Now that you are growing an online business, it becomes more and more important that you start tracking the performance of your business, not only your website. Most people that start an online business may not know how important it is to run it like a business. And knowing what metrics are important to track helps you make better, more informed decisions.
What we’re going to cover in this article is a list of some of the important, basic performance indicators to track.
Why Should I Track Anything?
You need to make decisions along the way toward becoming a millionaire. To make good decisions, you need information. CEO’s, business owners, and entrepreneurs are constantly making small changes along the way toward growing the business they managed. The most successful ones we encounter use the information to help them make those decisions. If you only trust your gut when you run your business, you may be surprised how often you are wrong. It’s good to back up your feelings with information and vice versa.
Here are a few important questions that need decisions
- Should I re-write this post to have a higher conversion rate?
- Will this advertising be profitable?
- Which keywords are proving to have the fastest growing traffic?
- What affiliate programs convert the best and should I promote that over others?
- What affiliate programs are not converting, but getting higher click-throughs rates?
- If I were to do an email marketing campaign, what affiliate program makes the most money?
- If I were to do A-B testing, which should I decide?
I’m sure you’ll have more, but these are some of the ones we use information in our decision making over ambiguity.
Start With Process In Mind
As you track information, think of the process first and the decisions along the points that you can change. For instance, here we lay out a list of aspects of your process that may need information to review performance effectiveness.
- Web Traffic
- Where did it come from?
- Social Media
- Organic Search
- Where did it come from?
- Web pages/Landing Pages
- Email gathered, and email campaign
- Affiliate click rates at each stage
- Affiliate conversion
- Affiliate refunds
All along the revenue chain from search to conversion needs point of information that determins effectiveness. Each point in the process could be optimize to help increase or improve profitability. At the end of the day, you’re trying to make money. And also, it helps you identify where in your process you have too much cost that you may want to eliminate. Most online entrepreneurs don’t think about that consideration.
For example, if you have a web page that you find has a low conversation or even people just leaving the page quickly, you may consider re-writing the page to keep people reading it or divert those people to a higher converting page. Information will help you determine if that is true or not.
Tracking Affiliate Links
As you build your business, make sure to track all of your affiliate links. We use a spreadsheet either through google or excel. But we have a list of every link we use, the exchange, basic affiliate id, and a monthly trend of success. We know each of your affiliate programs or affiliate exchanges keeps this information, but as you grow, you may find you have a hundred links and some you may even have forgotten you signed up for in the past.
Then you either get checks in the mail or a notification that the program is dumping you because you haven’t sold anything. Everyone likes checks in the mail, of course but you may find that you have other higher converting links, that you could maybe investigate to swap out because the non-performing links are not converting.
We know, tracking costs seem like its intuitive, but we find that most online business owners forget to track their hosting fees, websites they purchased, advertising budget, or outsourced costs. Then at the end of the year, it’s just ignored.
Just a tip, if you use an accountant on your taxes, ask them about these costs all together.
If you aren’t tracking these costs and you start to make some money. You start getting excited that finally you are generating income. Hooray! But if you do the math, you may be still losing money, Urgg!
A common mistake, especially when people start advertising, they start selling and making some money. Maybe you got the free $150 AdWords coupon. You spend all $150 and sell three products making $100. Since the $150 coupon was free, you think let’s do this again! And you start allowing Adwords just to roll because you made $100 in profit. But in reality that advertising scheme lost $50. Because if you did it again, it would cost you $150 to make $100. The math is $100 – $150 = -$50. Urgg.
Just make sure to track the costs of everything.
Tracking revenue, again, seems intuitive. How much are you selling? When the sales start coming and you get checks and online deposits, it feels incredible. Then after a while, you get lazy. You stop tracking.
When you look at if you’re making money over costs, sometimes you may be surprised that you aren’t making as much as you thought. We see valuations of websites that have incomes at over $200,000 a year, but since there is a big advertising budget, they may only be making $20,000 annually.
Also, track revenue from sources. You can track at what people call the top line, which is the total revenue, but when you get to start making real money, you need to make decisions on how to accelerate strong lines of revenue.
Here’s an example: maybe you have a revenue source for affiliate marketing that’s growing at 5%, and it’s most of your income. Then say you have revenue at only 10% of your overall total, but it’s growing at 50%. You may notice that in the long-run, increasing the smaller amount of revenue helps to improve your total faster than spending time on the slow, big growing.
Our point, keeping a level of granularity helps you make better decisions in the long-term
What is cashflow? You have revenue which is the total amount you get from commissions and product sales. You have expenses that are your total cost. And you have cashflow. Cashflow is the amount of positive or negative cash that you have overtime or a given moment. For example, if you are getting checks in the mail at $1,000 a month, but you need to spend $1,500 in the first month to set up your website. Then that month you have negative cashflow of -$500. But the second month you may have positive cashflow because you didn’t need to spend the $1,500. So for the second month you had a positive cashflow of $1000. Over the two month period, your cashflow as (1,000 + 1,000) – $1,500 = +$500.
Cashflow tracking allows you to think about the short and long-term profitability. When you start out creating an online business, you may have negative cashflow. Almost all businesses need to invest something at the beginning before they see a check. It may be small, but it may take 6-12 months to start seeing positive cashflow, meaning profit.
If you have a business that has some seasonality, for instance, you only sell summer items, but you don’t have many sales during winter, for the year you may be positive cashflow, but not over the winter months. At that time, you need to be sure you save money so that you can make it through winter.
Another mistake people make is how much they spend on advertising. Say you create five different advertising schemes, and you don’t put limits or max. Sometimes your ad network change expenses or keyword price. Overnight you could go from cheap advertising to losing money and a lot of money. It happens.
When you start out, make sure to track advertising spend as it relates to revenue and profit. One tip we like, if you have coupons for ad spending, only track those in as a negative cost. But keep thinking you’re spending on advertising. You’ll find you make better decisions on advertising spend.
Important Key Performance Indicators
What is a key performance indicator? KPIs are measurable values that demonstrate how effectively your managing your business to what you desire to be your outcomes. Here is a list of ones we like to use to measure how effectively we are executing to our plan.
- Traffic (Organic and Paid)
- Top 10 pages and keywords: we always like to take the top 10
- Bottom 10 pages and keywords: make sure we’re working on the low-end ones as well
- Number of email clients versus unsubscribers: tells you if you have a valuable message
- Total Revenue
- Revenue by affiliate and keyword
- Total Costs
- Total cost per affiliate and keyword (if there is a cost)
- Advertising Spend
- Cost Per Click
- Hop Rate: How many people click on Affiliate Links but leave
- Average Order Value: Total Order Revenue / # of Orders
- One-time Revenue % of Total Revenue
- Recurring Revenue % of Total Revenue
- Conversion Rate
We recommend you do some research while you start growing your online business. But the most important bit of advice we can give you when you’re starting out: JUST START. We know there is much to consider, but when you’re starting to generate real money, it’s fun to think how to make more. But if you get too worried early, you might as well stop right now.
If you’re new, Click Here to Start Now. If you’ve got some experience, we’d love to hear some of your favorite KPIs and why they are important to your business. And comment if you have a question, we love to help.