How to Increase Sales in Ecommerce: Running Your Numbers

Successful entrepreneurs will tell you that you need to know your numbers.

If you don’t know what you’re doing in this area, you should get it sorted out immediately. It will absolutely transform the way you run your business. If need be, get advice from a paid professional or mentor who understands financials.

If you’re more of a creative or designer, who doesn’t have a lot of experience with numbers, set your fear aside and just commit to figuring it out. There is no difficult math involved – it’s all addition, subtraction, multiplication, and division.

How to Increase Sales in Ecommerce

The key principle is to turn it into a habit. If you have a partner, assistant or team member that you work with, create a weekly standing meeting for the sole purpose of reviewing a scorecard.

If it’s just you, set aside time weekly to review your results and plan for the future.

Here is an overview of the 4 general concepts you need to understand:

Cash flow

If you are involved in any kind of manufacturing, cash flow is almost always an issue. Cash flow issues arise when there is too much time between when you have to invest in manufacturing your products and when you receive cash from the sale of your products.

In an ideal world, you would get paid for a sale in advance of manufacturing the product – and there are actually some businesses that can do this –  but in most cases, you will have to cover the cost of manufacturing via financing or the profits from previous manufacturing runs.

While there is no such thing as a crystal ball, you’ll be well-served spending time projecting your cash flows over the course of the coming months and year to try and predict any shortfalls. This will allow you to be proactive in ensuring you have the appropriate financing in place.

Margins and profits

Simply selling your products is not enough. You cannot build a successful sustainable business unless you are building an appropriate profit margin into every sale.

This margin needs to cover the cost of your financing, all of your sales and marketing costs, the overhead involved in running a business, as well as generating a profit – otherwise there is no point in taking the risk and investing the time and you are in your business.

For an in-depth look at standard markup pricing, see the article on Indie brand builder

Budgeting and expenses

You need to establish financial goals for the business. This means realistically projecting how much you plan to achieve in revenue as well as what you plan to incur by way of expenses for a given period.

Don’t just guess.

Make high and low estimates based on research such as talking to other people who have done what you’re trying to do. It’s quite common to run a deficit for an initial period, but you’ll need to have a plan for how you will cover your expenses until profits arrive.

The bottom line is to project ahead and avoid digging yourself into a hole that you can’t get out of.

Key Performance Indicators

If you want to continually improve your business performance, you’ll need to track key numbers on a regular basis. At our e-commerce business, we use a weekly scorecard that we review each Friday in our executive meeting, where we also address any issues that arise.

Here are some suggested metrics you will need to track so that you can continually grow your business:

Website Traffic
The number of unique visitors coming to your site on a daily, weekly and monthly basis.
Learn more about how to increase your web traffic for free.

Conversion Rates
The percentage of online visitors that make a purchase

Average Purchase size
The size of an average purchase. Combined with your conversion rates, this will allow you to predict sales as traffic increases.

The total revenue you generate is broken down by channel (in our case we have three channels: Wholesale, Direct/Online, and Distribution).

We track weekly sales and also keep running YTD figures.

Email Opt-Ins
The number of people subscribed to your email list.

Social media followers
If a social media channel is particularly important to your business in terms of marketing and driving sales, you may want to track growth in your number of followers.

Cost Per Sale
The amount you spend on online marketing is divided by the amount earned in that channel. For instance, if you spent $200 on online marketing and earned $1000 through your website, your cost of sale is 20%.

A few more metrics you may consider tracking, depending on the types and scale of your business

  • Value of terms Invoices outstanding
  • Overdue invoices
  • Cash on Hand
  • Returns/Defects
  • Top selling product

Here is a detailed look at how to create a company scorecard based on our e-commerce business’s approach

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