Your Online Business
– You Can’t Manage What You Don’t Measure – Part I
[Guest Post by Chris Taylor]
I’m an eBay seller. And running a successful business, big
or small, means understanding my numbers. What’s my profit? Do I make a
profit?? How much am I paying in fees? What is my inventory costing me? Do you
know all of these answers? As Jim “Griff” Griffith, Dean of eBay Education and
Senior Manager of the Selling Experience team at eBay says, “The numbers…you
can’t manage what you do not measure. And a business you can’t manage, you
can’t grow.” And he’s right.
Learn from Griff’s
Words
Griff recently did a webinar called “Know Your
Numbers: Managing Your Business to Greater Success.” I know, not quite the appeal of The Avengers.
But I’ll bet Griff’s webinar will do a lot more to make your online selling
efforts more successful! (Although who couldn’t use a few super heroes now and
again?) Anyway, I transcribed his presentation and wanted to share a few of his
recommendations.
The Important Numbers
Naturally we want to turn our attention to how much money is
coming in versus how much is going out. But what about the numbers behind
profit/loss?
Well, how much did you sell last quarter? Last year? What were
your shipping costs? How much did you lose in returns? If you don’t know off
the top of your head, can you get those numbers quickly? If the answer is “no”
to any of those questions…you have some work to do.
In order to better understand why your business is
successful or struggling, Griff suggests creating a Profit & Loss
statement. Here’s what it contains:
·
Gross
Sales
o
All the revenue you took in during a specific
period.
·
Cost of
Goods Sold
o
In order to sell goods, you need to buy them. So
this is that cost.
·
Gross
Margin
o
Pretty straightforward - subtract your Cost of Goods
Sold from your Gross Sales.
·
Operating
Expenses
o
These should be broken out into specific
categories. There are some common ones and others that will be appropriate for
just your business. These could include: facilities, selling fees, shipping
costs, supplies, losses, advertising & promotion, and everything else. Add
these all up.
·
Net
Income
o
This is the magic line. It means everything to
your business. Your Gross Margin minus your Operating Expenses equal your Net
Income.
Part II
The next post will talk about another set of important
numbers. These have to do with your conversion rate, format mix, sales velocity
and more. You can wait….or you can watch a recording of Griff’s entire “Know Your Numbers”
webinar right now as well as download the guide that transcribes his comments and
incorporates with his slides into a PDF for easy access.
Best success!
Chris Taylor,
