One Rule to Rule Them All: Keep As Much Green As You Can
What if I said there were literally thousands of dollars hiding in your sofa right now… would you jump up and immediately start ripping it apart? Or would you shrug and just keep sitting on it?
No really… does anyone have a chainsaw I can use to tear that couch apart?!
I personally have never owned or used a chainsaw before, but I’m pretty sure I would figure it out. And I’m sure you would too.
As it relates to the world of Amazon, your account is the sofa and I know for a fact that there is money hiding in there! I’m not talking about refunds, adjustments or “Amazon lost some of my units”...
I’m talking Profit Optimization.
To be more specific, I’m talking about Product ROI, Product Profit Margins and Product Unit Costs, just to name a few. All of these require meticulous data scrubbing in spreadsheet hell to finally get to the point where you have actionable data to make insightful choices.
There are two common ways to estimate profitability – one is to consider the Product Profit Margin, and the other is to calculate the Return on Investment (ROI). The Product Profit Margin percentage is calculated by ‘profit divided by revenue’, whereas ROI focuses on the investment value of a product.
Product Profit Margins (%)
Again, this is your profits divided by the product’s revenue. Suppose your best seller earned $25,000 last month, and $9,000 of that was pure profit. That gives you a profit margin of 36%. The lower the costs or the larger the profits on each transaction, the higher the margin. If costs rise but the sales stay consistent, the profit margin will shrink.
Product ROI (%)
To figure your product’s return on investment, or ROI, divide the net profit by the cost of goods sold. A product that has a profit of $10,000 and costs $5,500 to produce and ship, then there is a 182% ROI.
The question is: What will you get you the most bang for your buck? If capital was infinite, then it wouldn’t matter as long as the product was producing a return. Unfortunately, that isn’t the case for the majority of us.
Knowing where to invest your capital will help you expand your bottom line.
But let’s face it, you’re already burning the candle at both ends and you’re drained. When you look at your spreadsheets and online dashboard, the numbers jumble together and don’t make sense.
“Looking at numbers is never good for the Creative Mind.”
You started selling on Amazon because you thought it would be easy and enjoyable, then you started making some money, and then it became a REAL business!
Maybe you are doing this half-time while still working your full-time job or perhaps you quit your traditional 9-5 and are doing this full time. Nonetheless, you have a business to grow and being successful is numero uno!
Naturally, how you measure success is up to you. I personally measure success by my bottom-line.
Without a strong bottom line, you will eventually run out of money, which means no more business and no more customers. That’s not to minimize the importance of having a customer-centric business and develop strong relationships, but in e-commerce, the only thing that matters is how much margin your products are producing and what is your ROI.
That means scrubbing spreadsheets or staring at your dashboard searching for an answer.
And, ain’t nobody got time to do this kind of dirty work!
When it comes to growing and scaling a business, it’s truly impossible to do it all yourself. If you’re trying to run a one-man show, at some point you will plateau.
Without devoting several hours daily or weekly on keeping a watchful eye over your business’s profits, you are at risk of losing hard-earned profits. Not to mention finding time to develop strategies that will help you to grow your business.
A recipe for success is to do what you love and outsource the rest.
At SellerVue, we are the watchful eye… we provide accurate data and reporting for REAL profit Growth. We run your numbers, so you can focus on your business and profit more.
Wouldn’t you rather be working on growing your Amazon business than pulling your hair out over your dashboard?