Category: How-To

How to Increase Online Sales: Part 1

Posted on by Maria in How-To, Research Methods, Sales, Strategy

Every year I say I want to increase our online sales because, like all manufacturers, we make mad margins on products sold through our online store, which in turn improves our cash flow and bottom line. While our online sales have grown steadily year after year, for 2014, I intend to make a concerted effort to grow them more aggressively. How will I do that? Good question! I’m not entirely sure but thought I could use this blog as a way to share my journey as I go and hopefully help you shortcut the process.

So, for some background info, my goal is to increase our online sales by about 38% to cover the majority of our overhead expenses. It seems ambitious, but I believe it is doable if I put a solid plan together of how that will happen. 

Basic business education tells us that there are generally three ways to increase sales:

  1. Sell more to existing customers
  2. Find new customers
  3. Raise prices (or decrease costs)

I want to consider working on all three things but we need to do some research first.

How do we get our sales today?
My first thought is to try and understand what’s been working so far. I generate the “Sales by Traffic Source” report from Shopify (our e-commerce platform) for 2013 to see where most of our purchasers are coming from and find out that the vast majority of traffic comes from pocampo.com, meaning most people go to our homepage before clicking into the store. Not terribly insightful. Next, I go to Google Analytics to dig deeper into how people end up on our homepage. (Disclaimer: I am definitely a Google Analytics novice, which means you may find better information elsewhere. However, being an entrepreneur means you spend time everyday figuring out something new, which is what I’m doing here)

Since I’m most interested in sales, I go to the conversions menu first, expand “Ecommerce” and check out our conversion rate and average order value, among other things. I plan to use these values for benchmarking our progress as we grow. Next, I click on “Time to Purchase”, also under Ecommerce. Here I find out that 88% of our visitors are purchasing on the same day that they are coming to our site and that 81% are purchasing on their first visit! This suggests to me that when people come to our site, they have already decided that they want to buy.  To confirm that, I then opened up “Multi-Channel Funnels” and peek at “Path Length”. Yep, 70% of conversions have only one path, meaning the purchaser only clicked on one thing before coming to our store to buy, or just plain typed our URL into their browser window. While I like the thought of people exploring us on the web by searching through Google or whatnot, that apparently is not happening. 

I’m curious what the first (and only) path is, so next I go to Acquisition>Channels and change the Conversions option to “Ecommerce”. Here I learn that Google is responsible for about 22% of both my traffic and online sales. The direct channel, most likely meaning people typing our URL directly into their browser, accounts for 19% of traffic and 27% of sales. Facebook comes in third place with 4% of traffic and 2% of sales. Our Mailchimp newsletter shows up towards the bottom of the list which surprises me because it seems like we always get a bunch of orders whenever we send out a newsletter. I suspect that some of the direct sales are from these newsletters and make a note to check our Mailchimp settings to make sure clicks are being tracked properly.

It’s now obvious that people have already decided that they want to buy a bag from us by the time they come to our site and that they are coming to our site from Google or just directly. If from Google, what words are they searching to find us? I go to Acquisition>Keywords>Organic to find out. Most are irksomely not provided, but there are a lot of variations of our brand name. So even if our consumers come to our website from Google, they already knew that they want Po Campo!

Okay, so it’s clear that people who purchase from our online store come to our website with the intent to buy and don’t dilly-dally. But do they come knowing which bag they want to buy, or do they just know they want a Po Campo bag and browse around a little first? To find out, I go to Audience>Overview and see that most visitors see about four of our pages before leaving. That hints at a little browsing and I’m interested which four pages people are going to most often, as well as the sequence of those pages. In Behavior>Behavior Flow, I sort by “Converters” and see that half of all traffic visits our homepage first. After that, most people go to the Bike Bags category, then to a specific bag, then to Cart. Sometimes after that third step, they go back and look at a different bag or look at a video. However, it does seem that people are coming to the site with a specific bag in mind.

Lesson 1: Our current customers know Po Campo well
Based on my first go at Google Analytics research, it seems safe to say that our sales are coming from people already very familiar with Po Campo. Therefore, it seems the best place to start is to figure out how to sell more to our current customers. See Part 2 for that.

Did I make any mistakes in my usage of Google Analytics? Set me straight in the comments below.

Understanding your financial statements: Overview

Posted on by Maria in How-To, Money

I frequently meet with budding consumer products entrepreneurs who ask me questions about finding suppliers or talking to stores or getting press. Rarely does anyone ask me to help them understand their financial statements. And by rarely, I mean never.

As industrial designers, learning how to use financial statements to guide business decisions is just not a competency of ours. Financial statements are emotionless, brutally so. They lack nuance. They reduce the richness of our work to heartless black-and-white numbers. Moreover, we fear that the numbers will tell us to stop doing something when we know in our heart of hearts is the right thing to do, even if it isn’t making much money (yet).

Envisioning the future comes easily to me and is enjoyable, while addressing reality can be tiresome. As a business owner, you must be able to do both, and the objectivity of financial statements makes them useful for evaluating the “reality” piece of the equation.

The three main financial statements are:

  • Profit & Loss Statement (also called Income Statement)
  • Balance Sheet
  • Cash Flow Projections

I’ll devote individual blog posts to these different statement types, but here’s a quick overview of why you should care about each one, with a relatable example to illustrate how they work together.

Profit & Loss Statement (P&L)
I think this is the easiest one to mentally grasp. Basically, it takes your sales and subtracts your Cost of Goods and overhead expenses, leaving you with your net profit.
Why a P&L is useful: If your net profit is a negative number, you’re losing money, which is unsustainable.

Let’s say you graduated college and got a decent job that pays $4,000/month.Your monthly expenses are $3,000/mo., giving you an extra $1,000/mo of “net profit”. If you were spending more than you were making each month, you’d have to borrow money from mom & dad or use credit cards to keep going, neither of which is desirable for very long.

Balance Sheet
I think of the Balance Sheet as describing the overall “health” of your company. It summarizes your assets (things you own, like cold cash or inventory) and liabilities (things you owe, like loans).
Why a Balance Sheet is useful: The Balance Sheet shows you if you are healthy through and through or if you are actually sickly but clean up nice. If you are carrying a lot of liabilities, such as loans, you are being weighed down by debt, even if you are showing a profit on the P&L.

In our scenario from above, I forgot to mention that you have a $50,000 school loan debt and $10,000 in credit card debt. So, despite making a $12,000 “profit” each year, you are still in the red overall since you owe $60,000 to other people. The debts don’t show up on the P&L, so you need the Balance Sheet to get the full picture.

Cash Flow Statement
As a small company, your vendors are going to want you to pay upfront and your customers are going to want to pay you late. That means that even if you show a profit when all is said and done, there will still be times when you don’t have the money you need to pay the bills just because of timing.

Why the Cash Flow Statement is useful: If you look at your statement and see that things are going to be tight in, say, March, you can plan for it by asking for better payment terms from certain vendors or delaying purchases.

In our real-world example, this would be like deciding to use $4,000 of your annual $12,000 “profit” to book an awesome vacation for you and a significant other in February. At the end of the year, you will still have $8,000 profit leftover, but February will be tough since you still have to pay your normal living expenses.

 

This took me a couple of years to wrap my head around, but I think it would have been useful to internalize them earlier. Please leave questions in the comments below and I will answer to the best of my ability!