How much traffic is enough traffic for your eCommerce website? Well, it depends. How much money do you want to make in your eCommerce business?
What You’ll Learn
- The simple 4-step calculation that'll tell you how much traffic you need to hit your revenue and profit goals.
READ THE FULL EPISODE TRANSCRIPT
Let’s get real for a minute… eCommerce is a numbers name. With only 1-3% of website visitors converting; if you want big sales you need big traffic!
But how much traffic? Well, there’s a calculation for that and we’re going to talk through it right now!
First things first, you’ll need to collect some numbers.
Your average website conversion rate
Your average order value
Your gross margin percentage
So there are two ways you can do this calculation, either by your desired revenue number or your desired gross profit.
Quick note about gross profit if you don’t know what that is, it’s the difference between what you sold a product for vs. what you purchased it for at wholesale or what it cost for you to make it.
This is BEFORE all of your business expenses like website hosting fees, employees, overhead, etc. We’re just talking about the gross profit from your products.
Okay, for this exercise we’re going to assume the following numbers:
- Conversion Rate: 2%
- Average Order Value: $62.50
- Gross Margin %: 60%
Let’s get into the calculation
We’ll start with a gross profit goal because after the first calculation all the steps are the same. So let’s say we have a gross profit goal of 180 thousand dollars a year. First, we need to figure out how much revenue we need to generate in order to hit that goal
Gross Profit $ Goal / Gross Margin % = Revenue Goal
$180k / 60% = $300k. So that is our revenue goal.
Now, we have three more calculations to do
Let’s figure out how many orders we need.
Total Revenue Goal / Average Order Value = # of Orders Needed
$300k / $62.50 = 4800
Now comes the magic.
Number of Orders Needed / Website Conversion Rate = Total Traffic Needed
4800 / 2% = 240k
The result is 240 thousand, which means you need 240 thousand visitors to your website in a year to hit your $300k revenue goal which translates to your $180k gross profit goal.
Then you can just divide that by 12 to get your monthly traffic goal!
Annual Traffic Needed / 12 = Monthly Traffic Goal
240k/12 = 20k
When you first do this calculation for your business you might think, awww shit! How am I ever going to reach that? remember, in this case, we’re just talking about increasing your traffic and we’re assuming all your other KPIs are staying the same.
There are lots of levers you can pull in your business to hit the financial goals that you want, this is just one of them.
If you want to dive deeper into this and get a real handle on the numbers in your business then I invite you to learn. more about the Lounge, my membership for eCommerce business owners. There’s a tool I created, exclusively for Lounge members that will help you figure out where you need to focus on your business to hit the goals you want.
Doors for the Lounge are reopening on May 23rd, 2022. You can learn more about the program at eCommerce Badassery.com/membership
I’ll put a link in the show notes and if you have any questions, feel free to reach out to me on Instagram or in the eCommerce Badassery Facebook group!
So now that you have this calculation, go forth and calculate. So lame, lol. But seriously, go do the calculation and then see where you’re at. I know when you first look at it, it might be scary. But thin of it this way, once you know where you’re going it’s a lot easier to get there.
Think about when you take a road trip to somewhere new or even just if you’re going to a new restaurant. It always feels like a long time getting there because you’re in unfamiliar territory, you’re trying to follow the directions, looking for landmarks, lowering your radio so you can better… but the ride back home, the ride to that familiar place, the one that you know how to get to… it always feels a lot faster right?
This is the same. Once you know where you’re going, it’s a lot easier to get there.
I’m excited to hear how this goes for you and what aha moments you have. Reach out after you do the calculation for your business and let me know how it went!