In this episode of the eCommerce Lifestyle, podcast Anton addresses a conversation that he had with a guest on a previous episode.
Anton shares what you should optimize for when you're first starting your eCommerce store. In this episode, he also reveals how that may evolve over time.
Listen in to hear all of this and his answers to last episode's 'off-air' questions.
Anton Kraly: What's up, everybody. Anton Kraly here and welcome to another episode of the eCommerce Lifestyle podcast. Listen, if I sound different today, I don't know what happened. I somehow lost my voice, but I feel okay so all is well. Don't worry. Just if my voice cracks at all, it's been happening, I might sound like I'm going through puberty, but I promise you all is well over here.
Anton Kraly: Today we are going to talk about something that's just top of mind right now based on a conversation that I had where I was a guest on another podcast, where it was about mindset, but there were some off-air questions that I wanted to just share the answers with you. But before we do that ... Oh, there's the crack. Before we do that though, I wanted to share our newest five star review on iTunes. This is from SuperSeller18. And SuperSeller said, "I really like listening to your info on YouTube and on your podcasts. I've learned a lot of information. I'm trying your 21-day plan. Looking to purchase your course. Keep up the good work." So definitely I appreciate that and I'm happy to hear you're learning a lot.
Anton Kraly: And for anybody else that's a fan of the podcast or what we're doing over on YouTube or even on our blog, I promise you if you're loving that, you're going to love the course so much more. That's my program Drop Ship Lifestyle that was voted best eCommerce course by Shopify. If you're new here, you can learn more. Just go on dropshiplifestyle.com where you can see our course. But if you want to get more information, get a free training and maybe even a special offer. Go to dropshipwebinar.com, D-R-O-P-S-H-I-P-webinar.com, where you can choose a time and get on my 3-hour free training, which is pretty cool.
Anton Kraly: So today we are talking about what you're optimizing for. So what happened on this podcast that I was a guest on is we were talking about just some success habits and things that I think have led to me getting pretty good results over the past decade plus that I've been in business. And the way that the podcast I was on is formatted is you film, or you record, I should say, two episodes. So there's part one, then we took a break, and then we record part two. And the host releases them as two separate episodes. So I don't know when they're going to go live, but I will post an update on Facebook when they're live because they're definitely worth listening to in their own.
Anton Kraly: But what happened in part one is we were talking about one of the things I think I'm good at, which is managing analytics and managing really big ad budgets and being comfortable spending a lot of money every single month on Facebook ads, on Google ads, on YouTube ads. We talked about that and then we broke. So we took our little intermission. And in that intermission, the host said to me, he's like, "Hey Anton, listen, I'm not going to post this as a podcast, but just between you and me, it really sounds like what you're telling me is that you need a lot of money and you need really big budgets to successful with your business model, with the Drop Ship Lifestyle business model." And he's like, "I know personally I don't have that much money to invest into ads. And I think a lot of people listening, it probably wouldn't be for them, right?"
Anton Kraly: And then I was like whoa. Maybe I came off wrong when we were recording, because we weren't talking about how to start, we were just talking about what I think I'm good at. So I said, "All right, listen. Let's record part two and let me circle back to that." Because it might seem, and maybe even you listened to some previous podcasts where I talk about our ad budgets and whatnot, and maybe you've thought that same thing, like, "Whoa, what Anton's doing is on a different level and there's no way that I'm going to spend that much." And that's more than fine and actually you're better off if you're just starting and you're spending tremendously less than my company spends every single month. And let's talk about why. It's because you need to know what you're optimizing for in your business. And what you're optimizing for is going to change over time. What we optimized for my first month, year, two years, five years in business is not what we're optimizing for now. And again, it's an ever evolving thing.
Anton Kraly: Right now what we optimize for is net profit as far as a dollar amount. And this is the big thing. And I'm just going to throw out arbitrary numbers because it doesn't matter. But let's just say I said I wanted to make $100,000 a month net profit. That's what I wanted the business to keep. That's what I wanted to make. There's the voice again. But if I wanted to make $100,000 net profit and that's what I was optimizing for, I would be okay with having a lower return on ad spend. What that means is I know it might take me a huge investment into ads to get unique people to my website so that I can make $100,000 net profit. Again, I'm just throwing out numbers.
Anton Kraly: But when I first started that is not at all what I was optimizing for. Of course, it would have been great if my first month in business I could make that much, but in the beginning, and this is true for everybody, or at least it should be, what you should be optimizing for is your target return on ad spend and your target net profit as a percentage. Again, what I'm optimizing for now is a target net profit as a dollar amount, but when you're starting it should be as a percentage. So let's just say you are brand new to this. You go to dropshipwebinar.Com, D-R-O-P-S-H-I-P-webinar.com. You go through my free training. You decide this is for you. You invest into our program and you get started. And you're like, okay, what should I spend on ads?"
Anton Kraly: I've done another episode in the past about how much to spend on ads and why, but let's just say you say, okay, I'm going to invest $1,000 into ads my first month. What I would encourage you to do is optimize for a target return on ad spend, and I would say you would want to be at least 20X when you're not spending a lot of money. And when I say a lot of money, I mean anything under like $5,000 a month. So what that would mean is month one you get started, you follow my program, you build your store, and you spend $33 a day, which equals about $1,000 a month. If you did that, you spent $1,000 and you had a 20X return on ad spend, you would do $20,000 in sales. Now that's great. That's amazing. And if you don't think that's possible, listen, it's more than possible.
Anton Kraly: Go back and listen to the most recent episode of the podcast I did where I interviewed one of our coaches and one of my friends at Drop Ship Lifestyle. His name is Jeff. He has some ad sets where he's getting a 40X return on ad spend. Meaning he's spending $1,000 and doing $40,000 in sales. So definitely possible. But again, what I would say you should do in the beginning is take that $1,000 budget for the month and make your goal to turn that into $20,000 in sales. Now here's the other thing that you want to optimize for before you start spending more and more money. I say spending, but really investing more and more money into your monthly ad budget. And that is your net profit as a percent.
Anton Kraly: So let's say you spend your $1,000 on ads, you do $20,000 in sales. At that level, I would tell you and I would encourage you to optimize for at least a 25% net profit margin. What that would mean is if you did $20,000 in sales, you should make about $5,000. You should keep about $5,000. And that's what I want you to optimize for. Again, so let's say month one you spend $1,000 on ads and let's just say you do $15,000 in sales. Well, guess what? You didn't get your 20X return on ad spend, but next month I wouldn't tell you to pour a whole bunch more money in ads, I would tell you have your budget at $1,000 again and try to get that return on ad spend up. So do things like optimize your site for conversions. Do things like have better follow-up sequences for when people opt into your email list. Do things like have better remarketing ads. Do things like have better product descriptions and better calls to actions on your website.
Anton Kraly: And let's say you do that in month two, and let's say month two you get a 20X return on ad spend. So month two you spend $1,000 in ads, you do $20,000 in sales. Then you're looking at your orders and you see that your net profit was, let's say, 18%. So $20,000 in sales, you keep $3,600 in profit. Well again, at that level I want you to have a higher net profit percentage. So I would say, okay, month three, now you have your return on ad spend, but you need to find ways to cut costs. So maybe you are getting better pricing from suppliers, or maybe your are having your shipping rates shopped around and getting better quotes. So what you're doing in month three, sorry, there's the voice again, is you're spending $1,000, you're doing $20,000 in sales, and then maybe month three you hit that 25% net margin. Now you spent $1,000, you made $5,000 net profit.
Anton Kraly: Now, month four, guess what? That's when I would tell you it is time to put more money into ads. Reinvest more. Maybe you're going to spend $1,500 or maybe you're going to spend $2,000. Whatever it is that you're comfortable with, up it that much. Don't go crazy and go from like $1,000 a month to $10,000 a month. At the most I would say double it. But maybe, again, month four you spend $2,000 on ads, you do $40,000 in sales, you make $10,000 net profit. Then month five maybe you're going to spend $4,000 on ads. And that's how it works, okay? So the thing that I definitely got wrong in part one of the podcast that I was a guest on was not giving context for why we're spending as much as we are.
Anton Kraly: When you spend more and more and more every month, what's going to happen is your return on ad spend is going to go down, your percentages are going to go down. But that's because you're reaching less of a targeted audience. When you have smaller budgets, all of your money could be spent on hyper-targeted keywords on hyper-targeted Google shopping ads, and you could be only getting the best of the best buying pool. So the truth is, as a percentage, you're going to be most profitable when you spend less money. But what's going to happen with you, just like it happened with me, is you're going to get to a certain point where you want to switch and you want to start optimizing for net profit as a dollar amount, and from there is when you can start spending a lot more money. But knowing that, again, your percentages are going to go down as far as net profit, but there's going to be more money left as profit, dollar-wise, at the end of each month.
Anton Kraly: So if anybody has heard me throw around big numbers before, that is why. Again, the truth is you're going to be the most profitable that you'll ever be when you're first starting and when you're dialing in your ads and you're spending a small amount of money. That's when your percentages are going to be highest. But after you're in business for six months, a year, or two years, excuse me, maybe that's when you're going to start switching things up, spending a lot more and making more money as far as dollars at the end of the day. But you could be extremely profitable both ways. So hope you found that helpful. Just wanted to provide that clarity and that context.
Anton Kraly: And again, for everybody listening, if you got value and you're not part of Drop Ship Lifestyle yet, go to dropshipwebinar.com. Dropshipwebinar.com. Pull it up on your phone, choose our next training class. Get on there. It's all online. I go deep into all this stuff and I give you an amazing offer for our program. And if you guys do enjoy this podcast I really do appreciate those reviews. So please take a minute, 30 seconds, whatever, hop on over to iTunes, let me know what you think. And I will talk to you all in the next episode of the eCommerce Lifestyle podcast. Thank you, everybody.
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