the value of social media for generating sales has grown, many social media channels have improved their tracking options for sales completed on a website. In addition to Facebook’s long-offered conversion pixel, Pinterest now has a tag code tool and Twitter generates conversion code for placement on a “thank-you” page at the conclusion of a purchase.
If you created alternative SKUs for products sold by way of social media for tracking, be sure to merge them into the same category of your product tree. Using multiple SKUs isn’t recommended if your storefront solution includes inventory control.
You can input the numbers from your social media sales metrics into a sales calculator to forecast unit sales needed to meet your goals. Figure 2-4 shows a calculator from AccountingforManagement.org at www.accountingformanagement.org/target-profit-sales-calculator. Users enter values for the variables in the fields at the top of the image and click Calculate; different forecasts appear below the fields.
Courtesy of SEOReseller.com
FIGURE 2-3: Typical e-commerce statistics available on Google Analytics.
Courtesy of AccountingforManagement.org
FIGURE 2-4: Target Profit Sales calculator from AccountingforManagement.org.
Tracking Leads
Often, your social media or web presence generates leads instead of, or in addition to, sales. If your sales process dictates that some or all sales are closed offline, you need a way to track leads from initiation to conversion. Customer relationship management (CRM) software helps you track prospects, qualified leads, and customers in an organized way. A simple database might allow different managers, salespeople, and support personnel to share a client’s concerns or track the client’s steps within the selling cycle.
The process of CRM and lead management may also include qualifying and nurturing leads, managing marketing campaigns, building relationships, and providing service, all while helping to maximize profits. Table 2-3 lists some lead-monitoring and CRM software options.
TABLE 2-3 Lead-Monitoring and CRM Software
| Name | URL | What You Can Do | Cost |
|---|---|---|---|
| HubSpot |
http://offers.hubspot.com/free-trial
|
All-in-one software; manage inbound leads, lead generation, and more. | Free 14-day trial; starts at $40 per month after free trial |
| Freshsales |
www.freshworks.com/freshsales-crm/?source=fworks&medium=referral&campaign=fworks_product_nav
|
Lead scoring, phone, email, activity capture, and more. | Free 14-day trial; starts at $19 per month after free trial |
| SplendidCRM |
www.splendidcrm.com/Store.aspx
|
Install open source CRM software. | Options range from free open source download to unlimited use for $960 per user |
Understanding Other Common Business Metrics
Your bookkeeper or accountant can help you compute and track other business measurements to ensure that your business turns a profit. You may want to pay particular attention to estimating your break-even point and your profit margin.
Break-even point
Computing the break-even point (the number of sales needed for revenues received to equal total costs) helps determine when a product or product line will become profitable. After a product reaches break-even, sales start to contribute to profits.
To calculate the break-even point, first you need to figure out the cost of goods (for example, your wholesale price or cost of manufacturing) or average variable costs (costs such as materials, shipping, or commission that vary with the number of units sold) and your fixed costs (charges such as rent or insurance that are the same each month regardless of how much business you do). Then plug the amounts into these two formulas:
revenues – cost of goods (variable) = gross margin
fixed costs ÷ gross margin = break-even point (in unit sales)
Figure 2-5 shows this relationship. This graph of the break-even point shows fixed costs (the dashed horizontal line) to variable costs (the solid diagonal line) to plot total costs. After revenues surpass the break-even point, each sale contributes to profits (the shaded area on the right).
FIGURE 2-5: The break-even chart plots fixed plus variable costs; each sale after the break-even point contributes to profits.
The break-even analysis tool from the Harvard Business School Toolkit (http://hbswk.hbs.edu/archive/1262.html) can also help you calculate your break-even point.
Profit margin
Net profit margin is defined as earnings (profits) divided by revenues. If you have $10,000 in revenues and $1,500 in profits, your profit margin is 15 percent (1500 ÷ 10000 = 0.15).
Revenue
