Today, I’d like to offer a proven online success formula you can use with most any business that generates and nurtures leads and sales using online methods.
This post is an excerpt of my Online Business Gameplan, Executive Leadership Guide that covers the up-front goal setting and planning processes invoved in driving controlled business success.
STEP 1 – Set Online Financial Objectives and Goals
As the leader of your online business, you are responsible for getting results. You are also responsible for setting realistic, attainable goals for your team and then ensuring proper plans are put into place for achieving those goals.
Whether you personally determine the financial goals for your online business directly or the objectives are handed down to you, chances are you are responsible for figuring out how to achieve them.
One of the biggest mistakes online business managers make is not being specific enough about their goals. Without specific revenue and profit margin goals, you cannot build a realistic plan.
It’s been said, “Those who fail to plan, plan to fail.” This is especially true with online businesses, yet so often we rush past the planning phase in order to jump straight into execution, without having a plan for success in place first, then find ourselves meandering or struggling (instead of focused on breaking through the next barrier to achieving our milestone goal).
Let me ask you this. If you don’t do the necessary planning for your online business, who will?
Do you believe you can succeed without a clear, well thought out plan?
If you listen to just one thing I have to say here, remember this. If you don’t plan, you’ll struggle, meander, experiment and (very likely) fail to achieve your actual goals (and be forced to move onto something else).
It’s up to you as the leader to ensure proper planning takes place. It’s up to me to make this critically important planning process as easy and as foolproof as possible for you and your online business. So I’ve created some templates and tools for you.
Don’t be afraid to use some traditional business planning tools as well. These tools can often pinpoint problems and opportunities with your market and product strategy that will become key elements of your success.
STEP 2 – Reverse Engineering Key Execution Metrics
The beauty of online marketing is that we can measure almost everything. This enables us to “reverse engineer” the results we seek to achieve, by breaking our revenue goals down into the necessary execution metrics that must be present to succeed.
The Key Metrics Funnel (Figure 1 below) can help you visualize your online business. You drive visitors to your website from your marketplace using various types of traffic (PPC, SEO, banner ads, etc.). These visitors arrive at your Landing Page, where you turn them into a prospect, placing them into your prospect pipeline—a list of prospects in your sales cycle.
Figure 1 Key Metrics Funnel Model
Next, your prospects and visitors go through your Online Seller—a series of pages designed to warm them up, answer their questions and objections, and close the sales.
In addition to tracking your incoming traffic and visitor volume, you track the size of the pipeline and the rate at which prospects are converted to sales, both direct sales page visitors, and those derived from the prospect pipeline.
Going a step deeper, the Online Business Dashboard (Figure 3) shows all the key execution metrics used to plan, track, and achieve your goals. In particular, note the major flow pattern in this diagram first, then each metric.
Your Advertising and Traffic Generation programs create awareness and interest in your product, driving traffic to your site.
The Landing Page will result in some percentage of the visitors choosing to opt-in to take advantage of your offers, at which point the visitor becomes a prospect. Prospects are placed into your Prospect Pipeline List—usually an email auto-responder.
After registering as a prospect, the visitor arrives at the Sales Page, where some of these visitors actually purchase now during this visit (others will purchase later on).
Figure 2 Online Business Dashboard
Let’s define some of the key metrics in the dashboard:
• Gross Sales: how much revenue you want your online business to generate
• Profit/Loss: how much you make (or lose)
• eCPM: earnings per thousand advertising impressions (average)
• Average Selling Price (referred to as “A.S.P.” or simply ASP): how much revenue is generated by an average sale, computed by averaging all your sales together
• Unit Volume: the total number of average sale units that you must sell to meet the gross revenue target number
• Landing Page Conversion Rate: the rate at which visitors to your landing page convert to prospects, entering the prospect pipeline
• Pipeline-to-Sales Conversion Rate: the rate at which your process converts prospects from your pipeline list into sales (or qualified leads, if you are feeding online leads to an offline sales process)
• Sales Page Conversion Rate: the rate at which your sales page converts visitors into customers (sales close rate)
• Visitors Needed: the total number of visitors you must feed into your sales processes to reach your gross revenue goal
• Total Ad Impressions: number of ad impressions required to reach your goal
• Avg. Click Through Rate: your average click-through rate (CTR); percentage of people who click on your ads
• Advertising Costs: how much you must plan to invest in advertising to reach your revenue goal
• CPM: cost per thousand advertising impressions (how much you can afford to spend on 1,000 ad impressions).
You’ll find these exact metrics (and the dashboard shown above) in the Online Business Gameplanner spreadsheet, which you can download for free. I highly recommended that you spend some time entering your online business’ goals into this spreadsheet, then print out the results to use as the foundation of your plan.
Given the above metrics, you can begin putting plans into place to achieve these results. We will deal with our gross margins and expenses separately to keep things simple here.
For best results, track the metrics on a regular basis—weekly, monthly, quarterly and yearly. This way, as you make changes anywhere in your end-to-end system, you can measure the net effects. Some more experienced managers will also keep running 90-day averages to identify up/down trends and make course adjustments as soon as possible.
Please do this right now (if you did not already do it as requested earlier). Take a piece of paper and write down how much you want your online business to generate in revenue over the next 12 months. Next, subtract that amount from how much the business is making right now on an annual basis.
The difference is how much more revenue you need to achieve your business goal. That’s the figure you should plug into the game planner spreadsheet and build a plan to achieve.
For example, let’s say you have an existing business that’s generating $200,000 per year right now and you want to make $ 2.2 million in the next year. This means you need to drive an additional $2 million dollars in 12 months. That’s a fairly tall order…
STEP 3 – Subdivide into quarterly, more easily achievable goals
Rather than trying to bite off the entire $2.2 million goal (or your next 12 months revenue goal) in one shot, you need to break this goal down into achievable, bite-size chunks that you can swallow and digest along the way.
Perhaps it’s my corporate background, but I prefer to break things down into quarterly chunks and focus on what must be accomplished one quarter at a time. So, let’s subdivide this goal into four pieces
Let’s start by calculating 10% of that $2 million incremental revenue goal, which equals $200,000.
This figure will be our short-term goal for the next 90 days—or until you achieve this initial goal, which might take longer depending on your Learning Plan and development project timelines.
To achieve your goal of $2 million, you must begin this journey with a realistic milestone. Believe me, adding $200,000 in 90 days won’t be a walk in the park, so try to avoid inflating this goal to something higher that will be less realistic to achieve.
In marketing and sales, reverse engineering results is the key to success. Once you have a target figure in mind, you can build a plan for achieving that figure. Let’s continue the example…
Let’s say your product’s average selling price (ASP) is roughly $2,000, after reseller and other discounts (that’s how much your company brings in on an average deal). To make $200K over the next 90 days, you must generate 100 additional sales to reach that first milestone successfully.
Next, you’ll build a plan that will generate the additional sales required to meet your goal, a plan that includes:
- A sales process that can convert enough incoming prospects into 100 additional buyers
- An offer strategy that can attract enough prospects to feed this sales funnel
- A traffic strategy that can deliver enough qualified visitors to your website to meet your goals.
Now, I know this may seem simple, and at the highest level, it actually is. Per the prior section, you’ll reverse-engineer the metric targets that must be achieved at each stage of your development and growth plan.
Continuing with our example…
If you develop a sales process that converts 2% of your qualified website visitors into sales, then you are only closing 1 in 50 visitors who come to your site. That’s not great, but it’s good enough for starting out. You can work on improving your conversion rate later. Right now, it’s more important to start converting visitors on a reliable enough basis with a proven process.
So, to generate those 100 sales, you’ll need 50 times that number of qualified visitors to your website, which means 5,000 total qualified visitors over the next 90 days.
Now, all that’s left is to create the offers and ads that will bring you those 5,000 qualified visitors in 90 days. Easier said than done, right? Well, we’re going to provide you with plenty of offer and traffic strategies to achieve that goal.
Once you’ve managed to put the sales process in place that converts at least 2% of website visitors into sales, along with the offer and traffic strategies that drives 5,000 visitors, you’ll make your initial goal. In reality, depending upon how mature your business, product, and market are, this may take more or less than 90 days to achieve.
You should remain committed to achieving this first major milestone, even if it takes you longer than you’d prefer. Keep in mind that you’re in a learning process here, which is to be expected if you’re new to the online business world; have a new business or a new product; or are entering a new market that’s unfamiliar.
Once you achieve this first milestone, you’ll be ready to move on to the next one. Achieving that first milestone is often the hardest of all, since you need to get so many things right all at once—the offer, the online sales process, and the lead-generation (aka traffic) process. The good news is now that you have a functioning online business system, you can begin to optimize it and scale up to meet subsequent goals.
So, it’s time to raise your sights, to double your original milestone to 20% of the year’s goal, or in this example, $400,000. If your conversion rate remained the same, you’d have to double your qualified traffic, which is tough to do in many cases. So, you may need to employ some additional strategies this time.
What if you could double your conversion rate from 2% to 4%? That would do it. With the same amount of incoming traffic you already have, you could boost revenues enough to meet your goal. Therefore, that’s exactly what you’ll learn how to do:
- Ramp conversion rates through testing and optimization
- Boost conversion rates through improving your offers
- Increase conversion rates by building a better relationship with your prospects who are visiting your website, so more of them buy.
So, I think you’ve probably got the hang of this by now. Each quarter (or planning period) you’re going to raise your sights incrementally, and then figure out what aspects of the selling and lead-generation machinery you’re going to improve. Don’t worry. There’s typically no shortage of available ways to optimize and improve—only available time and resources for actually executing these optimizations.
By the time you reach the last part of the year, your site should be converting at least 5% of visitors into sales, and you should’ve found numerous viable sources of increased website traffic. Best of all, if your product is hitting the mark with your customers and market (it needs to be), then you’ll begin seeing repeat business, word-of-mouth and some momentum building, making it easier to grow your fledgling online business.
As you knock off each quarterly plan, reset your sights higher with a specific set of goals. Then, create a specific set of traffic and conversion plans for achieving the corresponding performance metric goals and your revenue results will naturally follow.
So that you can hit the ground running, we’re providing a spreadsheet tool that will enable you to plug in a few figures and quickly calculate the key metrics for your online business. We call this the WinningWare™ Online Gameplanner™ tool.
Click here to access the Online Gameplanner™ spreadsheet
(You’ll need Microsoft Excel for opening the file named “OnlineGamePlanner.xls.”)
Instructions for using the spreadsheet are included. You can change the cells shown in orange in the spreadsheet to reflect your business’ goals and expected performance targets.
For example, you enter your desired revenue goal for the next year (or planning period), your product’s average selling price, the percent of each sale that your company receives after a sale is made (after credit card fees, affiliate and sales commissions, royalties, etc.—after all the variable costs in your business have been paid).
Then, you enter your expected landing page opt-in rates and sales conversion rates for your sales page and prospect pipeline (the list of opt-ins you have captured). You can also enter the size of your existing lists, if you already have lists or a pipeline started.
The rest of the spreadsheet is self-explanatory. There are four tabs: the Planner tab, Dashboard tab, the Instructions tab and Legend/Terminology tab. Just read the instructions and then fill in the orange fields (or use the default settings) to set your financial goals and calculate conversion metrics and traffic you’ll need to achieve those goals.
You’ll see all the financial, selling, and traffic machinery metrics for your business. You can then build a plan to achieve your goals.
Feel free to adapt this spreadsheet to include other factors that go beyond what’s provided. This tool is intended to give you a head start using a proven model.
The resulting calculated values show you how many visitors you’ll need to bring to your site from various advertising, offers, and traffic programs to meet your financial targets. You can play with all these variables until you have a set of metrics that you’re comfortable enough with to build a plan.
I hope this proven online success formula helps you set your financial goals, and do the planning that’s required on the front-end to make achieving those goals possible.