mailing list and Facebook, who provide the majority of my initial sales, and I know what % of increase I've seen on those since the last time I released a title. So I can guesstimate from those numbers how much I will sell on a new release in one week (which varies between individual series, and is lower for new projects unrelated to existing series). I also keep track of conversion stats for release announcements, so I can always look back to that. For instance, 50% of people who click on the link in the email will buy it immediately; 70% of people who click on the link on Facebook will buy it immediately. And I have historical numbers on clicks as well.

I keep track of sell-through on my series, so I can also project how much a new book in that series will sell within a certain time frame. My next release is in my Cain Chronicles series, and this is what sell-through looks like on that:

Episode 1 > 2: 79%
Episode 2 > 3: 99%
Episode 3 > 4: 99%

My mailing list has increased 24% since the last episode came out. I could guess that I'll sell about 24% more of episode 5 than episode 4, in the first week. But in the slightly longer term, I'd say sales of episode 5 will still be somewhere around 99% of the sales of episode 4 after 6 weeks, if all factors were to remain consistent. It won't be consistent, though--the price will be higher, since episode 5 is actually a full-length book; it's been a longer period of time since I released the last one (two months versus two weeks); my overall reach has grown significantly since episode 4 came out. It does give me a number to work off of, though, and I can project units sold and earnings from there.

All of this also influences the price I choose for a new release, and estimates on royalties earned. By comparing statistics on my two separate series branches--YA/NA PNR series versus adult UF series--I can plan out the timing of releases, as well as what releases I need to make, so that I'm always hitting that monthly "magic number." Or at least, doing my darndest. This is all pretty much guesswork, in the end. But it's very educated guesswork!

Oh, but just to prove myself a hypocrite...my UF series only sells about 1/3 of what my YA/NA books do. I keep writing those anyway, even though they're longer and more energy-intensive. Why? Because they're fun! I love my UF books. As long as I'm still operating within reasonable profit margins (I pretty much expect my UF books to earn 300% of money invested in three months, whereas my other books do some other number I don't feel like calculating, but it's better), I'll keep writing the less-profitable stuff that I love.

I am really tired, so I hope that post made some semblance of sense.