The majority of us will agree that good business decisions are not a gut feeling. Also, successful business owners do not pursue certain strategies just because it “felt good”. If anything, that is very dangerous.
I don’t think I personally know anyone that has made a serious decision based on how they feel. Business wise of course. Anyone that does business that way is just straight up lazy. The lazy way is very, very rarely profitable.
The right way to do business.
What do smart business owners do then? They keep track of the most important metrics of the business. We are talking about the metrics that will show you if you are reaching your goals as a business owner. And if you have no goals then get some, or give up. You will eventually get to the point where making one small tweak to your overall strategy and you should see your numbers go up or down.
By tracking accurate metrics, the right metrics, you will no longer be flying blind.
The million-dollar question.
This could literally be a million-dollar question.
What metrics should you be tracking?
In the next couple of paragraphs, I will cover a few of the most important metrics you need to track. Not only are these key areas you need to always keep an eye on, but tweaking them might strengthen or even weaken your entire business.
Average transaction value, or ATV for short. This metric focuses on the average dollar amount spent by each customer. One way to increase your revenue is by increasing the amount of money each customer spends.
This is a simple calculation, you take the total amount of your transactions across a specific amount of time, and divide that by the number of transactions. (Tip: Your average will be more accurate if the total was taken over a long period of time. Let’s say 6 months or more. If you take it over one week and make drastic decisions off of the results you might harm your business.)
Here is a really simple example:
Let’s say you take your total amount of transactions over 6 months and it comes to $60 000.00. Now your amount of transactions were 2000, that means that the ATV was $30.00 per transaction.
Now you decide to tweak your sales funnel and make your average transaction value $35.00 per transaction. These same 2000 transactions are now worth $70 000.00. That is a wonderful $10 000.00 bump up in six months that did not really need heaps of effort, isn’t it!
Worth doing? Definitely, most will say.
With that in mind.
Here are some of the factors that are going to affect your average transaction value:
The price of the product.
The type of upsell available. (How many and what price.)
How these upsells are positioned and sold.
All seems rather straight forward right? The higher the price on your products, the more money you’ll make per transaction right? Unfortunately not guys. If it were that simple then everyone would do it.
Other factors come into play here and a good business owner always looks at the bigger picture. For example, you raise your price, and maybe your conversions decrease. Your value per transaction will go up, but what does it help if your sales go down? If it goes down too far you might end up losing revenue.
How do we figure all of this it and turn it into value? Testing, of course. This I will cover in my next article entitled “Testing the right metrics.”
IF you are enjoying my content, drop me a message via the voice message app on my home page. I will love to hear your thoughts. If you are interested, I have my Offline Webinar Formula 2.0 for sale. You can check it out here.
Until the next one, this was Anthony Flatt.