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Top 3 Profit KPI’s for eCommerce Businesses

The decisions that you make as a business owner will decide the fate of your business, family, and overall life.

Everything that you do in your business should be planned and measured.

There are tons of different KPI’s, financial ratios, and benchmarks we can use to diagnose and assess your business to drive key financial outcomes.

Below I go over three fundamental profit KPI’s that every eCommerce business owner should be constantly monitoring.

  1. Gross Margin Rate

It is essential to understand and track gross margin on a per product and per sales channel basis.

This will drive key business decisions regarding profitability and allow for benchmarking against your peers.

👇 I recorded a video going over this below

Your Gross Margin Rate is:

(Revenue – Cost of Goods Sold) / Revenue

It is key to have an accounting system that accurately tracks cost of goods sold per product and per sales channel basis.

  • Average Order Value

Your average order value (AOV) is the average amount of money each of your customers spends per order.

Your Average Order Value Is

Sales/Total Number of Sales

The Average Order Value multiplied by your Gross Margin Rate show your average margin per order.

This will drive your marketing decisions since this will show how much you can afford to spend on new customers to keep their first order profitable.

  • Customer Lifetime Value

Customer Lifetime Value it is how much the buyers contribute to your business from the first order they place to the last.

The more valuable your customers are over the course of their relationship with your brand, the higher your return on investments made in advertising and customer acquisition.

At Camuso CPA, we partner with your company to not only handle your basic accounting but to provide ACTIONABLE and PROACTIVE financial insights that improve your business and increase your profits.

If you’re ready to take the next step in scaling your eCommerce business, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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Sherman Case Study: Cautionary Financial Lesson for eCommerce Businesses

When you are a business owner you are solely responsible for your financial future.

Without having a strong accounting system AND financial system implemented in your business you are destined for failure.

This means that you have to have a strong accounting foundation.

But also, key financial data and key performance indicators that allow you to understand your business finances.

👇 I recorded a video going over this below

Case Study

Founder Jody Sherman was able to get $1 million in startup funding.

Unfortunately, he was not an CPA or CFO and, in fact, did not even hire a controller until 2011.

While revenues were solid and growing, the cost of getting those revenues meant the company was losing money.

When an additional $12 million was needed to turn around and scale, investors walked away – they were getting no return on their investments.

In 2013, the company went into bankruptcy.

According to the company’s controller, the company’s aggressive discount culture and Sherman’s lack of financial knowledge dwindled away the company’s account to nothing.

This is why gross profit margin is critical because it immediately gives you an overview of how your current revenue is impacting the rest of your business, and whether it is doing so at a profit or a loss.

This is one of many key financial metrics you should be constantly monitoring and improving.

This has a far-reaching impact on your strategic and tactical options for how to run your business.

Yes, revenue matters but it is not what you make that matters it is what you keep.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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eCommerce Businesses: The Only 2 Ways To Increase eCommerce Gross Margins

Gross profit margin is a key metric for eCommerce business owners to manage.

Gross margin is a two-part equation.

To improve gross margins for your e-commerce store, you can either increase your revenue per product or decrease the cost of each sale.

To increase revenue, you have to find opportunities to increase prices or average order value.

The specific strategies you should use here will be specific to your business circumstances.

👇 I recorded a video going over this below

Some examples include:

  • Add a recurring element to your sales to create repeat customers
  • Improve Your Product
  • Upgrade Packaging
  • Product Bundling & Discount Strategies to increase average order value

Decreasing your cost of goods sold is more difficult but possible.

The specific strategies you should use here will be specific to your business circumstances.

Some examples include:

  • Supplier negotiations for lower pricing
  • Reducing shipping cost
  • Reducing warehousing costs

Two keys to understanding and improving gross profit margin is gathering and interpreting data.

That is why it is key to invest in proper inventory management system to understand your inventory costs which compromise your cost of goods sold.

Additionally, you need to properly track your variable costs separately including freight, import, manufacturing costs, packaging and shipping.

This all should be tracked per each product, sales channel and customer.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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eCommerce Businesses: Gross Margins Can Make Or Break Your Business

Gross profit margin is a key metric for eCommerce business owners to manage.

Do you know your gross profit margin per product, sales channel and customer?

This can make or break your business.

Unfortunately, I know most of you will not have these key KPI’s integrated into your accounting and financial system.

Gross profit margin is critical because it immediately gives you an overview of how your current revenue is impacting the rest of your business, and whether it is doing so at a profit or a loss.

This has a far-reaching impact on your strategic and tactical options for how to run your business.

Yes, revenue matters but it is not what you make that matters it is what you keep.

Gross margin should not be confused with net margin which includes your overhead costs.

Gross margin tells you whether your e-commerce store is making a profit on each product that you sell.

Now, if you make a gross profit on each product, but you have a negative net profit, that means that the overhead and marketing costs are too high.

That also means that if you scale your revenue and your customer base, your overhead costs would grow less and you would grow into profitability.

What does it matter to have a business doing $1M, $5M or $10M if you have razor thin profit margins?

If you’re ready to take the next step in scaling your eCommerce business, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

Consider the below example:

Company A:

Monthly Revenue: $100,000

Gross Profit Margin: 15%

Gross Profit: $15,000

Company B:

Monthly Revenue: $30,000

Gross Profit Margin: 50%

Gross Profit: $15,000

In this example Company A and Company B make the same profit but Company B does so with only 30% of the revenue of Company A.

👇 I recorded a video going over this below

The key is first understanding and monitoring your gross profit per product, sales channel and customers.

Then you can take this data and benchmark it against your industry.

Finally, we can focus on strategies to improve this significantly.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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Products, Customers AND Sales Channels

One consistent trend that I see is that business owners do not focus on their accounting function until it is too late.

It is unbelievable how many serious business owners do not consistently and frequently review their financials.

Even more frequently, eCommerce business owners are not tracking their accounting data properly to make key financial decision.

This is step number 1 in scaling your eCommerce business.

You need to understand your income and expenses per each product, customer, and sales channel that you sell.

Additionally, you need to properly track your variable costs separately including freight, import, manufacturing costs, packaging and shipping.

We improved one of our recent new clients accounting systems to track this level of granular financial detail in their financial statements.  

This allowed us to then benchmark their key financial data and make improvements in their pricing which lead to an increase of 5.2% or $52,000.

👇 I recorded a video going over this below

Are you managing this properly?

Or are you overlooking your finances?

If you fall into this category check your books.

Are they reconciled?

Do they balance?

Is your financial. data detailed, clear, and actionable?

If the answer is no, this is a serious problem.

At Camuso CPA, we partner with your company to not only handle your basic accounting but to provide ACTIONABLE and PROACTIVE financial insights that improve your business and increase your profits.

If you’re ready to take the next step in scaling your eCommerce business, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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Increase Profits, Improve Cash Flows, Effectively Manage Inventory

The truth is most accountants are just a cost.

The cost of compliance with taxes.

The cost of getting the books done.

But when you work with me.

It’s not just about compliance.

👇 I recorded a video going over this below

It is about increasing profits, improving cash flows and effectively managing your inventory.

You need an eCommerce CFO on your team to effectively manage these processes on an ongoing basis if you have serious goals to scale your eCommerce business..

Whether it’s improving your gross margin through pricing strategies based on key performance indicators.

Or improving your cash flow and inventory management with effective forecasting.

Or customizing your accounting process to effectively track income, expenses and key performance indicators on a per product, customer or sales channel basis.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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Increase Average Order Value with Top 5 Strategies

An effective method for increasing your profit margins is increasing your average order value.

Average order value is the average dollar amount a customer spends per transaction in your store.

You can calculate average order value by using a simple formula: total revenue / number of orders = average order value.

To increase your average order value, you’ll need to convince customers to add more items, or more expensive items, to their cart.

There are many different strategies that can be used to achieve this.

👇 I recorded a video going over this below

I included an overview of 5 strategies below.

  1. Add product recommendations to product and checkout pages
  2. Upsell or cross sell complementary products
  3. Provide order minimum incentives
  4. Create product bundles or packages
  5. Run deals and specials

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

Read more

Why Customer Lifetime Value Can Kill Your eCommerce Business (Use This Metric Instead)

Customer lifetime value is an important metric for eCommerce companies to understand and measure.

Customer lifetime value is an average of how much a customer is worth to you over their lifetime.

What do you do if your business has only been operating for a short time period?

6 months?

1 year?

👇 I recorded a video going over this below

Customer lifetime value will be useless.

30, 60, 90-day customer values are a much more important metric for your eCommerce business.

Factors including your SKU set, your average consumption rate, and your cash flow will dictate the specific time periods you should account for.

The key is to choose a time window that you can impact and that you can afford to wait for from a cash flow perspective.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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eCommerce Growth Equation – Do The Math

As your business grows, it becomes more important to monitor and analyze your data.

This one equation simplifies your eCommerce financials and allows you to cut through uncertainty so that you can prioritize key financial decisions.

Visitors x Conversion Rate x AOV  = Revenue

By focusing on these three variables, you can you assess every way to increase revenue for your eCommerce business.

The key is acting with this information.

👇 I recorded a video going over this below

Identifying and implementing key financial decisions into your business that increase your bottom line.

The first key step is ensuring that we have clear and actionable data to base our decision on and to calculate our formula.

If these metrics are inaccurate you will make terrible financial decisions.

This requires a proper accounting system.

Then we need to implement financial and business strategies combined with effective marketing campaigns that increase your bottom line.

We need to effectively analyze and interpret this data so that we can make the necessary changes when it comes to pricing, inventory management or other aspects of your operations.

This has to be done on an ongoing basis, at least monthly.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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Markup v. Margin Cautionary Financial Lesson for eCommerce Businesses

Mismanaging margin and markup can lead to selling products at prices that are substantially too high or low, resulting in lost sales or lost profits.

Margin is sales price minus the cost of goods sold.

Below is a breakdown of each profit margin formula.

Gross Profit Margin = Gross Profit / Revenue x 100

Operating Profit Margin = Operating Profit / Revenue x 100

Net Profit Margin = Net Income / Revenue x 100arkup is the amount by which the cost of a product is increased to determine a selling price.

👇 I recorded a video going over this below

To determine a selling price, the figure you should use is markup.

When you’re analyzing your financial performance however, it’s typically better to use margins.

Do not confuse markups and margins at the cost of your profits.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

Read more