Management & Finance

10 Numbers Every Ecommerce Business Must Track

Most ecommerce storeowners are good at growing sales and streamlining operations. However, when it comes to improving how much cash the business generates they hope and pray that it all works out.

But cash is king. You must have cash to stay in business and grow.

In this post, I will review 10 numbers to track monthly to generate more cash.

The 10 numbers do not mean much by themselves. Put them into context to provide a complete financial picture. Monitor each number monthly and compare it to (a) the prior month, (b) the same month last year, and (c) your goal or budget.

  • Prior month. Compare each number to the prior month to spot trends and changes.
  • Same month last year. Ecommerce sales are often seasonal. Measuring the numbers against the same month last year will provide a meaningful comparison.
  • Monthly goal or budget. Set a goal for each of the numbers on the list. Then compare the budget to actual performance.

10 Essential Ecommerce Numbers

Sales and returns. Track sales and returns (a) by major product line or category and (b) by marketing source.

Consider an example of a hypothetical online bicycle store. In the table below, note that the store generated sales in January of $18,590. That’s an improvement over January of last year, which generated sales of $15,400.  It’s also more than the budgeted amount of $14,410.

January SalesPrior Year
Actual
Current Year
Goal
Current Year
Actual
Bicycles$9,568$10,000$11,258
Parts$4,450$5,000$6,840
Accessories$392$400$492
Total Merchandise Sales$14,410$15,400$18,590

Returns should also be tracked as a percentage of sales for each product line. Any increase in the percentage of returns needs to be addressed.

Tracking sales by the marketing source will help to evaluate advertising and promotional efforts.

January Sales by
Marketing Source
Prior Year
Actual
Current Year
Actual
Google AdWords$2,870$3,461
Bing Ads$2,460$3,077
Google Organic$3,280$3,077
Bing Organic$1,640$1,923
Email List$820$1,154
Social Media$410$769
Referral Partners$820$1,538
Total Sales by Marketing Source$12,300$14,999

Number of orders. Tracking the number of orders by product line and by marketing source is important because the monetary value assigned to an order can skew results.

For example, say your store generated $10,000 in sales on two separate days. The first day generated one order of $10,000 and on the second day generated 100 orders of $100.

Tracking the number of orders provides critical detail. Plus, it’s helpful for computing other metrics such as conversion rate, below.

Average order value. Once you track sales and the number of orders, you can calculate your average order value, which is the average amount of each sale. The aim is to entice your customers to purchase more items per visit.

Average Order Value = Sales ÷ Number of Orders

Cost of sales. The cost of sales is (a) cost of the product and (b) other direct costs involved to process the order, such as credit card fees and shipping.

Track the cost of sales as a percentage of overall sales and compare to your budget, the prior month, and the same month last year.

January Cost
of Sales
Prior Year
Actual
Current Year
Goal
Current Year
Actual
Merchandise (Bicycles)40.0%40.0%37.2%
Merchandise (Parts)30.2%30.0%22.0%
Merchandise (Accessories)6.8%7.0%10.7%
Merchant Fees2.4%3.0%2.0%
Shipping Labels4.3%5.0%4.0%
Average Cost of Sales %40.4%41.2%35.0%

Gross profit margin. Gross profit is simply sales minus direct costs. Compute the gross profit margin by dividing gross profit by sales.

Gross Profit Margin = Gross Profit ÷ Sales

This percentage tells you how much margin, or profit, each product produces.

Track the gross profit margin for the entire store and for each product line. Your objective is to increase the gross profit margin for each product each month. Decreases should be carefully analyzed.

Visits by marketing source. Before someone makes a purchase, you must first get her to the store. Thus it’s important to track the number of visits by marketing source. This will track how each marketing source performs in terms of generating traffic.

Conversion rate. The conversion rate is simply the percentage of visitors that purchase your products. Track your conversion rate for the entire store, and by marketing source.

To compute the conversion rate for the store, divide the number of monthly orders by the number of monthly visits.

Conversion Rate = Number of Orders ÷ Total Visits

To compute the conversion rate by marketing source, divide the number of orders from each marketing source by the number of visits for each marketing source.

The aim is to increase your store’s overall conversion rate.

January Conversion
Rate by Source
Prior Year
Actual
Current Year
Actual
Google AdWords2.92%3.21%
Bing Ads3.73%4.42%
Google Organic2.11%1.81%
Bing Organic2.35%2.54%
Email List7.87%7.32%
Social Media4.35%3.07%
Referral Partners3.73%6.25%
Conversion Rate (entire store)2.85%3.07%

Marketing costs. Even if you sell the same product to two customers, your net profit for each order may not be the same. It depends on how much money you spent to attract each customer to your store.

Thus it’s important to measure all marketing costs by the source as a percentage of sales, to track how each source is performing.

January Marketing
Costs by Source
Prior Year ActualCurrent Year GoalCurrent Year Actual
Google AdWords34.1%35.0%29.7%
Bing Ads36.2%35.0%31.1%
Google Organic30.5%30.0%32.5%
Bing Organic61.0%30.0%52.0%
Email List0.0%30.0%0.0%
Social Media7.1%10.0%5.3%
Referral Partners9.1%10.0%6.2%
Total Marketing Costs by Source %32.3%27.5%

Overhead expenses. Overhead expenses, such as payroll and rent, are mostly fixed. These expenses must be paid regardless of sales volume.

However, you should spend money on an overhead expense only if it will help produce more profit. Otherwise, there is no point.

Net profit. Net profit is the amount of money that is left over from sales after you have paid all costs and expenses. This is the ultimate scorecard for your business. Track the net profit monetarily and as a percentage of sales.

January Net Profit
Calculation
Prior Year
Actual
Current Year
Goal
Current Year
Actual
Merchandise Sales$14,410$15,400$18,590
Merchandise Returns$(959)$(1,128)$(1,153)
Merchandise Cost$(4,845)$(5,116)$(5,376)
Other Costs of Sales$(974)$(1,232)$(1,129)
Marketing Costs$(3,974)-$(4,124)
Payroll Expenses$(1,725)$(2,000)$(2,150)
General & Admin Expenses$(895)$(500)$(956)
Net Profit $$1,038$5,424$3,702
Net Profit %7%35%20%

A Complete View

In my experience, business owners often track too many numbers or not enough. Owners that track too many numbers sometimes get overwhelmed and simply stop the process because they don’t see the value.

Owners that don’t track enough end up basing their decisions on just one or two metrics, such as gross sales or cash in the bank. Neither offers a full picture of the business. Thus these owners end up making poor decisions.

But the 10 numbers above provide a complete view. Track them each month. Over time, your financials will come alive. You will know which areas of your business are working and which need improving. You can make decisions that improve profit and grow cash.

 

Adam Lean

Adam Lean

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