How Much Money Is Your Website Making?

The lifeblood of any business is money and at its heart is profit. As Duncan Bannatyne once famously quoted "turnover is vanity, profit is sanity". Now, you probably know exactly how much profit you are making month-by-month perhaps even day-by-day but do you know how much your website is contributing to (or subtracting from) your bottom-line profits?

The truth is few businesses really bother to dig deep into understanding this kind of information and consequently fail to either;

1. Maximise the good work the website is doing for them or
   
2. Fix it before it haemorrhages cash.

So, here's my 2-minute walk-through of some simple questions to work out a thumbnail sketch of your website's profitability.

So let’s begin with the formula for working it out...

1. How many enquiries do you get?
2. How many are from the website?
3. How many convert to clients?
4. What’s the average order value?
5. What’s your web turnover?
6. What’s your per order profit?
7. What’s the profit from your website?
8. What’s the annual Return on Investment from your website?

Let’s run through an example:

1. We get 100 enquiries a month.
2. 50 of them are from the website
3. 10 web prospects became customers
4. Our average order value is £300.00
5. Our web turnover is 10x300 = £3,000
6. Our average profit on an order is 30% and, therefore, £100.00
7. Profits directly from the web = £1,000.00
8. Annual ROI from website £12,000.00

Now if you really want to get fancy, work out how many times your clients buy from you during their time with you. So, let’s say a client spends £300.00 initially and £100 each year. On average a client stays with you for 2.5 years. Their lifetime value to you is £550.00 (300+(100x2.5)). This is critical information because even if the cost of acquiring a client increases you will be monitoring their lifetime value to you and not just basing your judgements on their initial purchase.

Let’s say that running the website costs you £4,000 per year (pay per click advertising, search engine optimisation, updating, etc) and that you are making £12,000 from it, leaving your net website profit at £8,000. So put in very simplistic terms for every £1 you invest in the website you will get £3 in return.

Now, how much money are you making from your website?