There are five good business reasons to use a pen name. At the time I wrote this I believed the following to be true:* I am likely to write under multiple names for the first two, and it is possible that at some point I will be forced into the third, though I hope not.
Overpublishing (see H&F III below). You produce more novels than the market, in the form of your editor(s) are willing to let you publish. This can be because you’ve got a big back catalog that shouldn’t all be released at once, or because you’re simply a fast writer—more than two books a year. I definitely fall into category one, and I’m hoping to fall into two as well once I can get loose of some non-writing commitments and gear up to writing at the pace I think I can comfortably achieve.
And now, a digression (are you surprised? Didn’t think so). If you can write more than two books a year without a significant deterioration in the quality of your work, your chance for long term financial success as a writer is significantly increased. This is because, A, you get paid more on simple linear basis and it helps build a dedicated readership if you produce reliably and, B, a good part of writing income is a non-linear phenomena. Book advances can run anywhere from ~5,000 dollars (a typical advance for a new writer) to ~3-4,000,000-deep fantasyland for almost everyone but the tip-top sellers in the fiction markets. Advances are based on previous sales which are wildly non-linear. 20,000-50,000 copies is pretty good for a first book, and what a lot of writers sell each time out. However, every so often, for reasons that no one seems to understand, a book will hit the sweet spot in the reading public’s mind and take off like a rocket. It is not unlike winning the lottery, though the returns are generally lower in comparison to the work involved. And, of course, the more books you write and sell, the more chances you have to hit big.
Multiple Unrelated Genres or Styles. Say you write sweet sappy romances, dark vicious serial killer murder mysteries, and oblique literary fantasy. The readership overlap for these is not going to be huge, and if a reader of one of these stumbles on another by dint of looking your name up and ordering from the other genre, the cognitive dissonance may cause them to have trouble reading future books from the you they liked before. In my case, I’ve written high-fantasy farce, adventure fantasy with a humorous element, dark adventure fantasy, urban noir fantasy, and dark to very dark YA fantasy. If you add in short stories and partials, I’ve also written space opera, hard sf, psychological and fantastic horror, light murder mystery, romance and a variety of poetry. I guarantee that someone going from my farcical FimbulDinner short (WT #339) to The Black School’s ultra-dark WW II YA without any warning is going to feel a certain amount of whiplash.
Dead Name. Because of the way sales are now tracked and books bought, an author, even a multiple-award-winning author with decent if not great sales can end up in a position where the editor who loves their work can’t buy books from them under that name anymore. This leads to one of two choices, quit writing or use a new name. For people like me, who can’t not write, the choice is an easy one. It’s even one I’ve consciously planned for and, though some writers have trouble with the idea of writing under a name other than their own, I don’t. One of the reasons I’m seriously considering starting a pen name sooner rather than later is to try to establish multiple parallel careers from the get-go. For writers who choose this route there is a decision to be made in concert with their editor, which is: how open should I be about being multiple people? There are writers who use multiple pen names that everyone who wants to make even a modicum of effort can dig out. There are also writers who have pen names that are so secret that when the writer makes an appearance they do so under that name with no hint to anyone that they exist as any other person. And, of course, there are writers who fall everywhere in between.
Necessary Anonymity. This can come from having a dead name, mentioned immediately above, or from having a non-writing career that is incompatible with your literary work. For example, an author who writer fetish erotica as second career or hobby while working with children in the day job. This is one of those cases, where no matter how good and responsible the writer is in their day job, there is going to be a certain percentage of parents who would object violently to the idea.
Unpronounceable/Hard to Remember/Too Long for a Book Spine. I think this one is self-explanatory.
Other reasons. There are many other reasons why someone might choose to write under a pen name, but I think I’ve covered the bases for business choices. I’d like to note also that I’ve heard from a couple of editors that they prefer where possible to have writers write under their own names, and are somewhat suspicious of writers who “don’t want to put their name to their work.” Also, anyone submitting work under a pen name must include their real name with the submission. Names and pen names are authorial tools, use them well. And that’s all for now.
*These days, I am much less convinced that I would ever write under a pen name. The field has changed radically with the growth of indy publishing—writing under a pen name makes much less sense in a world where your career is much less dependent on finding a good publisher than it is on making sure your readers can follow your career wherever it goes.