Do the Marketing Math for Your Online Business

Let's say the goal for your online business is to generate $1,000 in cash every month. Given this goal, how much should you invest to market your site? Or do you just spend what you can and hope for the best? Unfortunately, too many people I talk to are not doing the marketing math to realize that hoping is not enough.

Let's do some easy calculations to understand why.

First you need to answer a few questions:

• How much money do you make per order? Just multiply your profit margin by your average order size and this is how much you'll make per order. For example, if you expect to make a 50% profit on every order and your average order is $100 then you'll make $50 per order.
  

• What's your website conversion rate? Don't expect more than one out of every 100 visitors to place an order. An order could come from someone using your online shopping cart or seeing your phone number on the site and calling in their order. Either way, it means you have a "conversion rate" of 1% (1 order out of 100 visitors) which is pretty typical these days. And when you're first starting up, your website conversion rate could be a lot less than 1%.
  

• How much are you paying for each website visitor? Whether you advertise using paid search or banners, you want prospects to "click" your ad and come to your website. To keep things simple, let's assume you pay Google $2 for each of these clicks. This means your cost per website visitor is $2. (Generally speaking, you should expect to pay Google $2 to $4 per click)

Now we're ready to do the math:

1. Cash goal: $1,000 (my example)
2. Profits per order: $50 (per our assumptions)
3. Orders needed: 20 (20 orders * $50 profit = $1,000 cash goal)
4. Conversion rate: 1% (1 out of 100 visitors will order)
5. Number of visitors required: 2,000 (20 orders / 1% conversion rate)
6. Cost per visitor: $2 (cost per click)
7. Marketing spend needed: $4,000 (2,000 visitors * $2 per visitor)

Once you've figured out the math you'll come to an important conclusion: in my example, you have to spend $4,000 on marketing your website to generate $1,000 in cash. What's the bottom line? You'll actually lose $3,000 every month!

Or said another way, it's almost impossible to make money paying Google to drive traffic to your website. Does this mean that all is lost and you'll never make money with your online business? Of course not! There are a number of ways to more cost-effectively market your site than handing over every dollar to Google.

For example, search engine optimization can help you generate natural (free) search traffic to your website. You can also submit your site to online yellow pages and directories that make it easy for prospects to find your business. And when you make your first customers happy, they'll become a "volunteer sales force" and tell everyone to come check out your site!

Leave Money to Market Your Website

I was recently chatting with a business owner who needed help marketing her e-commerce website. It cost $10,000 to develop and had a nice design, lots of dynamic pictures, and an integrated shopping cart. It was also search engine optimized with a home page that included the most relevant keywords. I was looking forward to helping out and asked the obvious question: "What's the budget to market your site?" She said: "A couple hundred bucks a month." Huh?

Turns out she basically spent all her money developing and keyword optimizing her website... and now had very little left to market it. Why? Because she thought the search engines would find her site (remember, it was search engine optimized) and the resulting Web traffic would guarantee her business taking off. Not much I can do to help now...

Here are some suggestions to make sure this situation doesn't happen to you:

• Understand that natural search takes time. I don't care how search engine optimized your website is. It will still take (a long) time before the search engines find you, other website owners link to your site, and your site listing moves up the natural search ranking so that prospects can find you when searching on the keywords you care about.

• Use a 50/50 budgeting approach. Sure, every situation is different, but as rule of thumb, you should expect to spend on marketing at least what you do in developing your website. So if you budget to spend $2,500 in creating your site then you need that much (if not more) for marketing your site. That means you need a total budget of $5,000. Does that make you rethink how much you should spend on your website? Good.
  

• Please... no bells and whistles. A simple website that meets your basic needs is what you're looking for. Forget the "bells and whistles" since most of your visitors won't even care about them. For example, if your goal is to "get the phone to ring" then a website that describes your service, tells why you're great, and prominently displays your phone number is all you need to start.
  

• Don't spend a lot on SEO. Don't get me wrong. I'm a big fan of search engine optimization. With that said, if your website doesn't have lots of content to begin with then there's only so much you can do to keyword optimize it. Instead, buy an SEO book with great reviews on Amazon, put in practice what you learn, and then use the thousands of dollars you save on marketing your website.

With dollars in hand, you now have money to spend on generating Web traffic for your site!