Every quarter in the Lounge we hold a week-long workshop with 2 calls and daily prompts to help members plan the next 3 months in their business. It’s one of my favorite things in the Lounge and this most recent wrap call was sooo good I had to share some of the takeaways on the podcast.
Prefer to listen to the episode? Click here.
Financial Goals Change Over Time
When you first started your business you likely had simple goals like breaking even and not losing any money. Then over time, you set goals like paying yourself X amount per month or replacing your salary from your full-time job.
These types of goals make perfect sense when you’re just getting started, but as you grow and reach big-girl business status you have to get more strategic and specific with the goals you set.
A Lounge member revealed that even after years of being in business, she’s never actually set financial goals. She started off small like the rest of us, and then as the business grew first she replaced her full-time income, then her partner, and if memory serves even her mother works in the business now. Over the last few years, she and her partner have paid themselves a salary and any extra money has gone to expanding their team to support their new business growth.
Your Goals Will Depend on Your Business
We have a heavy focus on setting financial goals in the Lounge and even have a handy spreadsheet that will tell you what you need to focus on to hit those goals you set. It will break down how much traffic, what AOV, and what website conversion rate you need based on the dollar goal you set and your gross margin. But if you don’t even know what your goals are, there’s no way to get started.
The goals you set are going to depend on where you’re at in your business and where you’re trying to go. And it’s really important that you have a handle on the kind of business you want to create.
Biggie had it right, Mo’ Money Mo’ Problems…
The bigger your business gets, the more employees you need, the more responsibility you have. Do you really want the business that comes along with generating 7 figures in revenue? The investors on Shark Tank ask entrepreneurs all the time, do you really want the type of business that comes with having an investor? There is nothing wrong with having a smaller business that funds your lifestyle and only requires a small team. No one is putting pressure on you to grow except for you, so just be realistic about the type of business you want to create.
Reverse Engineer Your Personal Financial Goals
For this particular Lounge member, I recommend she start by figuring out how much she wants to take home from the business and reverse engineer how much revenue or profit would be required to hit that number as take-home pay. She’ll also need to consider what threshold of growth equals a new employee because that employee's salary will limit what can be paid out to her. So if every additional 150k in revenue equals another employee that costs them 50k, she’s got to work that into her calculations.
Again, there might be a cap on the number of employees she wants to be responsible for so that should factor into her calculations too.
In fact, you know what… this is the only way I recommend you set financial goals.
Break Your Financial Goals into Smaller Milestones
So when it comes you setting goals in your business you’ll want to set a few different ones. There are those big dream goals… which might already be on your way to – but I also want you to set milestone goals along the way.
Not only is it easier to hit goals when they’re broken down, but it gives you something to celebrate and be excited about along the way. Hitting those milestone goals creates momentum which keeps you motivated to keep moving forward.
Calculate Goals Across Your Individual KPIs
When I worked as a retail manager we were given monthly, weekly, and daily sales goals. Then in the store, I broke those goals out by the hour across our associates based on the amount of traffic we got at different times of day. There was no way the morning associate was going to be able to generate as many sales as the closing associate, ya know.
Then we’d track sales hourly so the associates always knew where they stood and could adjust as needed throughout the day. By the end of their shift and the end of the day, I’d always break down our shortfall into the smallest possible number.
For example: Let’s say we had a sales goal of $5000 for the day. If we generated $4000, with a $40 average order value and 100 transactions, then I’d break it down to show that if we had just added $10 to every transaction, we would have hit our goal. That could be as simple as suggesting a piece of jewelry or an accessory they may like. It’s the do you want fries with that cross-sell. The type of cross-sell you can mimic on your store with the help of some technology.
Depending on our foot traffic and conversion, maybe we needed to convert more customers too. For you, as an eCommerce business owner, you also get to leverage your traffic and margin – something I really couldn’t do when working for a corporate company.
I want you to break down the numbers in your business the same way. You don’t have to go down to hourly sales, that’s a little excessive for eCommerce, but understanding how all your KPIs and numbers play off of each other is really important so that you can break down your goals into super-achievable milestones.
Prioritize Profit Over Revenue
I also want you to focus more on your profit goals vs. your revenue goals. The KPI calculator in the Yearly Ops & Marketing Calendar I provide in the Lounge eCommerce Marketing Membership lets you calculate these numbers in a few different ways, by revenue goal, by revenue increase, and by profit.
While I provide all 3 because all of our brains work differently, I do want you to prioritize profit. One of my biz friends talked about this on her stories the other day. She’s been going through some ebbs and flows in her business this year and her revenue was down a bit, but when all was said and done, she was actually more profitable, even at the lower revenue than the year prior. Unfortunately, this unexpectedly hit her in the taxes – but at the end of the day, she got to celebrate that she made more money.
Reminder: revenue does not equal profit and I don’t want you blindly chasing some carrot just because it sounds cool.
4 Steps to Calculating Financial Goals in Your eCommerce Business
- Consider the type of business you want to have when setting goals, not just big numbers that sound cool
- Focus on how much you want to pay yourself and reverse engineer how to get there
- Profit over revenue, always
- Break your big goals down over time and KPI to set milestones that you can celebrate along the way.
If you’ve never set financial goals in your business, now is the perfect time to start. As we inch closer to the unofficial holiday kick-off, having clear goals to measure against will make it a lot easier to see when you’re successful and when you might need to step up your game.
Learn How to Calculate Your Financial Goals
I go deeper into the math of this on episode 93 of the podcast, All the Ways to Grow Your eCommerce Business so make sure you check that out.
If you just want a spreadsheet that can do the math for you – check out the KPI calculator in the Yearly Ops & Marketing Calendar in the Lounge. If you’re not a member yet, head to eCommerceBadassery.com/membership to join.