The only honest answer to this question is "it depends". What stage you are at in your writing, your goals, your strengths and weaknesses as a writer are all factors to consider. And it could be said there is a difference between "needing" an editor and "benefitting from" an editor. The former is often true, but the latter is almost always true.
For Self-Publishers:
If you are considering the challenging road of self-publishing, the benefits of a competent professional edit are innumerable. Beta readers are invaluable, unsung heroes, but they don't offer the same level of comprehensive feedback an editor can, nor the expertise in language, grammar, and punctuation. Editors identify the things no one else thinks they notice, the things that put readers off, even if they don't know why.
Self-publishing is hard, and you may find yourself fighting through a competitive, oversaturated market. All the time and money spent on promotion and design won't mean much if the text itself doesn't sing with professionalism. You don't just want to gain a reader; you want readers so delighted they recommend your book to friends, colleagues, book clubs. Your editor should be a trusted partner who respects your voice and vision, and who can give your manuscript the care and polish it deserves to rise above the rest.
For those pursuing traditional publishing:
You may have heard that if your manuscript is picked up by a publisher, they will take care of the edit, so doing so yourself is a waste of time and money. While true, there are still several reasons why you might choose to hire an editor yourself before querying your manuscript.
You want developmental or substantive editing I'm going to repeat myself a bit here: beta readers are invaluable, unsung heroes, but they don't offer the same level of comprehensive feedback an editor can. When you're caught in the messy work of revising a first (or second, third, or fourth) draft, a good editor is like a good therapist: they don't give you the answers, but they can guide you towards the answers you already have in yourself.
You are trying to get an agent Many publishers won't even consider a manuscript unless there's a literary agent involved. Agents are sent hundreds of manuscripts each year, and while they can look past poor formatting or punctuation to find gold, you want to make it as easy as possible for them to see the value of your story. A professional editor will highlight the things agents are looking for and minimize the things they are not.
You want to stand out from the pack Consider this from Kathy Belden, editorial director at Simon and Shuster: "My first thoughts are about the language. The ideal: language that captures my attention from the first sentence, the first paragraph. It is rare for me to change my mind after this early impression. If the language isn't there—I'm not there". -from The Business of Writing These are sobering words indeed. Notice that she doesn't mention story, plot, character, genre, or "hook"; no, it is the language that first captures the eye, that intrigues and encourages further investigation. This is true for readers as well as publishers. It matters little if a story has all the elements of a bestseller if they are not expressed well in the language. At our core, editors are language professionals. We understand the little mechanics that make sentence, paragraph, and chapter work together, so all other story elements are showcased to their fullest.
You want an editor that has only your interests in mind It's no secret that publishers have been shrinking their pool of in-house editors, often leaving them overworked with multiple projects. If your manuscript is picked up but requires extensive edits, they will be done to the publisher's standard, which may or may not match your own. By hiring an editor yourself, you can identify and fix problem areas before they get to that stage, when you still have final say. Plus, you'll be better prepared for any edits the publisher suggests, having been through the process already.
An editor can offer invaluable benefits regardless of the publishing route you choose. The path of authorship is never easy—make sure you are choosing partners along the way that will understand and support your goals, whatever they may be.
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