Project revenue simulation
Posted: Sun Dec 22, 2024 6:15 am
With the previous calculation we have obtained how much it will cost us to bring the necessary traffic to our e-commerce, now we are going to calculate how much approximate income we will obtain from that traffic.
To do this we will have to use a variable called conversion percentage.
This variable is calculated with the following formula and would indicate how many out of every 100 visits make a purchase.
Number of orders* 100
% conversion = -------------------------------------------
Number of visits
For example, if we have had 7,250 visits and we have received 70 orders, our conversion rate will be: 70*100/7250 = 0.97%
Each sector has a different conversion rate. If you search online, there are studies that can give you an idea.
E-commerce launch plan - Industry conversion rate
Although the average is usually between 0.8 and 1%, when deciding taiwan phone code what conversion % you are going to use, I recommend being pessimistic and not going for ratios above 1% unless your sector justifies it.
To obtain the income per keyword we will have to multiply 1% of the visits (which would be those that would buy) by the average price of the product related to that keyword.
For example, if the average price of a surfboard is €150 and as we have seen that keyword has 9,900 visits and we have defined a conversion % of 1%, we understand that they will buy 990 units which multiplied by the average price of the surfboard will give us an income of €148,500.
9,900 * 1% * 150 = €148,500
So the list of keywords would look like this:
E-commerce launch plan - Revenue simulation
Sales margin simulation
Now we have the approximate income based on keywords, visits and conversion %.
If we had a linear margin on the product, it would be easy to calculate what we would have with that income.
That is, if for example we have a margin of 30%, in this case our margin w
ould be €20,830 * 30% = €6,249
It may also happen that each product has a different average margin, so the best option is to use the spreadsheet and add a column with the average margin per keyword (product) in euros and another with the estimate of units sold, which would be the volume multiplied by the conversion %.
To do this we will have to use a variable called conversion percentage.
This variable is calculated with the following formula and would indicate how many out of every 100 visits make a purchase.
Number of orders* 100
% conversion = -------------------------------------------
Number of visits
For example, if we have had 7,250 visits and we have received 70 orders, our conversion rate will be: 70*100/7250 = 0.97%
Each sector has a different conversion rate. If you search online, there are studies that can give you an idea.
E-commerce launch plan - Industry conversion rate
Although the average is usually between 0.8 and 1%, when deciding taiwan phone code what conversion % you are going to use, I recommend being pessimistic and not going for ratios above 1% unless your sector justifies it.
To obtain the income per keyword we will have to multiply 1% of the visits (which would be those that would buy) by the average price of the product related to that keyword.
For example, if the average price of a surfboard is €150 and as we have seen that keyword has 9,900 visits and we have defined a conversion % of 1%, we understand that they will buy 990 units which multiplied by the average price of the surfboard will give us an income of €148,500.
9,900 * 1% * 150 = €148,500
So the list of keywords would look like this:
E-commerce launch plan - Revenue simulation
Sales margin simulation
Now we have the approximate income based on keywords, visits and conversion %.
If we had a linear margin on the product, it would be easy to calculate what we would have with that income.
That is, if for example we have a margin of 30%, in this case our margin w
ould be €20,830 * 30% = €6,249
It may also happen that each product has a different average margin, so the best option is to use the spreadsheet and add a column with the average margin per keyword (product) in euros and another with the estimate of units sold, which would be the volume multiplied by the conversion %.