Today we’re going to talk about smart goals, or goals that’ll help grow your online store. I’m going to give you some tips and specific key performance indicators that you can use to help make better decisions to manage and grow your business over time.
KPIs and Goals:
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What's up everybody? Anton Kraly here, and you are currently watching the video version of my podcast, E-Commerce Lifestyle. I created this podcast for e-commerce store owners that are looking to increase their revenue, automate their operations, and become number one in their niche. I love YouTube as much as anybody else, but I encourage you if you do get value from these podcasts to go ahead and subscribe to the audio version which is totally free. That way you can get notified every time new episodes go live, which is every single Monday and Thursday. We're on Apple Podcast, Google Podcasts, Spotify, Overcast, and just about every other podcast platform there is. I'm going to go ahead and post links to those in the description for you to click, check out and subscribe to. For now, just enjoy this episode.
What's up everybody? Anton Kraly here from EcommerceLifestyle.com. First off, I hope you're doing well. Hope you're staying healthy through all of this. And I hope you're making money. I hope your store is really profitable.
Today we're going to talk about smart goals, and I'm going to give you some tips and some specific KPIs, key performance indicators, that you can use to help manage your business and help make you better decisions that will help that business to grow over time. The reason this is the topic for today is because the last podcast episode was called How to Build Momentum on a New Store, and we got some great feedback on that so I wanted to go a little bit deeper today and give you again these specific KPIs, these specific numbers that you can use as goals. That way you can measure your business and see if you're moving towards them, if you're already exceeding them, or if you have some work to do. You might have heard me say this before, but I really love the quote from Peter Drucker that says, "What gets measured gets managed," and my goal is by sharing these with you, you can start measuring them in your own business to make better decisions, change your business activities, and exceed all of them.
Now before I share the four specific goals that I want you to set, it really is important to note that every time you're goal setting in your business all of your goals should have three things in common. First, they should somehow impact your profitability, how much money are you actually making? They should be able to be measured accurately. You want to be able to just pull up simple dashboards or reports in Google Analytics or in Shopify and make sure that numbers are actually visible. Not something you're hypothesizing on, but something you can actually see. Finally, these goals should provide actionable insights so that when you're looking at these reports and you're seeing the numbers, you can make decisions and make modifications to help change your business.
Now that we have that out of the way, let's get into number one. The first goal should be for your blended return on ad spend. Let me break that down. Return on ad spend, you often see it as ROAS, is the amount of money you get back for the amount of money you put into ads. If you spend $1.00 and that $1.00 gets you $5.00 in sales, your return on ad spend would be 5. 5x. $1.00 turned into $5.00 in total sales, gross revenue.
Now the thing with that is what we do in our businesses and what you should do too is you look at it on a platform by platform basis. Even deeper than that, you look at it on a campaign by campaign basis. What I mean by that is you might have a Facebook Ad campaign running and a Google Ad campaign running and you might have an email marketing campaign going out and all of those different traffic sources are going to have a different return on ad spend based on how much money you spent on them and how much money that specific platform brought you back. Going even deeper than that, in Google Ads for example you might have a Google Ads campaign running for a Google Shopping campaign. Then you also might have a Google Display Network campaign running for remarketing. Obviously each of those campaigns are going to have a different return on ad spend.
When I say blended, I mean you're looking overall every month at all of the money that's going out in ads and how much money is coming into your store in sales. When you're looking at the amount that's coming into your store in sales, it shouldn't just be from paid ads. It should be overall. Including people that found you directly, people that found you organically on Google. Whatever that top line number is.
Let's just use some basic numbers here for simple math, and let's say that your store did $100,000 in sales in a month and you spent $10,000 in ads amongst all the different ad channels you use, whether that's Google, Bing, Facebook, Pinterest, Twitter, Instagram, email campaigns, whether that's blog banner ads, it doesn't matter, it all goes in. Again, $100,000 came in in sales. You spent $10,000 on ads in a given month. That would mean that that month you had a 10x return on ad spend. Blended, everything together. That's what you want it to be. The goal or the KPI for your return on ad spend should be at least 10x.
Looking at this differently, let's say you spent that $10,000 in ads in a month and you did $50,000 in sales. Well then your blended return on ad spend would only be 5x and that is a red flag. Like I talked about earlier, when we're trying to be able to make actionable decisions based off our data, those are the things we want to look at. If we know it should be at least 10 and we see it's only 5, then what we're going to start doing is segmenting down further. We're going to start looking at our return on ad spend on a campaign by campaign basis, on a platform by platform basis, even as deep as looking at specific ads within ad campaigns to see which ones have those high return on ad spends and see which ones are pulling that number down. Obviously what you want to do is look at the ones that are pulling that number down, the ones that don't have the high return on ad spend, and you either want to modify them or you want to turn them off. But the first goal is your blended return on ad spend, and again it should be at least 10x. For every dollar that goes into ads, overall you should get at least $10.00 back in sales.
Now the second goal that you want to set and measure is your conversion rate. Your conversion rate is how many people visit your store versus how many people buy. How many people visit versus how many people complete their orders. Now we want this to be 2.5%, so for every 100 people that visit, we want at least 2.5 sales.
Now this can get a little tricky because sometimes you'll be looking at your dashboard in Shopify or in Google Analytics and you'll see that one random day of the month or a few random days you had this huge spike in visits and those visits might have been because Google or Facebook bots slammed your site. Or it might be because maybe somebody linked to your site from a very prominent blog or even online newspaper, but maybe it wasn't related. It wasn't something that had buying intent. Maybe it was just a bunch of visitors from people that wanted to see a blog post that you wrote, or again maybe it was just a link about your store but the people clicking that link didn't have buying intent, and if you get these huge spikes in traffic and those people aren't your normal type of visitors, that number isn't going to be 2.5%. It's going to drop in a big way because your traffic is not targeted.
When I say a 2.5% conversion rate, what you want to look at is your targeted traffic and if you're able to maintain that with targeted visitors. What are targeted visitors? Basically anybody that you're paying to see your site. Again, Google Ads. All of your Google Ad campaigns. All of your Facebook Ad campaigns, all of your blog banner ads. When you look at that traffic that you spent money on, when you spent money to acquire those visitors, are you getting at least 2.5% of them to become customers? Kind of X out or remove all of the views from those weird traffic spikes from your reports when you're looking at them and make sure on your paid traffic sources, your conversion rate is at last 2.5%.
Now just like when we are looking at our return on ad spend, you're going to see things where maybe some of your dynamic product remarketing ads on Facebook have a conversion rate that's much higher than 2.5% and the reason would be those are very hot leads at this point. Okay that's fine, that's good, but again we're looking at blended and whenever we see the different campaigns that are pulling that number down, that's when we either want to modify those campaigns or maybe even cut them off completely.
Now the third goal that you want to set in your business is how much money is email bringing in as a percent of sales? I talk about email marketing a lot. I even have a whole program on it called Inbox Funnels where I share our top email marketing campaigns that you can copy and paste into your own Shopify account. More specifically into Klaviyo, which is the program that we use that integrates really deeply with Shopify and it allows you to basically write emails for all different scenarios. All the emails have different trigger points so they're automated. For example, if somebody starts an abandoned cart, then we have a whole sequence of emails that goes to them. If somebody opts in for something on our website like a coupon code or the opportunity to win a free product, we can have a whole series of emails that gets triggered automatically.
Now what you want to look at is is your email marketing, and this is very easy to do in Klaviyo by the way because it shows you how much money your emails are making, you want to see is your email marketing making up at least 30% of your revenue, and if it's not that should be your goal, and that should be what you strive to. If you did, easy numbers again, $130,000 in sales in a month, you'd want to see $30,000 of sales coming from your email marketing efforts.
If you're not doing email marketing right now at all or if you are and your numbers are nowhere near that, that's fine. Again this is something that's very doable but it's not just having abandoned cart emails where you send two emails. You want all different types of email campaigns. I'll actually link to a podcast where I talk about some of our email marketing. Again if you want the full training on this I do share some of it inside of Drop Ship Lifestyle. You can learn more at dropshipwebinar.com. Or you can go to ecommercelifestyle.com and click on Courses and then check out Inbox Funnels where again I go as deep as I can into our email marketing campaigns.
But you want to be sending emails when people do abandon their carts. You want to be sending emails to people after they buy from you that are encouraging them to buy again, to buy different related products, to share your products and your store with their friends. You want to be sending emails to people for every holiday that comes up, any time new products come back in stock. There are a ton of different emails that you can and should be sending automated, and what you want in your business again is for your email, solely email, to be adding on 30% of your monthly revenue. If it's not, that's a goal you should set. It's a number you should manage, and it's something you should actively move towards.
Finally the fourth goal that I'm going to share with you that you should set in your business, this is specifically by the way if you're running a store that's built on the Drop Ship Lifestyle model, but that goal is your net profit margin. This should be at least 20%. We like to see it 25% or higher, but this is something that in the beginning it might be lower. This is something as you spend more and more on ads and get your top line number higher and higher and higher, your net profit as a percentage could drop because your targeted traffic won't be as targeted. The more you spend, the more broad you go. But again, you want this to be at least 20% of your sales.
How do we track this? Very simple. If we do $100,000 in sales in a month, we want at least $20,000 of that to stay in the bank, to be our true net profit. Now the way you manage this is just by tracking your numbers. Again it sounds basic, but a lot of people don't do it. What you can do is every month, or even every week depending on how much sales volume you have, is have all of your orders go into a Google sheet, or you can use an accounting software like Xero. That's what we use, X-E-R-O. Either way. Google Sheets work just fine. Have all of your orders go in with how much the customer paid. Then you input your product costs, how much it costs for you to actually get that item, input shipping costs, input your ad costs, input the Shopify fees for Shopify payments and the transaction fee.
Input any other fees that you have in your business and what you want to do at the end of every month or every week, again depending on your order volume, is look on a per product basis how much each sale made you and what was the margin? Do you have some where your margins were 40% or 50% net profit? Do you have some where it was 8%? When you're seeing these outliers, the ones that really aren't making you money, that could be because your pricing isn't high enough. That could be because your shipping cost is too much money. That could be because you're spending too much on ads for a specific product. Whatever that is, you want to look at these numbers and you want to make actionable decisions. You either stop advertising those products, or you negotiate better shipping rates or product costs, or you optimize your ads for those products better so that next time you sell one you're making at least 20% net.
That's the four, guys. There's a lot more I can share than that but this is a podcast and I don't want to just keep going on and give you stuff you won't remember and won't implement. My advice is start measuring these things right away. Write them down on your desk. Put them on a Post-It note stuck to your computer. Set it as a daily reminder to look at these numbers in your own business. Keep track of them because again, like Peter Drucker says, "What gets measured gets managed."
I mentioned this in the beginning of the episode, but if you did get value from this please do subscribe to the podcast. We have new episodes that go live every single Monday and Thursday. The best way to get them in real time and make sure you always hear about them is to subscribe to the podcast for free. We are on Apple Podcast, Google Podcast, Overcast, Castbox, Spotify, and again just about every other podcast platform out there. I'm going to post links to all of those in the description. Definitely check them out and click Subscribe. As always, if you got value from this podcast please do leave a review or send me an email or leave a comment. Just let me know. I love hearing your feedback on these things.
If you're listening to this and you're brand new and you're like, "Anton, that all sounds great but I don't even have a store yet," be sure you go to dropshipwebinar.com. D-R-O-P-S-H-I-P Webinar.com. I'm going to link to that in the description as well. There you're going to get a free training that's two and a half hours long where I show you how we build highly profitable, semi-automated online stores. Finally, if you know anybody that would get value from hearing this, maybe somebody that's running a store but that doesn't really seem like they are making it work yet, please do share this episode with them . Hopefully we'll reach them, it will help them. It'll help them have a stronger business as well.
Take care of yourself, everybody. Stay healthy. Stay safe. I will talk to you in the next episode of the podcast. See ya.
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