Mention how did you do versus your budget to a smaller ecommerce seller and their eyes likely glaze over and roll back into their head. They think oh no, another thing I have to worry about! Source, ship, customer service, source ship, pay bills, source ship and now budget! Ugg!
Few businesses do it. Everyone wants to, they have intentions to do it. But life happens. It always does. But maybe an easy 2017 plan is all you need to get started.
That’s pretty much it. You’re done! Ok maybe a little deeper than this but generally you have to start with these two categories. Let’s talk about revenue.
Revenue or sales represents the gross amount you sell. It doesn’t match the 1099 you will get from Ebay, Amazon, Walmart or your own calculations. It’s really just the desired total amount of gross sales you will have in all platforms. Simple math will get you this number based on your 2016 sales or you can trend to get a better idea.
If you are selling $10,000 a month then you would have a run rate of $10,000 x 12 months or an annualized revenue projection of $120,000. Simple enough.
Now let’s plan for a better year next year. What does that look like? 10% 30% 50% 100%? Don’t let the outlier posts scare you.
You know the ones:
“I started two weeks ago and I sold $120,000,000! This business is easy!” btw, want to buy my course? ”
You have to push these aside as distractions, you need to find your groove, your level. Differences are okay, we are not all the same.
So let’s shoot for a reasonable 30%. Now this is sales we are talking about and it could come from volume or pricing but that’s coming soon. Be patient.
2016 Sales $120,000 X 30% = $36,000
So $120,000 + $36,000 = $156,000
Guess what we now have a revenue plan number for 2017!
It is imperative that you do not create an unreasonable goal. Set the bar higher, but it is important to set achievable goals that make you step up and stretch. But you also need to see success when starting something new. And creating a plan is new.
Now that was easy but to be honest there are a few other things to consider. How will you get that 30%? Higher selling prices or selling more widgets? Both? This is tough to do when you are just starting out. Heck it’s hard enough figuring out how to find items worth selling that are not restricted! True that. But over time it gets easier. Remember put your head down and do the work.
So let’s look back at your imaginary 2016 sales of $10,000 a month. Pretty easy to find out how many units you sold then simple math and we have our average selling price.
In this example we sold $10,000 and 550 units or widgets.
So to get our average selling price: $10,000 / 550 = $18.18 per unit selling price or (ASP)
Is that good? Bad? Yes. It’s a little low but what if you paid $1.00 for each unit, it would be a great business. So again it can be good and bad. Again it is your business, don’t compare to others.
Now armed with an average selling price (ASP) you can do some projections.
To grow 30% in revenue you can either:
A- Sell more items at $18.18
B- Raise ASP
C- Combination of both
We were trying to grow $3,000 each month ($10,000 x 30%) so we estimate the additional number of units we need to sell by this simple math:
$3,000 (30% growth we want) / $18.18 (ASP) = 165 additional units needed to sell
Pretty simple (Not necessarily easy though)
We also could sell higher priced items to attain the desired 30% growth by simple math.
$18.18 (ASP) x 30% (Desired growth) = 5.45 so then the math would be $18.18 + $5.45 = $23.63 (30% higher ASP)
In this scenario you need to sell the same amount of items at a higher ASP and you meet your 30% target. Simple? Again easier said than done.
Most likely it would be best to do a combination of both. Find higher selling items and sell more of them and you can get there faster. So here is where the “Plan” in our 2017 Revenue plan comes in. The how?
This is what will make your business better than another. When you figure out how to find more items or higher priced items to sell you have figured “it” out. Do you need to add two more stores on your route? Do you need to extend your sourcing circle out 10 more miles? Do you need another wholesale account? Do you need to raise your prices? Get it, you ask and then answer through trial and error through hard work and putting your head down and doing the work. Simple huh?
Write it down!
Write it out!