Taking your numbers for granted…this error that almost costed $100K.

After 20 months in e-Commerce and exactly 14 months full time, I went thru multiple challenges. From learning to scale to a 7 figures business then few months later, struggling like if I was an entire newbie to this business. I’ve received a slap in my face that made me admit that I was not the master that I thought…

A lesson of humility and a required return to the roots.

Some people knows that I’m a fan of martial arts and this brings me to few principles that we are constantly learning as student.

  • You can never practice enough the basics.
  • Anchor yourself in your dream as deep as roots of a tree.
  • There’s nothing faster and more efficient than a straight punch.
  • When everything fail, go back to the basics.

Ok, now what does all these has to do with e-Commerce?

First, you will always hear from all the “gurus”: Take Action, Do It Now, It’s now or never…lol

Second, every courses out there will only show you how to sell, find products and do Facebook Ads.

Third, nobody is going to teach you about logistics.

Fourth, no one is going to teach how to manage your cash flow, how to make your business profitable, I mean the real “net profit” after all expenses and taxes paid.

And I can add up more…

But because of the of knowledge in logistics and numbers, most of the people will fail big time, and they will not understand why, and they will go around trying again and again and make the same mistakes.

Which brings me back to the “kung-fu” lesson #1:

  • You can never practice enough the basics

This is only true if you’ve learned the basics right from a proven system.

Most of the systems/courses taught have a deep lack in numbers, business administration and logistics. You’ll either have that background or you will need to learn it from somewhere else.

If you want to run a multimillion business and scale it, you will need to master the “right” basics or get surrounded by people in your business that will give you that balance, if not, at any stage of your growth you can fall down.

Lesson #2

  • Anchor yourself in your dream as deep as roots of a tree

Dream = Ultimate Goal

Which means what ever is happening stick to your plan. There’s so much distraction here and there. So much opportunities, so much ways of doing money.

The question is what you would like to achieve and how you are going to make it happen. Once you have figured this out, your focus, your desire, your motivation must be only that.

If someone wants to do a JV or a new project with you, just politely decline and tell them why. People won’t be mad but they will show you respect for what you’re trying to accomplish and for your dedication as well.

Lesson #3

  • There’s nothing faster and more efficient than a straight punch.

I like this one, and funny it is. The truth is that as entrepreneur we are masochist, we really enjoy torturing our lives to make things and show people how hard it is and how we hustle and we grind.

For sure entrepreneur life is not easy, but if we could just take a step backward sometime (again, we never have time for that) this could save us big mistakes and help us reduce friction points and make our road to success straight and faster instead of running around like a head-less chicken :P

Lesson #4

  • When everything fail, go back to the basics.

Because we tend to not follow Lesson #3 we will fail again and again.

The only way to fix that is to go back to the basics, but what’s happening if we have the wrong basics? We will fail even more!

…Until we decided to take a step backward and to fix it.

So now that we know more about what we should do, let’s have a deeper look into the numbers since this one important part that nobody is teaching and that can save and make you a lot of money if you understand it.

First let’s clear things up, the money that you’ll put in your pocket is not the your Daily shown revenues in Shopify minus the FB Ad spend.

Here are some expenses to consider

  • Cost of goods
  • Taxes
  • Discounts
  • Shipping Cost
  • Fulfillment cost (if you’re dealing with one)
  • Credit Card fees
  • Paypal Fees (you can add also the bank transfer fees)
  • Exchange rates (if there are any)
  • Ads (FB, Adwords, Twitter, AdRoll, etc)
  • Shopping Cart (don’t forget all the apps)
  • Email services (if you use more than one)
  • HelpDesk Software
  • Phone 1–800
  • Staff (Support, Designer, VA, etc)
  • General Business expenses (Accountant, Softwares, etc)

It’s a good list so far, I might have even forgot few things here and there.

Now the important metrics to take in consideration:

  • First Degree Net Revenue or called “Sub Total” in Shopify Reports (This Revenues without taxes and shipping cost)
  • Average Order Value (This will let you know for how much people are buying per order)
  • Average Product Per Order (This will let you know how many products are added in 1 order per customer)
  • COSG Ratio (This is the proportion that the cost of goods represent in your revenues, this can help you to have a sense if you have good margin on your product)
  • Ad Spend Ratio (This is another indicator to tell you what represent your spending on your revenue)
  • ROAS or Return on Ad Spend (This will tell you how much you spend for the gross revenue you generate)
  • ROI before Business & Salaries (This is only your ROI based on your Selling cost and returns)
  • Clear Net Profit (This is the money left on the table after everything is paid)
  • Profit Ratio (This is based on your Gross Revenue divided by your “Clear Net Profit”)
  • Conversion Rates
  • LTV (Customer Lifetime Value — a bit more complex to calculate right away but essential for growth)

If you don’t have these metrics in your tracking sheet, you must add them.

Here are some exemple on how this can help you

  • Let say that your “Profit Ratio” is way under what you’re expecting. By know what is COGS Ratio, ROAS, or Conversion rate, you’ll see right away what you have in hands to make good decisions and make the adjustment.
  • Now, if you want to increase your ROI, same thing can happen if you want to take a decision on the shipping fees or reducing the price. If you remove the shipping fees, you might increase the ROI but your Profit Ratio might lower down on the other end, so you’ll need to make adjustment on your either your product price, product cost or ad spend.

You see, these options open a whole new world in terms of taking the right decisions and building a sustainable business. Running a business with only “money-in — money-out” won’t be scalable, because you won’t be able to measure the real impact when you’re making some changes.

Since most of the courses teaches the same thing, when you want to make more profit the only thing you might have in mind is either find cheaper products, increase your ad spend or something else without really looking how it does impact other metrics.

I’ve made both of these mistakes and it costed literally $100K in profits.

Running without all these metrics for almost a year and looking mostly money in and money out, wasn’t bright, I admit and I can only blame myself for a lack of diligence into that.

From now on, I won’t work without it and the reason why, is that I’m addicted to it.

If you want a copy of the tracking sheet I use just go there http://business.imevolution.club/optin-ecom-tracking