If you can’t measure it, you’ll have a hard time improving it. What are you trying to achieve?
This is a simple question that often seems to be too hard to answer. Most businesses and entrepreneurs I have worked with in the last 15 year never really know what to say, except: More leads. More sales. More traffic. I’ve only ever had a handful of clients who knew exactly how much more they wanted and needed — because they had set their goals and targets.
If you do not know how much you’re currently generating form your online presence, you’ll never know how much you need to get what you want. If you can’t measure it, you can’t improve it!
Alright — here are a few questions you can ask yourself to figure out what would be an achievable and realistic goal to set. Relax, there are no wrong answers here.
- How much money do I need to generate per month to keep the business running. (Operating capital)
- How much money would I like to take home, after all expenses are paid for. (Profit)
- How much would I like to re-invest in the business, so I can build a buffer with which I can expand, grow and attract more business.(Investments)
- How much money would I need to keep the business running for at least 6 months, at its current capacity, if no new revenue was coming in.
If you answer these questions, you should have a reasonable idea of how much money you need to generate. One rule of thumb I have is to never accept a project that isn’t at least 30% profitable.
Once you have a ballpark figure — you’ll need to compare it to the current numbers. How much revenue are you generating? How much of it is profit? (depending if you account for your wages/drawings as profit or not). The difference between the two numbers is the gap that you’ll need to bridge in order to meet your goal! Take a minute to work this out of a piece of paper or excel spreadsheet. It is important to have this number handy so you can really tailor make your digital strategy.
Where are you at? Let’s see how we can close the gap to meet your goal.
If we look at this in a simple way — all we need is to figure out how much traffic you’re currently generating through various channels, see what the conversion rates are and adjust the input of traffic and improve the percentage of conversions. There are other ways, such as increasing your fees, margins and customer lifetime value, but in this guide we will just cover the bare numbers.
When I say channels, I break them down in the following categories:
- Organic Traffic (Search engines)
- Referral Traffic (Via links on other websites, forums, etc)
- Direct Traffic (Via browser bookmarks, type-in visitors)
- Paid Traffic (Google AdWords, Bing Ads, etc)
- Social Media
Let’s say you need the online business to generate at least $500K per year, and you’re currently only doing $250K — 50% short of the goal we’ve previously established.
We simply look at the traffic per channel and conversion rate per channel. For example, let’s say you’re getting 1000 visitors per month through Organic Traffic. 5% of those convert into a sale, which on average is worth $500.
This means you’re doing $25K per month or $300K per year in sales on your current Organic Traffic channel. If you were to either double the traffic to 2000 per month, OR increase your conversion rate to 10% — you’d smash the $500K annual goal by generating $600K per year on that channel alone.
So start defining your “MORE” and give yourself a chance to hit these goals, instead of always feeling like you’re chasing your tail and let FOMO rule your business.