Jed Wylie – Make Your Website Sell: Is Your Website Profitable?
Imagine hiring a taxi and just before the driver sets off he puts on a blindfold and says “don’t worry, I know roughly where I’m going”.
It’s never happened to me yet but I’m pretty sure I’d hire another taxi.
Now imagine setting up a website and never checking to see how it’s performing. Not even to see if it’s making money or heading in the right commercial direction. Without this information you would be blindfolding yourself as, crucially, you can’t improve what you don’t know. You may have the perfect moneymaking website or maybe you’ve invested thousands of pounds and it’s yet to earn its first sale? Either way you need to find out.
Measuring your website’s success may not sound earthshattering but it is absolutely central to understanding whether the money you have spent (or are spending) is generating you a sufficient return. Don’t forget, your website is, for the most part, just a sophisticated marketing tool and as with all marketing understanding past performance is the only way to underpinning future success.
Measuring can be as simple as asking your sales team to note down when a lead comes from the website or as complex as using web analytics but if you are just starting out then you only need the most basic information.
Let me walk you through some simple questions which will give you a step-by-step approach to working out your website’s profitability.
We get 100 enquiries a month
50 of them are from the website
25 website enquiries become customers
Our average order value is £100
Website turnover is £2500 (Q3 x Q4)
Our average profit on an order is 25% and, therefore, £25 (25% of Q4)
Profits are £625 (Q3 x Q6)
Annual website gross profit £7,500 (Q7 x 12)
Now if you really want to get fancy, work out how many times your customers buy from you during their time with you. So, let’s say your average customer spends initially £300 plus another £100 each year and stays with you for approximately 2.5 years. Therefore, their average lifetime value to you is £550 (£300 + (£100 x 2.5)). This is critical information because even if the cost of acquiring your customer were the same as the first sale it would still be profitable to continue the marketing because of their overall value to you during the next 2.5 years.
Well, I think that’s enough maths for one week!
As Harold Geneen said “It is much more difficult to measure non-performance than performance” so remember to keep your eyes open on your online journey.