Anna chats about a topic she is super passionate about - the numbers you need to be across to grow your business. But don't switch off! Get ready for a wakeup call.
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Welcome to episode three of The Elevatory podcast. I'm your host Anna Jonak and the founder of The Elevatory. Now, today, I'm going to be talking about a topic that I am personally super passionate about. But it's a topic that most women I know, and meet are less than enthusiastic about. I wonder what this topic could be.
What do you think?
I'm just going to say it it's numbers.
We're going to be looking today at the numbers you need to be across to grow your business. But before you switch off this episode, I'm sure there's many of you that just want to turn off runaway, go listen to something else, stay with me, because I can actually guarantee with you that the information that I'm going to share with you today, will do one of three things. It will save you more money. It could save your business. That's a bit cool, but honestly, I'm not joking. When I get into some of this stuff with our clients, it does save businesses. And number three is going to give you a bloody big wake up call. If nothing more as to the stuff that you really should be across.
And also maybe give you a little bit of a wakeup call as to what's going on with your mindset and beliefs here. With regards to why you were avoiding this area. Because there is so much power in your numbers, but so many of you ladies out there are avoiding this aspect. They don't understand it. They're unsure of it. They're scared of it. They shy away from it. They put their head in the sand. I wonder if this sounds like any of you guys, right?
Well, it's my mission honestly, hand on heart. I feel really strongly about this, a mission of mine to improve the financial and analytic understanding of women in business. You ladies have got to be across this stuff. We literally see hundreds of clients a year and the majority of them are not across what I'm about to take you through now, or across very little of it. But ultimately by the end of working with us, of course, it's a very different story. And I would like that story to be different for you too.
So what I'm going to do now is take you through a top line view of the numbers that we dive into with our clients, the numbers that you need to be across that will help you grow your business. And in all honesty, potentially even save it. Okay. So let's start with the first thing I want to discuss, which is financial management.
1. Financial Management
So when it comes to financial management, what I mean here is I want you guys across your profit and loss (PNL) and also your cashflow. Now, quite often, these two things are confused, but a profit and loss is a financial report that provides a summary of your revenue, expenses, and profits and stuff, over a period of time.
It's like a snapshot of your business's performance, but it's different to your cashflow because your cashflow, what's happening here is it's looking at what's going on in real time within your bank account, and sometimes your PNL and your cash flow, they look quite different. Also cashflow takes into account things like, GST, income tax and super payments that need to be made, whereas a profit and loss, already looks at things like that once they're taken out.
But you need to pay income tax and some of you pay GST and I've been into client's numbers and seen that they haven't put money aside for tax and they're not paying GST and they're going to get smashed with a big bill. So we need to be planning this into a cashflow plan. So you know exactly what you need to be paying it every month, what you can keep, and not running into any debt.
Basically. I see a lot of people just; they've got a bank account and they've got money coming in and they spend it. But they often could be robbing Peter to pay Paul. There's money there and they can pay for things, but actually the business is operating in a massive hole, lots of red. Not good right?
So it's really important that you have a view of what your business looks like on paper, but equally what's happening in real time. Cause you can have some businesses, which, on paper are profitable, but they've got no cash flow, whereas others that have got lots of money moving around in them, but they're not actually profitable.
And we want to make sure that you're a business that has got cash and is in profit. So alongside those two things, it's really important for you to be looking at things like forecasting and budgeting. So forecasting is a really great tool for help us to look at what your business can perform like over time. So what we can do is we can look at stress testing scenarios, like increase ad spend, increase your revenue goals, or bringing in an extra staff member. And what we can do is we can see what that might look like to your overheads each month and how much extra money you need to bring in and things like that. And then you can start to set budgets or goals for yourself. This is how much I'm going to spend. These are my monetary goals. So financial planning really, really important. You can't put your head in the sand about it because if your business is running in the red, it's just going to get worse. All right.
So that's financials. Next thing I want to talk about is profit margins and markup.
2. Profit Margins And Markup
Now I speak to a lot of people. And when I asked them what their margins are in their business, this will be an e-comm store specifically, most people can tell me what the markup amount is, but very few can tell me the margin.
Now, if I'm completely honest, I don't want to know about your markup. I don't care about the markup. I want to know about your margin because the margin amount shows me how much money is left over after you make a sale. Okay. So for example, if you've got a 50% margin, it means for every hundred dollars coming in, $50 comes back out and that is yours.
"I don't want to know about your markup. I don't care about the markup. I want to know about your margin because the margin amount shows me how much money is left over after you make a sale." - Anna
And with that $50, you get to pay yourself, you get to run and operate your business, ad spend, wages, you name it. Okay. Now obviously the lower the margin, the more work, the more that you need to sell in order to bring in cash out the bottom. So when I can see your profit margins and I can see your overheads very quickly I can see how long it's going to take and how much you're actually going to need to turn over in order to make a decent income.
And it can be really surprising for some people, because when they've got margins sitting around the 40 and 30% and downwards from there, you have to do a lot more volume in sales. So be across your margin. And also for service businesses, I think that it's worth having a look at margins for some services, like you might have overheads that are relevant relative to one service and not another. And it's worth you looking at how those services are operating and making your money because you might decide to invest more time in one over another, or even cull things. So take the time to look at profit margins.
Other areas when it comes to numbers that you're going to want to be across all your analytics.
So Google Analytics and/or Shopify data. So depending on what kind of platform you've got, what kind of business you have and what kind of setup you have, some of the metrics we would like to be looking at with your analytics, traffic, and sessions on the site, how many eyeballs are you getting? How many people are coming to your site on an average day? Is it what you think?
For example. If you've only got three or four people coming to your site a day and you've got a low conversion rate or an average conversion rate of one. It's impossible for you to make any sales. It's time to start doing the maths. So you get a hundred people to your site, and you've got a 1% conversion rate, then you're probably going to make one sale a day.
Now a lot of people come to us, they've got a traffic problem. They don't have enough people. There's not enough eyeballs on their site. So even though they've got a good conversion rate, it becomes statistically impossible for them to make sales with the volume of people coming through their site every day.
So the work becomes about bringing in more traffic. So have a look. How many traffic sessions, how many people are coming to your site each day? How long are they staying on your site? Like what's the session duration and are they there for a few minutes or are they leaving straight away? Do you have a high bounce rate? Do people come and then they go really quickly, you know, high bounce rate is over 50%. What's your conversion rate look like? All of these, these data will tell us how well optimised your website is for conversion. And if people aren't spending long on the site and people are leaving really quickly, and you know, your conversion rate is low, then you've got an optimisation problem that needs fixing. And obviously the beauty here, is fixes here, mean you can make more money. You get more traffic, you make more money, you fix the conversion issues, you get people on your site longer. They're more likely to buy. We make more money.
Another metric worth looking at is the average order value of your clients. How much is each client worth to you? Do they join you and do they spend a hundred dollars? or are they spending $10? Because the average order value also gives you an indication later on, on what is your cost per acquisition, as discussed in a bit more detail in previous episode with Caroline, when it came to Facebook ads. So these are just some of the metrics that you can be looking at using your analytics.
Other things that we would like to look at analytics wise with our clients are looking at the insights around your email campaigns, whether that's campaigns that you send out weekly or whether that's email automations, you know, some big stats here for businesses - we've got E-comm stats saying up to 20% of your current sales should be coming through email marketing. Is that true for you guys? Or you've got a really small percentage of sales coming through email marketing? Could your email marketing be working harder for you? You know, do you have all the automations set up that you need to have set up? How frequently are you sending emails? What kind of click-through rate? What kind of open rate, how many orders are being made. likewise, what kind of open rate are you getting if you're a service business? Like for us email marketing definitely delivers sales. It's certainly not up at the 20%, but it definitely is a big piece of our acquisition pie. And therefore we make sure we spend time there, but equally we look at the steps. What do we need to do to increase open rates? Do we need to change subject lines? Do we change body copy? Do we play around with calls to action? All of this stuff matters, guys, and again, it doesn't cost you anything to work on your emails. But what it does give you in the end / output is the opportunity to book more calls, have more conversations and make more money. All right. So emails break them down. You might find that certain titles work so well that you're going to want to repeat them every few months, people aren't going to remember, you know, what can you use again and again? Or like, were there certain campaigns that worked super well last year that you can tweak and then reuse for certain campaigns again this year?
Alright, so that's emails next is, tracking your paid ad spend. So we've got Google trackers and Facebook ad trackers for anyone running paid campaigns. And some of the things you're going to want to look at here are your cost per acquisition. So what does it cost you to acquire a customer, a paying customer, return on ad spend? So that's obviously how much money you're making after you have got the sale. And other things worth looking at, I mean, there's lots worth looking at, but other kinds of top-line parameters, I guess, worth mentioning here, you know, what kind of reach do you have? What kind of frequency are you getting at with your audiences and what kind of click-through rates? Again, all of this stuff has an impact on your ability to make money and get a good return on your investment.
So these are just a few areas that we have clients living in, breathing in spreadsheets regularly, and we meet with them regularly. And we look at this data so that we've got insights in what's working, and what's not, because as you can see, a lot of this stuff can help you understand a lot more about your business and save you money or make you more money. Just the financial management is going to help you see what's possible with your business. You can look at seasonal trends, you can be prepared by looking at what you've learned historically, and by budgeting and preparing for the future. Margins and pricing. Again, get that right. You don't have to sell as much and you can make more money with what you are selling. You use your analytics to find opportunities for conversion and having more people, spending more time on your site and indoctrinating them, get them in your email list. Get more emails opened, more clicks happening, more sales and calls booked, you know, and get your ad campaigns working harder for you. Obviously with your campaigns, there's a bit to it with regards to testing, in terms of copy and creative. But when you know what the baseline metrics are, you have that baseline with which to improve from.
You can tell I'm a bit excited about this stuff. I genuinely am really passionate about it because I just know how much power and insight we have in all of this stuff, to help us make better decisions and give us a direction sometimes when we're a little bit lost or, you know, when we want to focus in on a specific area, I mean, just recently I was talking to a client and we were talking about, average lifetime value of clients. And we basically have created a whole strategy just around the top two segments of her list who are spending, exponentially more than everyone else. We're really drilling down to understand what they want, what they need, giving them a special VIP status and really treating them very well. And we're also trying to understand their purchase behaviour, where they came from so that we can replicate that in our marketing. But this is the cool stuff that you can drill down into once you start looking at this stuff and then you can start doing some really cool stuff with your marketing.
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