The Science of Decision-Making: How Your Customers Decide What to Buy

The Science of Decision-Making: How Your Customers Decide What to Buy

When I was little, my grandma and I would go to the grocery store, browsing up and down every aisle for deals. We’d barely be in the door long enough to plop all of our bags down on the counter before my grandpa would say, “Helen, what is all this?!”

My grandma loves to buy things on sale. If she were a cartoon character, her catchphrase would be, “Oh, Larry, one of the girls will need it.” My mom and aunts couldn’t leave my grandparents’ house without a trunk full of household supplies.

How could two people approach purchase decisions in such drastically different ways? To my grandpa, the purchases were completely illogical. (Who could possibly use that much ketchup?) To my grandma, the purchases were completely rational.

What gives? It turns out dual process theory was hard at work.

What is dual process theory?

Dual process theory is the idea that there are two different systems at work during the decision-making process: system one and system two. One process is automatic and unconscious while the other is controlled and conscious.

The theory dates all the way back to the 1800s and William James, an American philosopher and psychologist who paved the way for more modern interpretations. If dual process theory sounds familiar, you may have read Thinking, Fast and Slow by Daniel Kahneman, who popularized the theory in 2003.

What is system one?

System one is that automatic and unconscious mind. It:

  • Requires very little, if any, effort.
  • Is fast.
  • Is primal, old in terms of evolution. (In fact, it’s often referred to as the “reptilian brain”.)
  • Has a large capacity.
  • Isn’t logical.

System one is always at work; it’s always on.

What is system two?

System two is the controlled and conscious mind. It:

  • Requires a lot of effort.
  • Is slow.
  • Is modern, new in terms of evolution.
  • Has a small capacity.
  • Is logical.

System two requires your full focus and is quickly depleted.

Why we’re not as rational as we think we are

As humans, we like to believe we’re rational people making rational decisions. The truth is it’s very rare for humans to make a genuinely logical, rational decision.

System two is absent more often than not. That means for most of the day, you’re using system one to make instinctual and emotional decisions.

So, why do we believe we’re more rational than we really are?

System two is often responsible for rationalizing the decisions of system one. For example, let’s say you purchase a new t-shirt after seeing a funny Facebook ad. You didn’t make the decision using sound logic and reasoning, but system two will “wake up” and rationalize the otherwise irrational decision for you.

“It was on sale”, “I needed a new gym shirt”, “The t-shirt quality is great”. As soon as that purchase is made, system two is hard at work rationalizing system one’s decision—the decision you made on instinct alone.

In the end, you think you’ve made a logical decision and remain blissfully unaware of how influential system one really is.

When to appeal to system one and system two

System one and system two work together, as demonstrated above. It’s impossible to completely isolate one and appeal directly to the other.

So, how can you use dual process theory to your advantage in marketing?

First, ask yourself: Are my products truly the most rational purchase decisions available? We don’t like to admit it, but more often than not, the answer is no. There can only be one “most logical” purchase decision, after all. In ecommerce, it becomes especially difficult because the odds of every single one of your products being the best of the best drops to near-zero.

Even if you are one of the few exceptions and all your products are truly the most rational purchase decisions available, you have to remember that system two is easily depleted. Your visitors can quite literally run out of capacity for logical decision-making daily.

If you’ve only focused on logic and system two, you’re out of luck and out of a sale. The best approach, then, is to start by covering your bases with system one. Make sure your site appeals to that automatic, unconscious mind first and foremost.

If one of your products truly is the most rational purchase decision, add appropriate triggers to your product page that will “wake up” system two. That is, if it hasn’t already been depleted for the day.

How to appeal to system one

If you want to appeal to system one, the unconscious mind, you’ll want to either deplete system two or avoid “waking” it up. Of course, there are many more ways to do that than I can list in this article, but I’ll cover a few examples.

1. Use up system two’s capacity

System two gets depleted the more it’s used and we already know it has a small capacity. So, if you want to force a system one decision, the best way to do that is to present simple choices during the checkout process. Every decision system two makes depletes it just a little bit more.

For example, Death Wish Coffee presents buyers with a few different choices:

Death Wish Coffee

Do you want ground coffee, whole bean coffee or death cups? Do you want a one-time purchase of $15.99 or do you want to subscribe and save 20%? If you do want to subscribe, do you want the coffee delivered every 7 days, 14 days, 30 days or 60 days?

There is a degree of customization here, which means choices. Those choices tire system two out, helping to deplete its small capacity.

Now, notice that while there are choices present in the example above, there is nothing difficult or confusing about the checkout process. Yes, adding choices is effectively adding a small amount of friction. Sometimes friction can be a good thing, though, like increasing the number of fields on a lead gen form to increase the quality of leads.

Just be careful you don’t go overboard. Making the checkout process difficult or confusing will deplete system two, but it will also throw off system one, which craves simplicity. It’s a delicate balancing act.

2. Use visuals liberally

You might be familiar with stats like “visuals are processed 60,000 times faster than text” and “65% of people are visual learners”.

Cue the rise of infographics and videos, am I right?

System one is more visually oriented than system two, perhaps because it is evolutionarily older. For survival purposes, it’s always been important that our brains process visuals quickly.

To appeal to system one, ensure your visuals meet the following criteria:

  • They are simple and clear. Remember, system one is automatic and unconscious. If the visuals are not clear, relevant and straightforward, the meaning (and impact) will be lost.
  • They articulate the benefit. You’re familiar with the idea that you should sell benefits, not features, right? Use images to articulate the benefit of your products. How will buyers feel after the purchase? How can you visualize that feeling?

For example, Harris Farm Markets uses nature visuals to reinforce the fact that they are all about encouraging people to “reconnect with the natural joy of food”:

Harris Farm Markets

Nature is at the center of the Harris Farm Markets brand and company. Prices, produce and specials are driven by nature. The bee and blueberry visuals get that point across immediately, much faster than reading the text.

Note that you want to visually appeal to system one at important points during the checkout process. Before the add to cart step, for example. Think carefully about how to do that because you want to visually persuade without visually distracting, which can be a difficult balance to strike.

3. Keep it as simple as humanly possible

Kayak is arguably one of the most complicated sites I’ve ever had to use:

Kayak

Above, I’m simply looking for a hotel room in Toronto, Canada from April 26th to April 28th. Immediately after entering that required information, I was taken to the page above.

Ads, filters, price comparisons, star ratings, number ratings, share, watch, “Save 25%” banners, comparison calls to action, sorting options. Where on earth am I supposed to look? If I’m just here to find a cheap hotel in Toronto, boy am I getting more than I bargained for (read: asked for).

Kayak is the proverbial alarm blaring, begging system two to wake up.

Nothing about the above page says “automatic” or “unconscious”. It requires genuine thought to navigate in a meaningful way. Now, perhaps that’s Kayak’s plan, perhaps they want system two bright-eyed and bushy-tailed, but if you don’t, keep it simple.

4. Play on familiarity

Simplicity is key for system one, this we know. An underappreciated way to create simplicity and a truly intuitive visitor experience is familiarity. Why? Because of what’s called the mere-exposure effect, a cognitive bias that quite literally means that merely being exposed to something can create a certain type of fondness for it.

For example, you’re more likely to develop a friendship with someone you see every day. If you were to stop seeing them so frequently, you might find yourself slowly losing touch. Why? All because your preference for one another (i.e. friendship) was likely fueled by mere exposure.

This isn’t just applicable to relationships and friendships, of course. It’s applicable online as well. As users of the Internet, we develop preferences for certain designs and prototypes simply because we see them all the time. For example, I’m willing to bet many people find the hamburger menus on mobile more appealing now than they did a couple years ago.

In ecommerce, visitors are used to seeing the cart in the top right corner, for example. On product pages, they’re used to seeing the product image on the left and the product details on the right. They’re used to seeing the price clearly marked. They’re used to seeing a big, obvious “Buy” or “Add to Cart” button.

Look how well Studio Neat sticks to simple, familiar ecommerce design:

Studio Neat

It’s familiar, it’s predictable, it’s intuitive. This level of simplicity allows system one to get in and out without waking system two.

How to appeal to system two

If you want to appeal to system two, the conscious mind, you’ll want to wake it up, avoid depleting it and keep it focused. Of course, there are many more ways to do that than I can list in this article, but I’ll cover a few examples.

1. All rise for the surprise

Anything unexpected will throw system one for a loop, which means system two will be called upon. For example, here’s an exit intent popup you receive when visiting Poo-Pourri for the first time:

Poo-Pourri

Yes, even something as simple as a newsletter subscription popup can leave system one gently shaking system two awake. It’s unexpected and it requires a decision: do I sign up or do I leave?

Think of surprise as the opposite of familiarity. Anything unexpected (e.g. a popup, an on-site survey, a snippet of clever copy, an eye-catching image) will slow system one’s mechanical routine and wake system two.

On that note, ensure whatever you’re using to surprise system one isn’t too taxing for system two. Remember, system two is likely already running low on capacity and you want to use some of that capacity later on. With great power comes great responsibility, folks.

2. Just the facts, ma’am

System two is the logical mind, so it makes sense to stick to the facts. After all, there’s no point waking system two if you can’t prove your product is truly the most rational purchase decision.

If you’ve ever purchased a laptop or smartphone online, you’re probably very familiar with the “just the facts, ma’am” approach to persuasion.

Here’s how Tortuga, a travel backpack company, does it:

Tortuga

Straightforward, side-by-side comparison of three core backpack products. Everything system two needs to make the right decision.

Remember, though, system two will want to heavily vet the options, which will include your competitors. The easier and faster you make it to compare your products to one another and to competitive products, the better.

Experiment to find a balance between providing the compelling facts and not overwhelming system two’s limited capacity. This is not a free pass to list every product spec you can think of or go overboard with competitive price comparison, which can ultimately leave customers overwhelmed with choices.

Every purchase decision is unique

My grandma’s system one was making purchase decisions that my grandpa’s system two simply couldn’t comprehend or rationalize.

Still, every once in a while he’d come puttering home in a beat up old car that he insisted he had to buy. “I’ll have ‘er up and running in no time, Helen.”

No one is a logical, conscious buyer all of the time. No one makes all of their purchase decisions with one system exclusively. The two systems work together depending on the context and number of previous decisions made that day.

Learning about dual process theory and how it really works is the first step toward using it to your advantage. If you want to influence decisions, start with understanding how your visitors decide.


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How (and When) to Hire An Ecommerce Expert to Level Up Your Business

How (and When) to Hire An Ecommerce Expert to Level Up Your Business

One of the most unexpectedly instructive memes out there today is “You have the same 24 hours in a day as Beyoncé.”

It’s easy to look at it as an entrepreneur, drowning in tasks and to-do lists, and feel overwhelmed, or inspired, or even just irked. But there’s a valuable hidden lesson there that most people overlook: Beyoncé spends those 24 hours doing what only Beyoncé can do.

She isn’t wearing every hat and doing every job in her empire. She’s relentlessly focused on making the biggest impact she can in the time she has available—which means she delegates, hires and outsources anything she doesn’t need to handle personally.

That’s a strategy you can use to level up your business, too. However, hiring expert help can be an opaque process if you’ve never done it before.

Where do you find them? How do you work with them? What’s a wireframe?

But there’s an even more important question you should tackle before addressing any of the above: Is hiring an expert the right move for your business?

Prep your business first

Is your business ready to hire an expert?

Before you hire anyone for anything, it’s important to take stock of your business, and figure out where adding an extra set of hands will have the most impact.

What do you need the most?

Look at your business, as well as your weekly routine, with a critical eye. You can make some great guesses just by identifying what you consider to be your biggest “problem areas.”

If your most painful problem is that you spend 80% of your day shipping orders, that’s a strong indicator that you need to hire someone to help you with shipping.

Things get a bit less clear, however, when your problems don’t point to their own solutions.

Things get a bit less clear, however, when your problems don’t point to their own solutions. If you find yourself saying things like “I don’t know why my store isn’t converting,” that’s a sign that professional advice is a good next step.

Luckily, you don’t need to know exactly how to solve those problems or know which ones to prioritize, before you start the conversation with a Shopify Expert. According to Chase Clymer, co-founder of Electric Eye, before consulting an expert you should work on identifying your acute problem rather than trying to prescribe your own solution—that’s their job.

“You should go into the conversation with an open mind,” says Chase. “Think of them like a doctor. You go into a doctor and you say, ‘This hurts.’ You don’t go into a doctor and say, ‘I need painkillers.’ Remember that the expert is there to help you properly identify the real problems in your business and solve them, as opposed to just putting on a Band-Aid.”

If you’re breathing a sigh of relief that you don’t need to go into it knowing everything ahead of time, you’re not alone.

What’s your budget?

Hiring outside help might be a big line item in your business’ budget, there’s no denying that. Before you sign on the dotted line to secure the help you need, make sure you have a solid plan for investing in your business.

That means you need to understand your business’ finances, how much you need to pay yourself, and all of the other commitments you have to handle, financially speaking. Once you know that, you can begin to allocate money towards whatever form of contract work is right for your business.

Hiring an expert can be intimidating

If you need to hire help doing something you already understand, like training someone to take over your shipping, it’s much easier to be confident going into it.

However, when it comes to hiring outside of your expertise, such as a developer, designer, marketer, or a team that handles all three of those things, generally you’re doing it because you astutely recognize your time is best spent running your business, not mastering every discipline or specialty.

If you’re new to working with professionals, stepping into their world will expose you to domain expertise and industry lingo you’ve never encountered before, which can be intimidating. That’s why we spoke with two Shopify Experts to go over some advice in four key areas of the process.

  • Finding and hiring the right person or team
  • Setting the project scope
  • Communicating clearly throughout
  • Wrapping up the project

Their answers will give you a solid footing to make sure your first experience with an Expert is a positive move for your business.

Finding and hiring the right person or team

Hiring an expert: how to approach it

Once you’ve made the decision that yes, you’re ready to hire someone, the next question is how do you find them? And equally important, how can you make sure the person or team you found is a good fit for your business?

Ask for referrals

It turns out, referrals are by far the most common way entrepreneurs have connected with both Expert teams we spoke with. When you’re looking for someone to work with, your best bet is to start by asking around.

“Talk to your friends who are running online businesses. A referral can go a long way to finding the right fit,” says Chase Clymer, of Electric Eye.

However, just because someone comes highly recommended doesn’t mean you shouldn’t do your own due diligence, even if it’s just a peek through their business’ website and online presence.

Pay special attention to any past projects they’ve included as case studies, anything they’ve written about how they work with clients, and their social media presence—those things can all give you additional insight into what it’d be like to work with them.

Interview for fit

Both teams we spoke with stressed the importance of finding the right people to work with. That’s why you should always plan on at least one call with an agency or freelancer before you start working with them, even if you can’t meet face-to-face.

“If you can talk to your vendors when you’re making a selection, it can make a huge difference,” says Natasha. “Either in-person meetings or through Skype or Google Hangouts, taking one-on-one is always a really good idea, just to get a feel for who they are. If you can meet multiple members of the team, that’s also really helpful.”

On the other side of the call, your experts are trying to determine if you would be a good fit, too. Since they have extensive experience working with other clients, you can expect them to come prepared—and if they don’t think they’re able to help with what you need, they’ll tell you.

When you do consult with a vendor or Expert, always be wary of unrealistic guarantees. It’s fine for them to promise deliverables and deadlines, but any grandiose promises around performance or results should be taken as a red flag.

“If they guarantee they’ll design you a new webpage, okay, that’s fine. But if they’re “guaranteeing” you a 10X ROI in two weeks, that’s sketchy,” says Shawn. “Internet marketing and ecommerce is such an agile thing that the tactics that work today are different tomorrow, and they’re different across all industries.”

Setting the project scope

Hiring an expert: how to set project scope

Once you’ve found a great person or team to work with, the next step is outlining exactly what work they’re going to do, and on what timeline. This is commonly known as setting the project’s scope.

If you’re worried that you’ve never done that before, don’t be. The experts you’re working with have, and they’ll have processes in place to make sure it’s a smooth experience. If you find that someone you’re speaking to isn’t prepared with a defined process, it’s likely a sign to revisit your search.

Paid scoping vs. unpaid scoping

Every business is different, and while you should expect some level of process from any vendor you work with, what exactly that process entails and how much it costs can vary greatly.

Some teams, like Nicely Built, scope out projects before the start of paid work. “If we think we can do a project and we want to do a project, then we’ll work with our clients directly to come up with a list of specifications,” says Natasha.

Other teams, like Electric Eye, prefer to do paid scoping projects. They’ve put together a standard process they work through with every client and deliverables they work on for a few dedicated hours, and that initial work is a paid engagement. It allows them to take a holistic view of your business, beyond just website issues.

“How are you handling fulfillment, how are you handling email, how are you handling marketing?” asks Chase as he talks through their paid scoping process, called Shopify Business Roadmapping. “Those aren’t necessarily part of your website, but they are part of your business, and it sets the expectation about how much work really goes into a successful outcome. We get to really dig into the business and find out entirety of what the project entails.”

There are pros and cons to both approaches, so before working with an agency or freelancer take time to decide which one would better suit your current needs.

Tips for a successful kickoff call

Whether it’s paid or not, there’s work you can do ahead of your first conversation with your chosen Expert to make the most of your time.

“All of our projects start with a kickoff call,” says Natasha. “We really dig into what they want their site to look like, and spend time discussing how it’s going to work. Any preparation they can do for that call is really helpful for us. They can go through and pick out other sites they like, or just have examples ready to go in terms of what they want and need. If they can show us how they want it to work, it makes our job a lot easier.”

To make your job easier, Nicely Built also put together a blog post that goes over all of the best ways you can prepare for a kickoff call.

Communication is key

Communication is key when working with an expert

To keep a project going smoothly for the entire duration, communication is key on both sides.

Up front, your Expert should let you know what to expect during the process.

“When you hire an expert, they should clearly explain, “This is what you should expect over the next weeks, months. This is what milestones look like, this is what the timeline looks like.” They should set expectations from day one around what the project will be and how it will be delivered,” says Shawn.

Throughout the project, you’ll be expected to give feedback on the work at different stages. If you’re interested in providing more effective feedback, even when you don’t have all the technical know-how your expert has, Natasha has some good advice on how they handle it.

“From the beginning, whenever we start working with someone we really place a big emphasis on providing visual examples, which could be screenshots or websites they like. Let’s say that they want a Frequently Asked Questions page that has an accordion functionality on it. They could try to describe that and be like, ‘It opens up, or expands.’ Or they could just show me what they’re talking about and like, ‘Oh, okay. Well that, you call this feature this’. It’s just easier to start with a picture sometimes.”

Wrapping up the project

You’re nearing the end of your project, and you’re getting excited to get the results of all this hard work out in the world. How should you be wrapping up the project to make sure everything goes smoothly?

Follow process and timelines

It’s especially important to pay close attention to next steps nearing the end of the project, since it can be a critical time for key tasks and handoffs.

“We close out every project with a full round of user acceptance testing,” says Natasha. “That’s when the client actually goes through the site and logs bugs, logs anything that they see isn’t working correctly.”

Offer feedback—good or bad

Last but not least, once all is said and done, there are still some things that should be said. As a client, the best and most valuable gift you can give is constructive feedback on how the project went.

“We want to learn so we can be better in the future,” says Chase. “I remember one time, we sent an email to a client asking for feedback and they responded with negative feedback. I reached out for clarification, and it turned out they were upset because they didn’t understand how to use the site we built for them. It was just something I didn’t think about at the time, and I was like, ‘You’re absolutely right.’ We scheduled a call and I taught them how to use what we had built.”

Hiring help can be a big business boost

Bringing in an Expert can be a great next step for your business, but the key word there is your business. Before you make the call, it’s important to take a look at your business’ finances, goals, and priorities.

But on the other side of the coin, it’s also important not to wait too long for fear of handing over control, or for fear of admitting you need help. The best people in every field, from business to athletics to music, rely on paid professionals to keep them at the top of their game. There’s no shame in bringing in expert help to level up your business when and where you need it.

Beyoncé didn’t build her own website, after all.

67 Key Performance Indicators (KPIs) for Ecommerce

67 Key Performance Indicators (KPIs) for Ecommerce

Performance should inform business decisions, and KPIs should drive actions.

Key performance indicators (KPIs) are like milestones on the road to online retail success. Monitoring them will help ecommerce entrepreneurs identify progress toward sales, marketing, and customer service goals.

KPIs should be chosen and monitored depending on your unique business goals. Certain KPIs support some goals while they’re irrelevant for others. With the idea that KPIs should differ based on the goal being measured, it’s possible to consider a set of common performance indicators for ecommerce.

Table of Contents

  • What is a performance indicator?
  • What is a key performance indicator?
  • Why are key performance indicators important?
  • What is the difference between a SLA and a KPI?
  • Types of key performance indicators
  • 67 key performance indicator examples for ecommerce
  • How do I create a KPI?

Here is the definition of key performance indicators, types of key performance indicators, and 67 examples of ecommerce key performance indicators.

What is a performance indicator?

A performance indicator is a quantifiable measurement or data point used to gauge performance relative to some goal. As an example, some online retailers may have a goal to increase site traffic 50% in the next year.

Relative to this goal, a performance indicator might be the number of unique visitors the site receives daily or which traffic sources send visitors (paid advertising, search engine optimization, brand or display advertising, a YouTube video, etc.)

What is a key performance indicator?

For most goals there could be many performance indicators — often too many — so often people narrow it down to just two or three impactful data points known as key performance indicators. KPIs are those measurements that most accurately and succinctly show whether or not a business in progressing toward its goal.

Why are key performance indicators important?

KPIs are important just like strategy and goal setting are important. Without KPIs, it’s difficult to gauge progress over time. You’d be making decisions based on gut instinct, personal preference or belief, or other unfounded hypotheses. KPIs tell you more information about your business and your customers, so you can make informed and strategic decisions.

But KPIs aren’t important on their own. The real value lies in the actionable insights you take away from analyzing the data. You’ll be able to more accurately devise strategies to drive more online sales, as well as understand where there may problems in your business.

Plus, the data related to KPIs can be distributed to the larger team. This can be used to educate your employees and come together for critical problem-solving.

What is the difference between a SLA and a KPI?

SLA stands for service level agreement, while a KPI is a key performance indicator. A service level agreement in ecommerce establishes the scope for the working relationship between an online retailer and a vendor. For example, you might have a SLA with your manufacturer or digital marketing agency. A KPI, as we know, is a metric or data point related to some business operation. These are often quantifiable, but KPIs may also be qualitative.

Types of key performance indicators

There are many types of key performance indicators. They may be qualitative, quantitative, predictive of the future, or revealing of the past. KPIs also touch on various business operations. When it comes to ecommerce, KPIs generally fall into one of the following five categories:

  1. Sales
  2. Marketing
  3. Customer service
  4. Manufacturing
  5. Project management

67 key performance indicator examples for ecommerce

Note: The performance indicators listed below are in no way an exhaustive list. There are an almost infinite number of KPIs to consider for your ecommerce business.

What are key performance indicators for sales?

Sales key performance indicators are measures that tell you how your business is doing in terms of conversions and revenue. You can look at sales KPIs related to a specific channel, time period, team, employee, etc. to inform business decisions.

Examples of key performance indicators for sales include:

  • Sales: Ecommerce retailers can monitor total sales by the hour, day, week, month, quarter, or year.
  • Average order size: Sometimes called average market basket, the average order size tells you how much a customer typically spends on a single order.
  • Gross profit: Calculate this KPI by subtracting the total cost of goods sold from total sales.
  • Average margin: Average margin, or average profit margin, is a percentage that represents your profit margin over a period of time.
  • Number of transactions: This is the total number of transactions. Use this KPI in conjunction with average order size or total number of site visitors for deeper insights.
  • Conversion rate: The conversion rate, also a percentage, is the rate at which users on your ecommerce site are converting (or buying). This is calculated by dividing the total number of visitors (to a site, page, category, or selection of pages) by the total number of conversions.
  • Shopping cart abandonment rate: The shopping cart abandonment rate tells you how many users are adding products to their shopping cart but not checking out. The lower this number, the better. If your cart abandonment rate is high, there may be too much friction in the checkout process.
  • New customer orders vs. returning customer orders: This metric shows a comparison between new and repeat customers. Many business owners focus only on customer acquisition, but customer retention can also drive loyalty, word of mouth marketing, and higher order values.
  • Cost of goods sold (COGS): COGS tells you how much you’re spending to sell a product. This includes manufacturing, employee wages, and overhead costs.
  • Total available market relative to a retailer’s share of market: Tracking this KPI will tell you how much your business is growing compared to others within your industry.
  • Product affinity: This KPI tells you which products are purchased together. This can and should inform cross-promotion strategies.
  • Product relationship: This is which products are viewed consecutively. Again, use this KPI to formulate effective cross-selling tactics.
  • Inventory levels: This KPI could tell you how much stock is on hand, how long product is sitting, how quickly product is selling, etc.
  • Competitive pricing: It’s important to gauge your success and growth against yourself and against your competitors. Monitor your competitors’ pricing strategies and compare them to your own.
  • Customer lifetime value (CLV): The CLV tells you how much a customer is worth to your business over the course of their relationship with your brand. You want to increase this number over time through strengthening relationships and focusing on customer loyalty.
  • Revenue per visitor (RPV): RPV gives you an average of how much a person spends during a single visit to your site. If this KPI is low, you can view website analytics to see how you can drive more online sales.
  • Churn rate: For an online retailer, the churn rate tells you how quickly customers are leaving your brand or canceling/failing to renew a subscription with your brand.
  • Customer acquisition cost (CAC): CAC tells you how much your company spends on acquiring a new customer. This is measured by looking at your marketing spend and how it breaks down per individual customer.

What are key performance indicators for marketing?

Key performance indicators for marketing tell you how well you’re doing in relation to your marketing and advertising goals. These also impact your sales KPIs. Marketers use KPIs to understand which products are selling, who’s buying them, how they’re buying them, and why they’re buying them. This can help you market more strategically in the future and inform product development.

Examples of key performance indicators for marketing include:

  • Site traffic: Site traffic refers to the total number of visits to your ecommerce site. More site traffic means more users are hitting your store.
  • New visitors vs. returning visitors: New site visitors are first-time visitors to your site. Returning visitors, on the other hand, have been to your site before. While looking at this metric alone won’t reveal much, it can help ecommerce retailers gauge success of digital marketing campaigns. If you’re running a retargeted ad, for example, returning visitors should be higher.
  • Time on site: This KPI tells you how much time visitors are spending on your website. Generally, more time spent means they’ve had deeper engagements with your brand. Usually, you’ll want to see more time spent on blog content and landing pages and less time spent through the checkout process.
  • Bounce rate: The bounce rate tells you how many users exit your site after viewing only one page. If this number is high, you’ll want to investigate why visitors are leaving your site instead of exploring.
  • Pageviews per visit: Pageviews per visit refers to the average number of pages a user will view on your site during each visit. Again, more pages usually means more engagement. However, if it’s taking users too many clicks to find the products they’re looking for, you want to revisit your site design.
  • Average session duration: The average amount of time a person spends on your site during a single visit is called the average session duration.
  • Traffic source: The traffic source KPI tells you where visitors are coming from or how they found your site. This will provide information about which channels are driving the most traffic, such as: organic search, paid ads, or social media.
  • Mobile site traffic: Monitor the total number of users who use mobile devices to access your store and make sure your site is optimized for mobile.
  • Day part monitoring: Looking at when site visitors come can tell you which are peak traffic times.
  • Newsletter subscribers: The number of newsletter subscribers refers to how many users have opted into your email marketing list. If you have more subscribers, you can reach more consumers. However, you’ll also want to look at related data, such as the demographics of your newsletter subscribers, to make sure you’re reaching your target audience.
  • Texting subscribers: Newer to digital marketing than email, ecommerce brands can reach consumers through SMS-based marketing. Texting subscribers refers to the number of customers on your text message contact list.
  • Subscriber growth rate: This tells you how quickly your subscriber list is growing. Pairing this KPI with the total number of subscribers will give you good insight into this channel.
  • Email open rate: This KPI tells you the percentage of subscribers that open your email. If you have a low email open rate, you could test new subject lines, or try cleaning your list for inactive or irrelevant subscribers.
  • Email click-through rate (CTR): While the open rate tells you the percentage of subscribers who open the email, the click-through rate tells you the percentage of those who actually clicked on a link after opening. This is arguably more important than the open rate because without clicks, you won’t drive any traffic to your site.
  • Unsubscribes: You can look at both the total number and the rate of unsubscriptions for your email list.
  • Chat sessions initiated: If you have live chat functionality on your ecommerce store, the number of chat sessions initiated tells you how many users engaged with the tool to speak to a virtual aide.
  • Social followers and fans: Whether you’re on Facebook, Instagram, Twitter, Pinterest, or Snapchat (or a combination of a few), the number of followers or fans you have is a useful KPI to gauge customer loyalty and brand awareness. Many of those social media networks also have tools that ecommerce businesses can use to learn more about their social followers.
  • Social media engagement: Social media engagement tells you how actively your followers and fans are interacting with your brand on social media.
  • Clicks: The total number of clicks a link gets. You could measure this KPI almost anywhere: on your website, social media, email, display ads, PPC, etc.
  • Average CTR: The average click-through rate tells you the percentage of users on a page (or asset) who click on a link.
  • Average position: The average position KPI tells you about your site’s search engine optimization (SEO) and paid search performance. This demonstrates where you are on search engine results pages. Most online retailers have the goal of being number one for their targeted keywords.
  • Pay-per-click (PPC) traffic volume: If you’re running PPC campaigns, this tells you how much traffic you’re successfully driving to your site.
  • Blog traffic: You can find this KPI by simply creating a filtered view in your analytics tool. It’s also helpful to compare blog traffic to overall site traffic.
  • Number and quality of product reviews: Product reviews are great for a number of reasons: They provide social proof, they can help with SEO, and they give you valuable feedback for your business. The quantity and content of product reviews are important KPIs to track for your ecommerce business.
  • Banner or display advertising CTRs: The CTRs for your banner and display ads will tell you the percentage of viewers who have clicked on the ad. This KPI will give you insight into your copy, imagery, and offer performance.
  • Affiliate performance rates: If you engage in affiliate marketing, this KPI will help you understand which channels are most successful.

What are key performance indicators for customer service?

Customer service KPIs tell you how effective your customer service is and if you’re meeting expectations.You might be wondering: what should the KPIs be in our call center, for our email support team, for our social media support team, etc. Measuring and tracking these KPIs will help you ensure you’re providing a positive customer experience.

Key performance indicators for customer service include:

  • Customer satisfaction (CSAT) score: The CSAT KPI is typically measured by customer responses to a very common survey question: “How satisfied were you with your experience?” This is usually answered with a numbered scale.
  • Net promoter score (NPS): Your NPS KPI provides insight into your customer relationships and loyalty by telling you how likely customers are to recommend your brand to someone in their network.
  • Hit rate: Calculate your hit rate by taking the total number of sales of a single product and dividing it by the number of customers who have contacted your customer service team about said product.
  • Customer service email count: This is the number of emails your customer support team receives.
  • Customer service phone call count: Rather than email, this is how frequently your customer support team is reached via phone.
  • Customer service chat count: If you have live chat on your ecommerce site, you may have a customer service chat count.
  • First response time: First response time is the average amount of time it takes a customer to receive the first response to their query. Aim low!
  • Average resolution time: This is the amount of time it takes for a customer support issue to be resolved, starting from the point at which the customer reached out about the problem.
  • Active issues: The total number of active issues tells you how many queries are currently in progress.
  • Backlogs: Backlogs are when issues are getting backed up in your system. This could be caused by a number of factors.
  • Concern classification: Beyond the total number of customer support interactions, look at quantitative data around trends to see if you can be proactive and reduce customer support queries. You’ll classify the customer concerns which will help identify trends and your progress in solving issues.
  • Service escalation rate: The service escalation rate KPI tells you how many times a customer has asked a customer service representative to redirect them to a supervisor or other senior employee. You want to keep this number low.

What are key performance indicators for manufacturing?

Key performance indicators for manufacturing are, predictably, related to your supply chain and production processes. These may tell you where efficiencies and inefficiencies are, as well as help you understand productivity and expenses.

Key performance indicators for manufacturing in ecommerce include:

  • Cycle time: The cycle time manufacturing KPI tells you how long it takes to manufacture a single product from start to finish. Monitoring this KPI will give you insight into production efficiency.
  • Overall equipment effectiveness (OEE): The OEE KPI provides ecommerce businesses with insight into how well manufacturing equipment is performing.
  • Overall labor effectiveness (OLE): Just as you’ll want insight into your equipment, the OLE KPI will tell you how productive the staff operating the machines are.
  • Yield: Yield is a straightforward manufacturing KPI. It is the number of products you have manufactured. Consider analyzing the yield variance KPI in manufacturing, too, as that will tell you how much you deviate from your average.
  • First time yield (FTY) and first time through (FTT): FTY, also referred to as first pass yield, is a quality-based KPI. It tells you how wasteful your production processes are. To calculate FTY, divide the number of successfully manufactured units by the total number of units that started the process.
  • Number of non-compliance events or incidents: In manufacturing, there are several sets of regulations, licenses, and policies businesses must comply with. These are typically related to safety, working conditions, and quality. You’ll want to reduce this number to ensure you’re operating within the mandated guidelines.

What are key performance indicators for project management?

Key performance indicators for project management give you insight into how well your teams are performing and completing specific tasks. Each project or initiative within your ecommerce business has different goals, and must be managed with different processes and workflows. Project management KPIs tell you how well each team is working to achieve their respective goals and how well their processes are working to help them achieve those goals.

Key performance indicators for project management include:

  • Hours worked: The total hours worked tells you how much time a team put into a project. Project managers should also assess the variance in estimated vs. actual hours worked to better predict and resource future projects.
  • Budget: The budget indicates how much money you have allocated for the specific project. Project managers and ecommerce business owners will want to make sure that the budget is realistic; if you’re repeatedly over budget, some adjustments to your project planning need to be made.
  • Return on investment (ROI): The ROI KPI for project management tells you how much your efforts earned your business. The higher this number, the better. The ROI accounts for all of your expenses and earnings related to a project.
  • Cost variance: Just as it’s helpful to compare real vs. predicted timing and hours, you should examine the total cost against the predicted cost. This will help you understand where you need to reel it in and where you may want to invest more.
  • Cost performance index (CPI): The CPI for project management, like ROI, tells you how much your resource investment is worth. The CPI is calculated by dividing the earned value by the actual costs. If you come in under one, there’s room for improvement.

How do I create a KPI?

Selecting your KPIs begins with clearly stating your goals and understanding which areas of business impact those goals. Of course, KPIs for ecommerce can and should differ for each of your goals, whether they’re related to boosting sales, streamlining marketing, or improving customer service.

Key performance indicator templates

Here are a few key performance indicator templates, with examples of goals and the associated KPIs.

GOAL 1: Boost sales 10% in the next quarter.

KPI examples:

  • Daily sales.
  • Conversion rate.
  • Site traffic.

GOAL 2: Increase conversion rate 2% in the next year.

KPI examples:

  • Conversion rate.
  • Shopping cart abandonment rate.
  • Competitive pricing.

GOAL 3: Grow site traffic 20% in the next year.

KPI examples:

  • Site traffic.
  • Traffic sources.
  • Promotional click-through rates.
  • Social shares.
  • Bounce rates.

GOAL 4: Reduce customer service calls by half in the next 6 months.

KPI examples:

  • Service call classification.
  • Pages visited immediately before call.

There are many performance indicators and the value of those indicators is directly tied to the goal measured. Monitoring which page someone visited before initiating a customer service call makes sense as a KPI for GOAL 4 since it could help identify areas of confusion that, when corrected, would reduce customer service calls. But that same performance indicator would be useless for GOAL 3.

Once you have set goals and selected KPIs, monitoring those indicators should become an everyday exercise. Most importantly: Performance should inform business decisions and you should use KPIs to drive actions.

Ten Mistakes I Made Running Two Online Stores (And How You Can Avoid Them)

Ten Mistakes I Made Running Two Online Stores (And How You Can Avoid Them)

Getting into ecommerce has been one of the best educational experiences of my life. The things I’ve learned by actually running a business would be challenging to find in an MBA or any business course.

With that said, the lessons I’ve learned were all born from mistakes I made. Each mistake sets you up to do better in the future as long as you reflect on what you could have done differently. I’d like to share some of my missteps with you so you can hopefully avoid them and succeed even faster.

Mistake #1: Rushing the math

Rushing the math.

If you ask any seasoned entrepreneur what the most important skill in running a business is, it’s math. When I started out, my business was like a hobby for me, so I didn’t pay as much attention to the math as I should have.

As a result, I ended up in a niche that had good demand but not enough revenue potential to make it worthwhile. The products I was trying to sell were very cheap, and I had to sell way more than I forecasted to be able to make decent money.

Business math works very simply. To see how profitable your business can be, use this formula: Profit = Demand * (Revenue – Expenses).

To break this down, let’s assume altogether there are 20,000 people that are searching for your product (I’m using such a generous assumption to account for the main keyword, as well as some long tail keywords).

Assuming you can put yourself in front of even half of those people, that’s 10,000 potential buyers. If you convert at the average of between 1-2%, that’s 100-200 sales. If your average order value is $100, and you have a net profit margin of 30%, your profit will be anything between $3000-6000.

Of course, these are really rough estimates. But whatever you get into, if you’ve done the math, you know what you are in for. It took me two stores to learn the math lesson properly, because even though my second store had a very high average order value, the margins were so thin that I was barely making any money after factoring in costs.

Mistake #2: Not finding a gap in the market

Market gap.

Both stores I started were based on the dropshipping model. This meant that I was up against hundreds of people that would carry the same items that I was carrying.

Unless I could differentiate myself from them somehow, I’d just be a “me-too” store and I wouldn’t be providing any value to the situation. Not to mention you still have to compete with the likes of Amazon and Walmart.

With my first store, I just dove in, thinking it was a good niche, but without really researching any of my competitors to see what the market’s situation was. I failed to notice that the biggest player in my niche was just plain awesome. They had all the products I was carrying, hundreds of reviews, thousands of social likes, a popular blog, and tons of press coverage. They had every base in the market covered, and I still thought I could go up against them. Needless to say, the store was a disaster commercially.

With my second store, there was a big gap: not in terms of products, but in terms of information. I pounced on this opportunity and started doing my research, and managed to create a very comprehensive resource in my niche.

It’s not that the information wasn’t available elsewhere, but I presented it in a way that was easy to use and helpful for visitors. The result? With some search engine optimization (SEO) efforts, I managed to grow the store to 15,000 organic visits per month in a competitive niche.

The easiest gap to find is an information gap: you don’t need much of a financial investment, and your business’ worth will not only be that of your products and customer list, but of your content, too.

Mistake #3: Spreading myself thin with products

Spread too thin.

My first store sold eco-friendly recyclable bags. However, since the bags weren’t selling very well, I slowly started adding other eco friendly products from my supplier.

Eventually, I had a whole medley of products, with no relation between them except that they were all eco-friendly. This would have been OK had my brand been something more general, but it wasn’t. While this didn’t directly hurt sales coming from paid traffic, it made it very difficult to appeal to a specific customer, and it also hurt our search efforts.

The error here was more of a branding error than a financial error, but building a brand is just as important, since your brand is what your business is actually worth.

Mistake #4: Not having a content plan

Have a content plan.

This was another mistake I made with my first store. I didn’t put much effort into content marketing, which made getting organic and social traffic very difficult, especially with something as innocuous as reusable bags. I rectified this mistake with the second store, which was built with content marketing as the foundation.

It’s difficult to write content for a boring niche.

Seriously, how much can someone manage to write about reusable bags, right? The key here (which I later learned) is to do content marketing not according to a product, but according to your customers.

Continuing the reusable bags example, who would potentially use reusable bags? Someone that was environmentally conscious, right? It’s also likely that they are into eating healthy, working out, yoga, and natural wellness. These are all initial hunches, but a little bit of research can confirm them.

By building your content marketing strategy around this ideal customer rather than around a product, you have a lot more to write about and a lot more ways to connect with your audience.

Even if your niche is very technical and you manage to write 50 to 100 articles just on the nuances of your product, that information will only go so far. To really round off your effort, you’d want to have more in common with your customer than just the fact that they are buying something you sell.

Mistake #5: Not thinking freebies through

Product freebies

Some businesses do very well with giving away a product for free. Since I was in the eco friendly niche, one such opportunity did fall in my lap.

Unfortunately, I misjudged the whole thing and took a loss on the entire project. I only made one sale from 300 samples that I sent out. Ouch.

Freebies, contests, and giveaways are an effective way to market a product, but they aren’t a good fit for every niche. Freebies would work on perishable or consumable products: skincare, foods, supplements and the like. For all other products—even if it’s something that someone could order another one of, like a piece of clothing—it’s very hard to make work.

What I learned from that expensive experience was that these gimmicks don’t really drive sales; they build a brand. And to build a brand, you need to have a plan.

Mistake #6: Running a contest without a plan

Contest plan.

Reeling from the freebies, I was still looking for effective ways to market my bag business. I decided to run a contest with a blogger. I figured we could pick up a few links and social shares, and I’d also increase my social media following and email list.

This time, I was more prepared financially, as the prize offered was just a $50 gift certificate. The result? I nearly tripled my social media followers, and the contest turned out to be a hit.

Or was it? Since I had already made mistake #4, I didn’t have a content plan to follow up with all of these social media followers.

The trick with social media is that you have to engage your followers from the get-go. Find content to share every day. Put out your own content on a regular basis. Start conversations. Be helpful. Who would have thought Facebook and Twitter could be so much work. Eventually, to all my followers, I was forgotten. Another lesson learned!

Next time you plan on running a contest, make sure you plan for the aftermath of the contest. That planning could end up being far more valuable than the contest itself.

Mistake #7: Wasting too much time with menial tasks

Too many tasks.

In economics, there is a concept of opportunity cost. Essentially, when you choose to pursue any one opportunity, the “cost” of that to you is that your time is no longer free for other opportunities. So the cost of one opportunity is actually every other opportunity you have.

If you are bootstrapping your business like I was, chances are you did everything yourself. You set up the website, you tinkered with it, you uploaded products, you wrote all the descriptions, you did all the marketing. A spectacular one-man (or woman) show.

The problem here is that while doing everything yourself is great, it’s also incredibly time consuming. This is time you could be using elsewhere—spending it with your family, cooking up new ideas, or building business relationships, just to name a few.

Menial tasks come in two varieties: necessary and unnecessary.

You want to try and automate as many necessary menial tasks as possible. This process will cost a bit of money, but the headache and heartache you save typically outweighs the money you’ll spend. Besides, you can often find people that will gladly do these tasks (inventory uploading, data entry, etc.) for you for a reasonable sum.

Unnecessary menial tasks have to go to the chopping block. By unnecessary, I mean things like spending too much tinkering with your site’s logo, fiddling with a few pixels in image size, going into unnecessary detail about the color of a button, or some other minor change that probably you alone have noticed.

Some of the things I mentioned above can have a positive effect on your conversions, but you’ll only know once you have a lot of visitors and sales to compare it to. In the early stages of your business, you want to avoid those things.

Especially since after two hours of tinkering, you’ll feel like you did a lot of work, but realistically, your time could have been better spent.

Mistake #8: Not knowing who my ideal customer was

Customer persona.

This was a mistake I learned from after working my first online store, but that I still made missteps around when working on my second store.

Doing quality niche research comes in two parts: finding a product and knowing your customers. The tricky thing here is that you can have customers and then build a product, but it’s very difficult to have a product and then hunt for customers.

Most of the conventional wisdom says to look at numbers and analytics when researching a niche, and that’s absolutely necessary, but a crucial step I didn’t do was to find an ideal customer and build a customer profile.

Even if your niche has sufficient demand and a good selection of products, without knowing your ideal customer, it will be a lot harder for you. That’s what happened with my second store. I did have very good months, but I wasn’t targeting my customers enough and because of that, I probably lost out on a lot of sales.

If you dig deep enough, you will find that niches have niches within them. The more you can target, the better, since it will be easier to identify with your customer’s needs.

I sold fairly complicated electronic equipment on my second store. Even among the myriad selection of products in my niche, there were levels: some were less complex, some were in the middle, and some were very advanced.

My store listed all three types, but in retrospect, had I focused on just one type, I could have connected with my customers even more—and I wouldn’t have found it so hard to network with the right influencers, either. My situation was something of “too pro for the newbies, and too newbie for the pros.”

Mistake #9: Not having a solid marketing plan

Marketing plan.

“Fail to plan, plan to fail,” or so the saying goes.

When you set up an ecommerce website, and you know who your customers are and where you can find them, setting up your marketing plan should be easy. Unfortunately, since I didn’t know either of those things, my marketing plan was more of a “spaghetti-on-the-wall” plan. I’d be doing one thing one day, and something else another day. Not the best of ideas.

While every ecommerce store should have a well-rounded marketing plan that covers all bases, some channels will obviously be more effective than others. Some businesses will do better with pay-per-click (PPC) advertising, while some will shine with SEO or social media. Email is a steady sales channel, too.

Whatever your plan is, make sure it is in place from the time you launch. New opportunities will naturally arise, but your foundation, if strong, will allow for steady and scalable growth.

Mistake #10: Falling for PPC company sweet talk

Overpromise.

When your business is fledgling, it’s easy to see every service and software as a silver bullet to your problems. I can’t even count how much time I must have spent browsing through site after site, looking for the solution to all my acquisition problems.

Then one company caught my eye. It could have been any company, really, but for me, it was that one. It was a little costly, and would severely hurt my bottom line if it didn’t work out, but the appeal of their marketing videos and the extraordinary results they were showing from other clients pulled me in.

Then I had a call with them, in which they convinced me that they could turn my business upside down and it would just run on autopilot.

I couldn’t have been any more wrong. The results? I was stuck in a 6 month contract that cost me a good chunk of cash, and any sales that I did make during that period were from my own SEO efforts—not a single one from pay-per-click (PPC). Please note this is not an attack on that company! I’m sure they are good at what they do, but it was my mistake to see that the niche I had chosen was not a good fit for their solution.

Pay-per-click companies that I’ve come across have two pay schemes: a) they charge a fee, and out of that fee, they will use a fixed amount towards your ads, or b) you can spend as much as you like on ads (above a fixed minimum) and pay them a set percent of your ad spend on fees.

With scheme (a), you as a small business will throw a lot of capital into just paying for the service without getting much return, and with scheme (b), you need to have a large budget to start with.

If you dropship like I did, it’s going to be very tough. A friend of mine was using the same service and he made some money, but it was nothing close to something to live off of. If you manufacture your own products, or source them in such a way that you have very comfortable margins, then and only then can you even consider going this route. Many companies are wildly successful with PPC, but it’s just a matter of getting your numbers right.

What I recommend to new entrepreneurs

With all of those mistakes laid out, you might be wondering: How do you know you’re on the right track? No one can predict the future for you, but to help in some small way, here’s a shortlist of the hard but worthwhile work you should do to successfully launch and run an online store:

  • Research your niche: is there demand?
  • Know your customers: who exactly are you solving a problem for?
  • Find a gap in the market: is there some value you can add, or are you just a me-too store?
  • Have a marketing plan in place.
  • Avoid wasting time with distractions.
  • Think twice and thoroughly vet any company you work with, and avoid anyone that “guarantees” grand promises.
  • Use a nice, clean design that you don’t have to tinker with.

No Inventory Required: 7 Low-Investment Business Ideas You Can Start Online

No Inventory Required: 7 Low-Investment Business Ideas You Can Start Online

Buy stock, store it, pick it, pack it, ship it. Managing inventory is a big commitment when you’re running an online business.

But there are actually many business ideas you can start that let you focus less on the logistics associated with inventory and more on your business.

These low-investment, no-inventory online businesses make a great entry point for beginners or anyone with a busy schedule, giving you a hands-on education in entrepreneurship at a fraction of the cost.

You still need to come up with a solid idea, build a brand, do marketing, and provide customer service. But you won’t have to keep a stack of products in your living room or ship every order yourself.

Here are some low-investment business ideas that free you from the demands of inventory management.

Low-Investment, No-Inventory Business Ideas

choosing a low-investment business idea

1. Build a dropshipping store

Dropshipping is a business model where a third party seller stores and ships inventory to customers on your behalf. You just need to make the sales; you don’t need to handle the products yourself.

Simply put, dropshipping is a modern take on the oldest form of business: Buy an item for a low price and sell it for a profit. Except in this case, the supplier you’re buying it from is also the one responsible for getting it to the customer.

You can curate products from different suppliers into your own online store under a theme that focuses on a specific niche, like mats for yoga enthusiasts or water bowls for dog owners. When a customer buys a product from you, the order is sent to your supplier who fulfills it on your behalf. However, you are still responsible for your own customer service.

There are both local and overseas suppliers you can work with, as long as you can establish a relationship with them built on trust—an unreliable supplier will reflect poorly on your brand.

Since many of the products you can dropship are commodities and will be unbranded, your business will be competing with others through marketing and quality customer service. In other words, it often boils down to whether you can sell a product better than the competition.

That said, dropshipping is a low-investment way to test product-market fit and launch a business before you invest in your own original products. Just be sure to always order a sample for yourself to make sure that your supplier is reliable and that the quality of the products is fit for selling to your customers.

dropshipping business idea

Additional Resources:

  • Oberlo (free app for importing products from dropshippers into your store)
  • Burst (free stock photos to use in your marketing campaigns)

2. Design and sell print-on-demand t-shirts

Another dropshipping model, print-on-demand puts inventory, shipping, and fulfillment in the hands of a third-party supplier. But unlike the dropshipping idea above, the focus here is on customizing these products with your own designs to create something original.

T-shirts, hats, phone cases, hoodies, skirts, tote bags, and more become canvases for your creativity. You can think up witty slogans for developers or references that resonate with cat owners—if there’s passion and pride within a community, there’s a potential t-shirt business you can start.

Even if you’re not a designer, you can find a designer to work with using freelance sites like FiverrUpworkDribble, or 99Designs.

With many print-on-demand services, you’re paying per-product, so the base price per unit will be more expensive than if you were to order in bulk. But the advantage is that if a certain t-shirt design doesn’t sell, you haven’t actually paid for the item yet (only the design if you outsourced it).

You can even use t-shirt mockup templates so you don’t actually need to spend money on a full photoshoot for every new design.

There are a variety of print-on-demand platforms you can work with, many of which can be integrated with your Shopify store for seamless order fulfillment. However, be sure to always order a sample of your product (often offered at a discount) to make sure your custom products look good.

t-shirt business idea

Source: ThinkPup

A book is just another product when you think about it. And as such, you can create one to serve a particular demand in the market.

Cookbooks, picture books, comic books, photo books, coffee table books, and novels—if you’ve got the knowledge or the creativity, there are a variety of original books you can bring to the market.

Print-on-demand publishing is a relatively safe way to test the waters and get started with self-publishing, while giving you control over the quality and look of your book.

Blurb is a popular platform for this purpose, letting you create, order, and distribute your own books as digital and physical products.

While you can order one book at a time, costs naturally go down when you buy in bulk. You can consider pre-selling your book idea through Kickstarter to ensure that there’s demand and guarantee a certain number of customers for a bulk order.

Launching your own book can be a great way to monetize a blog if you have one or are looking to start one.

book business idea

Additional resources:

4. Create digital products or courses

Digital products like music, courses, and templates are unique on this list of ideas. Unlike the others, they’re not tangible products. There aren’t recurring manufacturing or shipping costs to worry about so your margins can remain high.

The trick is figuring out what makes for a good digital product. What is useful enough that people are willing to pay to download it?

The answers range from original instrumental beats to stock photos that can be licensed to other creators, to information products and templates that help people level up their skills in a particular field.

If you’ve got a talent that can be turned into a digital product, you can think about packaging it into a new stream of income.

Shopify offers a free digital downloads app that lets you offer digital products in your store as easily as physical products.

digital products business ideas

Source: PixieFaire

:5. Sell print-on-demand posters, greeting cards, and prints

If you’re artistically inclined or know your way around a camera, you can dropship using a print-on-demand business model to let others physically own a piece of your work. Just be sure you have the rights to the content you want to print, unless you’re using public domain assets that you can freely monetize.

If you’ve already got an engaged online following, say you’re a cartoonist or an urban photographer, you’re in an especially good position to give this business idea a try.

Depending on the printer you work with, you can turn your work into products such as posters or framed wall art, even greeting cards. There are plenty of digital templates and mockup generators like Place.it that you can use to showcase your products without having to print out each item and conduct your own photo shoots.

sell prints business idea

Source: Zen Pencils

6. Start a charitable business

Starting a non-profit organization isn’t the only path you can take to help fund a better world.

Having a mission to go along with a business, and setting aside some profit for a cause, gives social entrepreneurs a unique way to position their company in the market while addressing the issues they care about most.

In fact, 89% of consumers surveyed said they were likely to switch to a new brand with similar products and prices if it was associated with a good cause.

While many social enterprises offer their own original products, you can also take any of the business ideas above and partner with a non-profit, or execute that social good with your own hands, as long as you’re transparent about how it works.

As part of your marketing, you can share the impact that your customers are having by supporting your business, such as a blog post covering your work in the community or a real-time impact calculator on your website.

The Give & Grow Shopify app makes it easy to partner with charitable organizations and incorporate your mission into your business. You can set it up to donate a specific amount or a percentage of sales, or ask your customers to add a donation at checkout.

charitable business ideas

7. Sell a service

With services-based businesses, “time” is your inventory and your biggest investment. You’ve only got a limited supply of hours in your day. However, that makes it easier to get up and running if you’ve got skills that are in demand.

Writers, designers, developers, photographers, house cleaners, fitness trainers, and more can build a business around their skill set.

They can also expand their business with any of the other ideas above to create additional revenue streams.

A photographer, for example, can service a local event while selling prints online through their Instagram account. Coupling your service-based business with physical products can give you another source of income that isn’t directly tied to your time.

 

You can also offer your services through a freelance marketplace like Upworkor Fiverr to increase your chances of getting discovered by the people who need your skills.

sell services

How to Start a Blog That You Can Grow Into Your Business

How to Start a Blog That You Can Grow Into Your Business

Businesses of all kinds start blogging as a way to build up a long-term audience.

But the reverse is also happening where more and more bloggers start businesses as an extension of their publishing. And it makes sense.

One of the biggest challenges new businesses face is building an audience for their products. Bloggers, on the other hand, often work backwards, building an audience first by consistently putting out good content, and then exploring ways to monetize their traffic.

Starting a blog is easy if you just want to have fun. But if you’re thinking about making money as a blogger down the road, you’ll need to be strategic about how you set it up for success.

This guide will take a thorough look at what you need to know to start a blog and grow it into a source of traffic and income. And while it’s meant for those who haven’t started a business yet, it’s also relevant for any businesses that want to get into the blogging game.

But first let’s answer an important question that may seem obvious at first.

What Is a Blog?

how to start a blog

You’re reading one right now.

A blog or “web log” is a web page for content that you regularly add to and update. Unlike other publications and articles, blogs tend to take on a more personal tone that helps them connect more deeply with their audiences.

People start blogs for all kinds of reasons, including:

  • Sharing their opinions, passions, or glimpses into their lives.
  • Teaching others what they know.
  • Building an email list.
  • Developing their personal brand as an expert.
  • Selling products or services.
  • A combination of any or all of the above.

For these reasons, blogging can be incredibly fulfilling—especially when complete strangers start consuming your content—but it’s also a commitment.

Whether you publish daily, weekly, or monthly, it’s important to be as consistent as possible, not just in how often you publish but in the kind of content you publish as well.

It’s very rare for bloggers to see results right away, so keep in mind why you’re doing it to stay motivated in the early stages.

How to Start a Blog

The hardest part about blogging is finding the time and the ideas you need to do it consistently. Getting started, however, is fairly straightforward.

Starting a blog with the potential to be a business comes down to the following steps, which we’ll explore in detail:

  1. Consider the different opportunities to monetize.
  2. Pick an audience to serve.
  3. Choose a blogging platform, a domain name, and build your blog.
  4. Lay the groundwork for distribution.
  5. Planning out your publishing strategy.

If you’re wondering why we’re talking about monetization first, it’s because we need to think more like an entrepreneur than just a blogger in order to make this a profitable venture.

Different Ways to Make Money Blogging

There are a bunch of ways you can monetize your blog, depending on the kind of blog you decide to start. But people usually think of ads first for some reason.

The truth is, there are better and faster ways to make money with your blog that don’t require a massive volume of page views every day. It’s twice as true if you can build a loyal audience, not just a large one.

You can make money blogging by:

  • Selling physical products that align with your audience, whether it’s t-shirts or hot sauce.
  • Selling digital products like resumes, photos, or designs that you create once and sell again and again and again.
  • Selling services like writing, consulting, and design.
  • Publishing a book and selling it as a physical or digital product.
  • Becoming an affiliate for another brand and make a commission every time you sell their product.
  • Subscriptions powered by platforms like Patreon.
  • Doing paid reviews/promotions for brands.

There are ample opportunities to monetize your blog, but you have to enjoy what you blog about in order to succeed.

Your most important consideration—more than making money—will be who your audience is and how you’re going to serve them.

Picking a Niche: What’s Your “Thing” Going to Be?

There’s no shortage of content on the internet. It may seem hard to stand out (it is), but there are two ways you can compete: By choosing a specific audience to focus on and by creating content that has something about it that readers can’t easily find elsewhere.

You can do this in a number of ways:

  1. Focus on a specific location (e.g. New York).
  2. Focus on a specific segment within a larger category (e.g. not just recipes, but vegan recipes).
  3. Deliver your content in a different style or voice (e.g. humor).
  4. Compete with quality (e.g. in-depth posts on a topic that no one else is willing to do).

BlogTO, for example, covers a wide range of lifestyle topics but focuses specifically on the diverse city of Toronto.

how to start a blog

Source: BlogTO

The niche you choose is important as it not only has to be an audience that you can sustainably serve with a steady flow of content ideas, but will ultimately determine how you explore monetization later. Consider what kind of products or services you could potentially sell to this audience, and whether you know enough or care enough about that topic to cover it many, many times over.

Once you have some ideas for niches, use Google to look up your competitors on the topic and use Buzzsumo to get a sense of how well content on this topic performs and what channels it performs best on.

Choosing a Platform and Building Your Blog

This is where many would-be bloggers get stuck. They’re not exactly sure which platform they should invest their time and money on.

The choice usually boils down to a self-hosted or hosted platform:

  • Self-hosted: These platform generally offer more customization options, but you will still have to pay a monthly fee to host the site yourself and it requires some initial setup. WordPress.org is the go-to platform if you’re considering the self-hosted route. This guide from Smashing Magazine will walk you through it.
  • Hosted: These platforms let you get started right away and some of them have built-in audiences. Some are free like Blogger and WordPress.com (the hosted alternative to WordPress.org) and some are paid.

When choosing a platform, think about the future and how you want to monetize your blog eventually. Not all platforms will give you everything you need, while some will give you more than you will ever need.

Some bloggers opt for free hosted platforms like Medium and Tumblr because they give you access to an engaged community of other bloggers and readers on the platform. We’ll discuss it in more detail later, but you can republish on these platforms to take advantage of their audiences—you don’t need to build your main blog on these free platforms to use them.

Shopify is a hosted platform that includes both an ecommerce site and a blogging platform, as well as hundreds of apps you can add as you grow, if you want to sell physical/digital products or services right away. You can start your 14-day free trial today.

Picking a Name and Theme For Your Blog

Once you’ve picked your platform, you should considering buying a domain name (yourblog.com) and a theme (the look and layout of your blog).

Shopping for a domain is a good time to think about what you’re going to call your website. Choose something that’s catchy, memorable, easy to type, and isn’t already taken by another brand.

Unless you’re trying to build a personal brand or a portfolio site, I would recommend against using your name as the domain. You can still be the face of your blog even if your name isn’t in the URL, and it’s a lot easier to build a sticky brand when you come up with a creative name that reflects your blog’s identity. To add some more personality, get a logo made on Fiverr or use Hatchful, our free logo maker app (now available on iOS as well).

Once that’s settled, you’ll need to pick a theme.

A “theme” is just a template for the layout, look, and features of your website. There are plenty of free themes available, whatever platform you choose. But if you’re not happy with those options, consider paying the one-time fee for a paid theme as it will have a big impact on the overall experience users have on your website.

how to start a blog

 

Laying The Groundwork for Growth

We usually talk about growing an audience after we start publishing. But if you want to build up momentum quickly, you need to start thinking about it even before you launch.

Many bloggers struggle with distribution, and I think there’s two parts to the reason:

  1. They don’t have a concrete, repeatable distribution strategy within their publishing process.
  2. Publishing is already a nerve-wracking experience, and amplifying your reach makes it that much scarier.

The latter is something you eventually get over, but the former requires some initial thought and investment of time before you launch.

So let’s walk through some of the ways you can plan for growth and get the most out of every post you create.

Start Collecting Emails as Soon as Possible

It doesn’t matter what platform you’re blogging on, you should be focusing on getting email subscribers. Every new subscriber is a sign that you’re doing something right and is a potential repeat reader that you can easily reach.

Even if you switch platforms down the road, or decide to start something new, your email list remains with you.

MailChimp is an easy email marketing tool to recommend because it’s free up to 2000 subscribers. But it’s not enough to just have a subscriber list. You need to capture these emails at every turn and you do that with sign-up forms.

how to start a blog email list

A good habit to get into is to embed sign-up forms directly into your content with a call to action to subscribe, like the one you see below.

Many email marketing solutions lets you create and use these forms easily. You can even generate a link that directs to a separate sign-up page that you can link out to in your blog posts, social media, and email signature.

Remember that people aren’t going to subscribe to your blog if you don’t ask and if you don’t make it easy for them.

Every time you publish a post, you should email it to your list—a process you can automate down the road once you get into the swing of things.

Look For Opportunities to Go After Search Engine Traffic

Using keyword research, you can get an idea of how much search volume there is for particular search queries in your niche. The higher the number, the more demand there is for a topic, and the more traffic you can potentially generate long-term.

The easiest way to do this is to simply install the Keywords Everywhere Chrome Extension and start googling from your audience’s perspective to try to unearth interesting content ideas. Queries that start with “how to…” or “best…” are a good place to start.

 

Even if you don’t land a spot on the first page of the search engine results for these searches, you’ll have a content idea with proven demand. But if you want to aim high, you can learn more about SEO.

Set Up Your Social Media Strategy

At first, it might seem like a smart move to be on every single social media platform, but that gets hard to manage fast and isn’t always effective.

Instead, focus on the channels where your audience spends the most time. Depending on your niche and your resources, your choice of channels will vary.

For example, a Facebook Page is a good all-around asset for any blogger who’s willing to pay to promote their content. On the other hand, a cost-conscious food blogger will probably stand to get a lot more free engagement on Pinterest and Instagram than Twitter.

Don’t neglect your personal networks either—your friends and family make a great early audience.

Reduce, Reuse, and Resurface Your Content

You can’t put out large posts every day. A good blogger knows how to reuse and repurpose their content to get the most mileage out of it.

So, here are some ideas to keep in mind as you go forward:

  • Create “micro-content” for social media from existing posts with tools like Canva.
  • Post a roundup of past blog posts with a common theme (e.g. “Our Best Posts of 2016”).
  • Recreate blog posts as other types of content, such as infographics or quizzes.
  • Regularly republish your content on new platforms with built-in audiences like MediumLinkedIn, or Tumblr to get more early exposure, adding a link to the original post to the top (“Originally published on youblog.com”) to increase your chances of getting clicks back to your site.
  • Occasionally update and republish old content after a good amount of time has passed to expose it to readers who missed it the first time. This works great with seasonal content (e.g. “10 Lazy Halloween Costume Ideas”)
  • Consider accepting guest posts once you’ve started to amass a following. Guest authors will likely share this content with their own audiences too.
  • Add links to related content within and at the end of your posts. (If you’re on Shopify, install the free Related Blog Posts app.)

When time is money and you’re in the business of blogging, you need to constantly squeeze more value out of your efforts.

Understand Analytics to Understand Your Audience

The best opportunities are hidden in data.

Depending on the platform you choose you’ll have different metrics to look at, but you’ll at least get the number of views and where your visitors are coming from, which can tell you a lot about your performance.

But if you take the time to set up Google Analytics on your site (it’s free), you can get deeper insights, like the average amount of time people spent reading your post, the quality of the readers coming from different sources, and even the number of readers in real-time.

how to start a blog

Data can also be used as leverage for bloggers. The ability to prove how much traffic you bring in is a huge asset that makes others more likely to want to work with you or gain access to your audience.

Planning Out Your Publishing Strategy

Every blogger needs to keep a healthy supply of ideas and it helps if you plan ahead to ensure you never run out.

I highly recommend that you create a content calendar to help you keep track of your ideas (and keep yourself on track too).

You can use a simple spreadsheet to plan out your content calendar, but I recommend Trello since it’s free and also makes for a good place to dump ideas and organize them.

how to blog

Thinking about your content mix is also important to get a sense of the scope of your blog and what categories/tags you might use to organize it all as you add more content in the future.

A good mix includes:

  • Evergreen content that addresses questions/queries/problems that people regularly search out on Google.
  • Topical content that tackles current topics and trends your audience cares about.
  • Curated content that is smaller in scope and requires less time to create to help you pace yourself and keep your audience engaged between longer posts.
  • Feature pieces about other people or brands who might share it with their audiences (e.g. interviews, reviews, etc.)
  • Visual or interactive content at least occasionally to add some variety to your blog (e.g. infographics, quizzes, memes, etc.).

Try to plan out your blog posts at least one month in advance and publish on a consistent schedule so your audience has an idea of how often to expect new content.

Keep in mind that you won’t grow your audience overnight. You’ll have some hits and some misses, but you need to keep going to keep growing.

Building Your Audience-Powered Business

However you choose to go about your blog, it’s your audience that ultimately determines its potential as a business. Focus on growing this audience as you publish on a regular basis, and you’ll see your traffic and reach grow as well.

Blogging isn’t just fun and fulfilling—it’s also one of many paths to entrepreneurship. If you think like an entrepreneur when you start your blog and aim high when it comes to growth, you can build a valuable audience that can help power your business for a long time to come.

How Referral Programs Can Encourage Customers to Do Your Marketing for You

How Referral Programs Can Encourage Customers to Do Your Marketing for You

Ecommerce powerhouses like Bonobos, Rothy’s, and Everlane have all been known to run referral marketing programs. They work. They help retailers build a loyal following of their best customers.

But referral programs can be complicated to set up, aren’t a fit for every business, and, as with every growth initiative, offer no guarantee of success. There are many moving parts to consider and configure because an effective referral program needs to be treated as a holistic marketing campaign.

As a result, many retailers setup referral programs prematurely, often before they’ve found product/market fit or a large enough customer base. Or, they invest in referral marketing halfheartedly, not allocating enough investment in promoting their campaigns. Either situation is sure to lead to underwhelming results, which means wasted time and resources.

So, with all of that in mind, should you run a referral program? To help you answer that question for your business, let’s walk through the broad strokes of what you’ll need to do to run a referral program successfully.

Is a referral program right for your business?

Referral programs amplify the existing word of mouth that your store already gets from your customers and fans; they cannot create brand new customers or word of mouth out of thin air.

Since referral programs depend on happy existing customers or advocates to help extend your reach, there’s no single magic measure to tell you in advance whether a referral program would be successful for your store. However, for entrepreneurs who are seriously considering implementing a referral program, I recommend looking at the following two variables:

  1. Are you already getting organic word of mouth referrals?
  2. How many sales does your store make a month?

To be confident about the potential success of your referral program, already having at least 100-200 monthly transactions is ideal. A customer base of this size accounts for the fact that not every customer will be willing to make a referral, and even those that are will often forget, or fail to recognize opportunities to refer your products.

Tailor the specifics to match your store

There are a few things you need to get right when setting up your referral program from scratch.

1. Incentives

Referral marketing example.
The whole point of a referral program is to incentivize more deliberate word of mouth from people who are already casually talking about your store.

To do this, you need to think clearly about what would be a meaningful incentive for both the advocate and the friends they are referring. The right incentives vary depending on the conditions of your store, your product, your pricing and so on.

The big question to answer is: Should you use a cash incentive or a discount coupon?

This depends on whether you expect advocates to return to your store to make future purchases. If you’re selling a product people buy once, or infrequently (like a mattress), it’s better to offer a cash incentive since your advocate won’t have any use for five “20% off your next mattress” coupons.

If you’re selling something people buy often or need to regularly replace i.e., apparel, makeup, or shaving razors, then a discount coupon means that each referral is likely to lead to two new sales. Score!

2. Messaging

Brand values in referral programs.
Example from Shopify customer GoldieBlox.

There are multiple touchpoints in a referral program where you’ll have the opportunity to communicate your brand’s voice, particularly through the images and copy you create.

You want to ensure every referral touchpoint reminds your advocates, and the friends they’re referring, what your store is about: your ethos, your company’s mission, and the values your brand represents.

Consider the above example from GoldieBlox. The mission of the product is to encourage girls to get involved in engineering. The messaging makes sure to emphasize that, and in turn creates an offer that’s significantly more compelling than a mere discount.

Referral emails are a particularly important channel in which to hone and refine your messaging. Referral emails can be an effective way to remind your existing customers that they can be rewarded for referring their friends to your store.

But to do that, the emails you send have to capture attention and spur action—the table stakes are an interesting email subject line, copy that is short and sweet, content that highlights the benefits to both the advocate and their friends, and a crystal-clear call to action.

Promoting your referral program

Airbnb is one of the mega-brands that is commonly referenced when people discuss and analyze examples of highly successful referral programs. But did you know that their first referral program was a complete failure?

It failed because it wasn’t adequately promoted; even Airbnb employees didn’t know it existed.

You want to avoid this outcome at all costs. It’d be pretty tragic to take the time and energy to figure out the right incentives and messaging for your referral program, only to have customers completely ignore it.

There are several steps to effectively promote an ecommerce referral program to ensure the right people hear about it.

1. Email your existing customer list

Example of a referral email.
Example from Shopify customer ZOOSHOO.

Store owners who’ve been running businesses for years will sometimes confidently declare they wish they would’ve created and run referral programs sooner. There’s a hint of regret that they must have missed out on acquiring lots of new customers.

But that’s not necessarily true! Relatively “mature” ecommerce stores often get significantly more out of their referral programs compared to brand new stores, because they have the opportunity to send out an email campaign to a much larger email list of past customers. And in general, the audience available to established stores makes getting the ball rolling for a new referral program significantly easier.

2. Feature your referral calls to action

Where to highlight referral programs.
Example from Kurgo.

It’s always sobering to realize how easily distracted customers are. They’ve got tons of other things on their mind—now more than ever. So it’s always worth taking the extra effort to remind them of your offers at every step of the way. Here are some locations you could consider putting your referral program calls to action:

  • Header (“Earn $20”)
  • Hero Image Carousel
  • Pop-up Widgets (use sparingly!)
  • FAQ Page

3. Prompt customers after they purchase

Prompt customers for referrals.

One of the best times to ask your customers for a referral is right after they’ve purchased your product. They’ve just made the decision to buy, and they’re extra receptive to taking another little action—ideally, telling their friends about you.

This is an important time to get the copy exactly right. Your customers have just purchased, they’re (hopefully) excited about completing the purchase and getting what they want. You want them to do you a favor, but you don’t want it to sound like a burden or a chore.

To do this, you’ll want to emphasize the good feelings that your customer is going to have when their friend enjoys your product at their referral.

4. Add referral marketing to existing channels

Example Facebook ad.
Example from Boxed.

Your referral program doesn’t need to “live” in any particular place, like on your site or in your marketing emails. You can and should remind your customers about your referral program across all your marketing channels.

Of course, be tasteful about this. A referral program, while it offers benefits, is still a marketing tactic. Space these messages out within the context of a broader, more comprehensive social media strategy.

5. Send smart email reminders to your advocates

Schedule referral emails.

It’s incredibly easy to overestimate how many customers have heard or paid attention to any of your campaigns, referral or otherwise. We all lead busy lives, and that often makes us very forgetful customers.

Sometimes it takes multiple reminders before customers realize that your business even has a referral program, and a few more after that before they remember they’ve got a friend who’d be a perfect fit for your product. To address this, it’s worth sending reminder emails from time to time.

It might be tempting to send referral reminders every week, but what other emails are you sending your customers? If you’re already sending them lots of other emails—discount coupons, new arrival announcements, and so on—then it makes sense to send them out less frequently.

You can always also insert mentions of your referral program in your existing marketing emails! The important thing is to pay attention to your customers’ experience, and make sure that it’s a positive and pleasant one.

Reach your next best customer

Let’s not sugarcoat things: referral programs are a lot of work. But they work.People who participate in your referral program are doing you a huge favor—they’re incentivized to think about which of their friends, colleagues, or followers would most love your products, and that level of targeting is how you reach some of your best and most loyal customers.

Customer referrals are proof that you’ve built something that your customers truly love. If you’re selling something that has a positive impact on your customers’ lives, then a customer referral program will enable and encourage them to tell their friends about you.

What’s more important, however, is that you get a good sense of the scale and scope that a successful referral program requires. This will help you better plan how and when you should run your referral program. Happy referring!

How to Sell Photos Online: For Both Amateur and Pro Photographers

How to Sell Photos Online: For Both Amateur and Pro Photographers

Making money as a photographer, like a YouTuber or Instagrammer, is all about harnessing that same creativity at the heart of your work and applying it to the monetization of your talents.

It can seem hard to make it when anyone with the newest iPhone can call themselves a “photographer.” But success, for most creators who turn to entrepreneurship, comes down to three things:

  1. Finding your niche.
  2. Building an audience.
  3. Creating several streams of income.

This guide will explore some of the things you should know about selling photos online with resources to help you make your photography-based business a reality.

E

 

How to sell photos online: two essential steps

1. Define your niche

Every successful photographer has a consistent style or theme that runs through their work. Whether your thing is travel, fashion, cityscapes, nature, food, etc., consistency is key.

People follow other people online to see more of whatever it is that interested them in the first place. People unfollow other people when those expectations aren’t met.

Finding your niche if you want to sell pictures online is typically something you feel your way into as you see which styles and photos resonate with your audience. But you can also evaluate the demand for certain topics using keyword research to analyze the search volume for terms related to your photographs.

Keywords Everywhere is a browser extension that shows you the search volume right below your Google search, making it easy to find and experiment with in-demand subjects and angles to see what you can cater to with your photographs.

As a suggestion, anything above 1,000 average monthly searches is sthe ignificant volume to consider capitalizing on.

Photographers, just like bloggers, YouTubers, and artists of any kind, should also invest in building their audiences because that’s ultimately what helps them build their business and sell photography online.

Whether you’re freelancing or selling photography online as prints, you’ll need to build and leverage your network to expand your reach and credibility.

Visual social platforms like Instagram and Tumblr with built-in audiences can help you reach a wide audience, but there are also photo-sharing sites that can connect you with other photographers where you can build a following and, depending on the platform, sell licenses to use your photos (more on that later).

Linking your various accounts makes it easier to manage your photo-sharing across several platforms, which is good for visibility of your photographs, especially important when you’re trying to figure out how to sell your photography. On Instagram, for example, you can go to Options > Settings > Linked Accounts to connect Tumblr, Facebook, and more to publish in more than one place with a single post.

IFTTT is a free tool that can help you create other useful integrations between apps that don’t usually integrate, like Instagram and Dropbox.

On Instagram, you can also use Hashtagify to discover relevant, active hashtags to increase the visibility of your photographs on the platform to get more likes, comments, and engagement.

2. Integrate ecommerce into your portfolio

Most photographers have a main portfolio site to showcase their work and let clients hire them. But by adding ecommerce to it, including the ability to accept payments, you can open several more doors to monetization, like selling courses, physical products, and services.

Matt Suess (below), for example, has a store that showcases his work, lets others purchase da igital and print version of his shots, and buy his courses.

Source: Matt Suess

You can build your portfolio or store on Shopify, install the relevant apps to customize it to your needs and monetization strategies, and start sharing and selling your photography in different forms: online or even offline through POS.

 

You might also want to consider installing apps to add more functionality like Digital Downloads (free), an Instagram gallery, and more.

There are a lot of reasons your own ecommerce site can be a best place to sell photos online, many of which we’ll explore below.

Best place to sell photos online: 20 stock photography sites to license your photography

Here are 20 stock photography sites to sell photos online:

  1. Getty Images
  2. Shutterstock
  3. iStock
  4. 500px
  5. Stocksy
  6. Can Stock Photo
  7. FreeDigitalPhotos.net
  8. Adobe Stock
  9. Fotolia
  10. PhotoDune
  11. Alamy
  12. Twenty20
  13. Depositphotos
  14. Dreamstime
  15. GL Stock Images
  16. EyeEm
  17. Image Vortex
  18. Crestock
  19. 123RF
  20. Foap

Licensing is one of the most popular ways to “sell” your photos online to brands, publishers and anyone who might have an interest in using your photos for their own purposes.

And that’s the key here. You need to work backwards and think about how your photos can used by a brand or a publisher — versatile photos that express ideas tend to be popular, especially when they feature human subjects.

There are a lot of stock photo sites to choose from, including:

1. Getty Images

On the higher end of stock photography sites, Getty Images attracts brands and publishers looking for high-quality or hard-to-find exclusive images to license. The standards for becoming a contributor are predictably higher than many other stock photo sites. For photos licensed via GettyImages.com, rates start at 20%.

2. Shutterstock

Shutterstock is a micro-stock site where photos are cheaper and non-exclusive, and the way to increase downloads is by contributing a large quantity of images that can be used as visual metaphors. Don’t expect to earn as much here, but it’s a good place if you’re just starting out. Payouts are based on your earnings over time and range from 20% to 30%. There’s also an affiliate program where you can earn additional money if you refer new photographers or customers.

3. iStock

iStock is the micro-stock offshoot owned by Getty Images. Commission ranges from 25% to 45% depending on whether the photos are exclusive or non-exclusive.

4. 500px

500px isn’t just a stock photo site; it’s a community-based platform for photographers. You can follow other photographers, list your photos in their marketplace, and participate in Photo Quest competitions for prizes. The community is full of stunning, creative shots with a 30% commission payout for non-exclusive photos and 60% for exclusive ones.

5. Stocksy

Stocksy is a popular mid-range stock photography site, especially among publishers. The standards to be accepted are higher, and Stocksy requires exclusive images, but it also pays out a generous 50–75% commission.

6. Can Stock Photo

More than 70,000 photographers sell photos on Can Stock Photo. There are various payout structures ranging from percentages to fixed amounts, and they’ll also give you $5 for every 50 photos your referral sells. When you sell photos on Can Stock Photo, they also list your photos for sale on Fotosearch, a stock photography agency.

7. FreeDigitalPhotos.net

FreeDigitalPhotos.net offers free photo downloads as well as images for users to purchase. When the small version of your photo is downloaded for free, attribution is required. While you won’t earn a cent, you will get credit. When their target market (professionals who need images for business use) purchase images, photographers earn 70% commission.

8. Adobe Stock

Adobe Stock is a best place to sell photos online because when you list photos for sale here, they’re also available on stock site Fotolia. You’ll earn 33% commission on the photos you sell through Adobe Stock.

9. Fotolia

Fotolia, which has been purchased by Adobe Stock, has two pricing models for users: Pay-As-You-Go and Subscription. Photos sold to Pay-As-You-Go customers earn 20–63% commission, while Subscription generates 33% commission but has a minimum guarantee.

10. PhotoDune

PhotoDune, part of Envato Market, is another best place to sell photos online. Payout structures vary. PhotoDune also has a referral program:Receive a 30% commission from your referral’s first cash deposit.

11. Alamy

Alamy pays contributors monthly and has a varied payment structure. Sales through www.alamy.com earn photographers 50%, Distributors earn 70%, Novel Use earns 50%. Payments are deposited monthly, as long as your Cleared Funds are $50 or more.

12. Twenty20

Twenty20 started as a tool for Instagram photographers to sell their images to brands. Now, it’s a robust stock photography site where you can sell photos online and connect with potential clients. You can earn money three ways: selling a photo, for you earn $2 per photo licensed, 100% cash prizes from photo challenges, and 100% commission from whatever brands hire you for scheduled shoots.

13. Depositphotos

Depositphotos has its commissions based on the contributor’s experience and status on the platform, as well as the resolution and license type. Commissions range are 34–42%.

14. Dreamstime

Dreamstime is a stock photo site with a generous payout for contributors. However, they require more commitment: You must have at least 70% of your portfolio on their site for at least six months. But, non-exclusive contributors earn 25–50%, and exclusive photos generate a 27.5–55% commission. There are also lots of ways to earn money for referrals, both on the contributor and the purchaser side.

15. GL Stock Images

On GL Stock Images, you have the choice of setting your own prices. And you’ll earn 40% commission on all sales.

16. EyeEm

EyeEm focuses more on advertising stock photography, making it a best place to sell photos online if you’re looking to be in the commercial photography space. They advertise a 50% commission on their site.

17. Image Vortex

Image Vortex doesn’t require exclusivity, so you can sell your photos on other sites as well. Commission rates are 70%, and you establish your own prices.

18. Crestock

Crestock pays contributors 20–40% commission rates based on the total number of downloads. They also have several affiliate programs through which you can earn money.

19. 123RF

This is another stock photo platform that pays contributors based on the number of downloads and purchases. Commissions range from 30% to 60%.

20. Foap

Foap offers contributors five ways to earn money from selling photos online: $5 for every photo sold, $100–$2,500 for Missions, $0.25/photo for album-specific photo sales, submitting photos to Getty Mission (payouts vary), and selling photos online via partner platforms, such as Adobe and Alamy.

How to sell photography prints, products, and photo books

  • How to sell photography prints and products
  • How to sell pictures as photo books

It’s not just brands and publishers who might want your work. Your fans might too.

And there are plenty of ways that they can potentially own it, whether it’s as a simple framed print or a pillow. Luckily, selling your own physical products is a lot simpler than you think.

How to sell photography prints and products

There are many sites and tools where you can upload your photographs and sell your pictures as photo prints on paper or physical products, such as mugs, T-shirts, and calendars.

You can work with a local photo lab that ships prints or use a print-on-demand service like Printful to dropship a wide range of products (prints, phone cases, pillows, and more) featuring your photos.

Be sure to order samples first to ensure that the quality of the products match the quality of your photos.

how to sell photography onlineImage via Burst

There are many other sites and tools you can use to print photos and products to sell.

How to sell pictures as photo books

You can also learn how to sell pictures by creating photo books with your photographs and selling those online.

Photo books are another physical photography-based product that can complement any coffee table. The more niche and consistent your photography is, the more likely you’ll be able to put together a stellar photo book based around a compelling theme.

You can use a service like BlurbYork Photo, or Shutterfly to create, print, and ship them on the demand.

While you won’t get the best margins with print-on-demand services, it’s a great risk-free way to test demand for your products before you decide to invest upfront.

How to sell your photography as a service

Whether you’re covering events, doing fashion shoots, or taking product photos, there’s ample opportunity to take advantage of the demand for professional photography. Here’s how to sell your photography as a service:

While you can list your services in freelance directories like Fiverr and Upwork, or apply to be an Expert, selling your photography as a service for decent pay usually involves networking locally since you need to be able to travel to meet clients in-person.

Here are some tips to build your network:

  • Always have business cards handy — you never know when you might meet a potential client
  • Tidy up your LinkedIn profile, showcase your work, and optimize it for the main photography service you provide (“Event Photographer”, for example).
  • Attend networking events where entrepreneurs and event organizers go — these folks will inevitably have a need for a professional photographer in the future.
  • Build a personal brand as a photographer so you’re top-of-mind when anyone in your network needs your camera and skills.

Since photographers, unlike other freelancers, must operate in strict time slots, it’s good to have a booking platform you can use to let prospective clients see your schedule and book you when you’re available.

Both Set More and Simply Book have free plans and features that work well for photographers. Or, if you’re using Shopify, you can install BookThatApp to schedule appointments directly from your site.

Now, let’s talk about usage rights and protecting your work.

A photographer’s legal primer to selling photos online

Figuring out how to sell your photography online can be overwhelming enough. And while rights and licenses related to selling photography may seem a foreign language, there are some terms and concepts you should know to help protect yourself from theft and infringing upon others’ rights when selling photos.

This is by no means a comprehensive list, or a substitute for actual legal advice (I’m not a lawyer), but it should offer you broad definitions that will help you navigate the world of usage rights.

Glossary of legal terms for selling photos online

  • Editorial use
  • Commercial use
  • Retail use
  • Exclusive
  • Non-exclusive
  • Public domain
  • Creative Commons
  • Royalty-free
  • Rights-managed
  • Right of publicity

Editorial use: Permission to use in blogs, newspapers, magazines and other publications.

Commercial use: Permission to use in marketing and advertising to promote a product or service.

Retail use: Permission to use in the creation of a physical product to be sold. This includes prints, posters, and products that feature the photo (pillows, mugs, etc.). Sometimes talked about in the same context as commercial use, but it should be considered separately.

Exclusive: Exclusive use means that the one who purchases the license from you is the only one who can use the photo.

Non-exclusive: Non-exclusive photo licenses can be purchased and used by anyone and usually cost less than exclusive ones.

Public domain: Holds no restrictions or copyright claim and can be used for commercial, editorial, and personal purposes. Works created by U.S federal government agencies (such as NASA) generally fall into this category unless otherwise stated.

Creative Commons: Conditional usage of your work is allowed as long as it’s in compliance with the stated restrictions. Attribution to credit the creator is sometimes required. Visit Creative Commons to generate a badge for this license for free.

Royalty-free: Others can buy a license and use the photo for an unlimited duration and unlimited number of times. This is the most common type of license purchased and on the cheaper end of the spectrum since these photos are usually non-exclusive.

Rights-managed: A one-time license can be purchased to use the photo with restrictions regarding distribution. Additional licenses must be purchases for additional use.

Right of publicity: The subjects in your photos are entitled to certain rights when it comes to their inclusion in your photography, especially when it comes to commercial use when you sell photos online. This is a separate concern from the copyright considerations above and you should seek a subject’s explicit permission first in order to be safe.

For more in-depth information about copyright laws and licensing in the U.S., check out Photo Secrets to understand the copyright laws that protect your work, or look at any major stock photo site to see how they define different types of licenses.

What to do if someone steals your photos

Theft is common when it comes to content, and many people do it unknowingly.

It’s common practice for photographers to watermark their images before selling them online to offer them at least some layer of protection against theft. If you’re going to sell or share your own photos, you can apply your own identifying mark in Photoshop or use a Watermark Generator.

A smaller watermark, often in the corner, still lets others enjoy your photo, while a larger tiled watermark with reduced opacity offers the most protection against theft.

But what do you do if someone decides to steal and use your photos anyway?

cease and desist request will usually work. Or you can send the culprit an invoice for using your photo. A combination of the two will likely be the most effective at persuading the perpetrator by offering them the choice to either pay you or take the photo down.

At the very least, you should always try to get others to credit you whenever they borrow your work, even if it’s just for editorial purposes. Remember that links back to your portfolio site are not only good for driving traffic back to your other work, but also good for search engine optimization and helping your standing in Google search results.

Turning your passion into profit

Whether photography is your hobby, your side gig, or full-time hustle, there are more avenues than ever before when it comes to how you sell photos online.

Your talent and your determination ultimately decide your earning potential, but the income you get from doing what you love and what you’re good at is some of the best cash you’ll ever earn.

How to Make Money on Instagram (Whether You Have 1K or 100K Followers)

How to Make Money on Instagram (Whether You Have 1K or 100K Followers)

You’ve probably heard stories of Instagrammers who are cashing in on the pictures they snap and share every day. You might’ve even looked at your own sizeable following and thought, “Maybe I can do that too”.

Just like bloggers, YouTubers, and anyone who’s amassed an audience around the content they produce, Instagrammers have reach and influence figured out—two things many companies struggle with.

Together, these two things offer the opportunity for Instagram creators to explore multiple streams of potential revenue, whether they want to build an empire or just earn some extra cash and free stuff.

How many followers do you need to make money?

If by now you’re wondering how many followers you need to make it happen, the short answer is “not as many as you think”.

The long answer depends on factors that range from:

  • What niche you’re in and how easily you can directly tie it to a product category (fashion, food, beauty, and fitness are popular niches, based on top hashtags)
  • How engaged your followers are (100K fake followers won’t amount to much).
  • Which revenue channels you explore.

Naturally, the more engaged followers you have, the better.

While top Instagrammers make thousands per post on the photo-sharing platform, even those with a smaller-but-engaged following of 1000 have the potential to start making money.

How to make money on Instagram

Depending on your unique brand of Instagram content, your audience, and your level of commitment, you can make money on Instagram in the following ways:

  • Doing sponsored posts for brands that want to get in front of your audience.
  • Becoming an affiliate and making a commission selling other brands’ products .
  • Creating and selling a physical or digital product, or offering a paid service.
  • Selling your photography.

The beauty here is that chasing one revenue stream doesn’t necessarily rule out another.

So let’s start with the most common approach to Instagram monetization: partnering with brands as an influencer.

Work with brands on sponsored posts

The term “influencer” gets thrown around a lot these days.

An influencer is basically anyone who’s built themselves an online reputation by doing and sharing awesome things online. To their audiences, influencers are tastemakers, trendsetters and trusted experts whose opinions about certain subjects are respected.

Many brands just can’t compete with that and so they partner with influencers instead to do sponsored posts that help get the word out about their products.

But it’s not just the size and reach of your Instagram account that brands want. It’s your audience’s trust and engagement with your content.

It can be hard to balance your revenue as an influencer and your integrity as a creator, but if you’re not relying on your Instagram income to stay afloat, you always have the freedom to be selective about the brands you work with, just as brands will be selective about the Instagrammers they work with.

brands looking for influencers
Brands of all kinds are using influencer marketing to get their products out there (via Fohr Card). 

How to decide what to charge as an influencer

Typically these influencer deals involve the creation of content—an Instagram post, video or Story—and will sometimes include permission for the brand to use this content on their own site or in an ad.

Most of these deals are negotiable and can involve a single post or an entire campaign in exchange for a fee, a free product, a service, a gift, the promise of exposure, or some combination of these.

Keep in mind when negotiating that you’re not just offering content but access to your audience, a potentially large reach on one of the most popular social platforms around, and usage rights too.

In a survey of 5,000 influencers, around 42% said they charged $200 to $400 per post—just to give you an idea of what some brands are willing to pay, and how to negotiate based on the cards you’re holding.

Finally, it’s important as an influencer to also know your own audience.

What is the make-up of your audience and what is your engagement rate (total engagement divided by your number of followers)? You can dig up numbers to back this up in your Instagram Analytics report, if you’ve switched to a business account. This will help you be prepared when it comes time to negotiate.

How to find brands to work with

If you’re big enough, chances are brands will find you. But you can also look for brands to work with that are on a similar level in terms of personality and values, so your audience won’t feel like you’re “selling out”.

You can reach out to them directly to try to work out a deal, but you can also list yourself on one of the many influencer marketplaces out there to increase your chances of being discovered:

  • Shoutcart: Sell a “shout out” to your audience on behalf of a brand, regardless of how large your following is.
  • Fohr Card: Connect your Instagram, blog, YouTube channel, and other social platforms to create an influencer “card” that shows your different profiles and total reach for brands shopping around for a partnership. You also get access to a list of brands and their wants, so you can take the initiative to reach out too.
  • Grapevine: If you have 5000 or more followers, you can list yourself in the Grape Vine marketplace for the opportunity to work with like-minded brands.
  • Crowd Tap: Do small content creation tasks to earn rewards. This is great if you’ve got a smaller audience. Available in the U.S only.
  • indaHash: Brands put up campaigns that you can participate in. Post a picture with the specified hashtags on Instagram and get paid. You need 700 engaged followers to be eligible.

The rules vary when it comes to sponsored content, but to be on the safe side and respect your audience’s trust, consider adding a #sponsored hashtag to indicate sponsored posts. If you need reassurance, about 69% of influencers in one report said that being transparent about sponsorships didn’t affect how consumers perceive their recommendation.

You can find examples of sponsored posts and how Instagrammers integrate brands into their story by searching up #sponsored on Instagram, like this one from How He Asked, an account that shares wedding proposal stories and partners with a jewlery business:

howheaskedToday is a good day – it’s a @ShaneCompany takeover day! We’re sharing a few of our most-loved designs throughout the day, so feel free to chime in if you’re into them too. The first needs no introduction – we’re always a fan of showstoppers ✨ More rings via the link in our profile! #Sponsored

Instagram also has a “Paid Partnership with” tag that prominently identifies sponsored posts, which some brands might require you to use to disclose your relationship with them.

Become an affiliate

Unlike an influencer, an affiliate is more invested in making sales for the partner brand—not just generating awareness—in exchange for a commission.

This is typically done with a trackable link or unique promo code to ensure clicks actually translate into sales. Since Instagram doesn’t yet allow links anywhere outside of your bio, you can only focus on one product at a time if you choose to rely on affiliate links, making promo codes a better option for Instagram since you can actually incorporate them into your posts.

Note: Instagram has plans to roll out links for Instagram Stories, which will open up new opportunities for you as an influencer.

Consider reaching out to one of the many online merchants that offer affiliate programs that you can participate in. Or you can also explore popular marketplaces like:

  • ClickBank: An affiliate platform with a tier-based commission that’s open to everyone.
  • RewardStyle: An invitation-only fashion and lifestyle influencer network that offers 20% commissions.
  • Amazon’s Affiliate Program: A popular option that pays out a 10% commission.

Though it sounds like a numbers game, affiliate marketing is also an art, and you’ll have a better chance at success if you have a plan going into it and expand your online presence to include a website and other marketing channels.

Tip: Affiliate links can be long and ugly, so I recommend a URL shortener like bit.ly, especially if they’re going in your Instagram bio.

Open your own online store

By now it might sound like the only way for an Instagrammer to make money is to sell out and work with other brands.

But creators of all kinds are also in a good position to “sell out” with their own products: physical goods, services, or digital items that can be an extension of their brand, building a business with an audience at its center.


Set Up Your Own Store on Shopify Today

Start your free 14-day trial—no credit card required.


You need to invest some time upfront, but in today’s world it’s almost natural for creators to make the leap into entrepreneurship.

Just look at Doug the Pug, one of the biggest Instagram dog-preneurs of his time.

doug the pug making money on instagram

By selling your own stuff, you  don’t need to worry about integrating messages from other brands into your posting strategy. Better yet, you can get your own brand out there on the products you sell.

Sell more with shoppable Instagram posts

Start tagging products in your posts and turning engagement into purchases with Shopify’s Shopping on Instagram sales channel.

Learn more

Fans can show their love and support your work by buying from you—a purchase they can feel good about.

There are a few ways to do this:

  • You can use a print-on-demand service to print and ship your own t-shirts, pillows, coffee mugs, wall art, and more.
  • You can sell services such as photography or consulting, using your bio to direct interested people to a contact email or a link to your professional website.
  • You can sell digital products such as courses, ebooks, or design templates.
  • You can use your Instagram account to launch a business selling your own original products, or even a book.

If you plan on selling several items in your own Shopify store, you can also make your Instagram shoppable on your website using one of the available Instagram gallery apps.

Take it a step further with our Shopping on Instagram integration to enable product tags that make the experience from Instagram posts to your own products more seamless and fluid. To use it, you’ll also need to switch to an Instagram business account, have a Facebook page, and an approved Facebook shop (all of which you can set up for no additional cost).

making money on instagram with product tags
Source: Child of Wild

Sell your photos online or on things

Someone might get famous on Twitter by telling 140-character jokes, but Instagram is a photo-sharing app at its core. And photos are assets that can be licensed, printed, and sold in a variety of ways.

If photography is what got you into the Instagram game in the first place, you can list your photos in marketplaces like 500px or Twenty20 where brands and publishers might license them.

However, you can also sell your photos as prints and on other physical products using a similar methods described in the last section. Services like Printful and Teelaunch can let you put your photos on posters, phone cases, pillows, and more, taking care of fulfilling orders and customer service so all you really need to worry about is making sales.

Take the story of Daniel Arnold who went from “eating toast 3 meals a day”, according to an interview on Forbes, to making $15K in a single day by offering to sell prints of his popular-but-controversial photos. If you’ve already got the demand, all you need to do is take the initiative and offer your audience the opportunity to buy your photography from you.

Do it for the ‘Gram (and get paid)

What started as a hobby—making people laugh, doing silly photoshoots with your dog or sharing pictures of food—can snowball into the chance to turn Instagram into a source of income fuelled by your engaged following.

There’s a world of possibilities out there as a creator with a large online audience made up of people who can’t help but stop when they scroll past your post in their feed. It’s this special appeal that you have that opens the door. You just have to walk through it.

How to Predict If Your Next Venture Will Be Profitable

How to Predict If Your Next Venture Will Be Profitable

Starting a business often carries risk. As the saying goes, “You have to spend money to make money.

While that’s not always true, there is one very effective way to lower your risk: do a break-even analysis. A break-even analysis will tell you exactly what you need to do in order to break even and make back your initial investment.

If you run a business—or you’re thinking about starting one—you should know how to do a break-even analysis. It’s a crucial activity for making important business decisions.

What is break-even analysis?

Break-even analysis sounds complicated, but it’s actually quite simple. It’s a calculation that will tell you how many units of something you need to sell to break even.

For example, how many cell phone cases you need to sell to cover your warehousing costs. Or how many hours of service you need to sell to pay for your office space. Anything you sell beyond your break-even point will add profit.

There are a few definitions you need to know in order to understand break-even analysis.

  • Fixed Costs: Expenses that stay the same no matter how much you sell.
  • Variable Costs: Expenses that fluctuate up and down with sales.

Why you must do a break-even analysis

Why you need to do a break-even analysis

There are many benefits to doing a break-even analysis.

Price smarter

Finding your break-even point will help you price your products better. A lot of psychology goes into effective pricing, but knowing how it will affect your profitability is just as important. You need to make sure you can pay all your bills.

Cover fixed costs

When most people think about pricing, they think about how much their product costs to create. Those are considered variable costs. You still need to cover your fixed costs like insurance or web development fees. Doing a break-even analysis helps you do that.

Catch missing expenses

It’s easy to forget about expenses when you’re thinking through a business idea. When you do a break-even analysis you have to lay out all your financial commitments to figure out your break-even point. This will limit the number of surprises down the road.

Set revenue targets

After completing a break-even analysis, you know exactly how much you need to sell to be profitable. This will help you set more concrete sales goals for you and your team. When you have a clear number in mind, it will be much easier to follow through.

Make smarter decisions

Entrepreneurs often make business decisions based on emotion. If they feel good about a new venture, they go for it. How you feel is important, but it’s not enough. Successful entrepreneurs make their decisions based on facts. It will be a lot easier to decide when you’ve put in the work and have useful data in front of you.

Limit financial strain

Doing a break-even analysis helps mitigate risk by showing you when to avoid a business idea. It will help you avoid failures and limit the financial toll that bad decisions can have on your business. Instead, you can be realistic about the potential outcomes.

Fund your business

A break-even analysis is a key component of any business plan. It’s usually a requirement if you want to take on investors or other debt to fund your business. You have to prove your plan is viable. More than that, if the analysis looks good, you will be more comfortable taking on the burden of financing.

Doing a break-even analysis leads to better financial planning for your business. [Click to Tweet]

When to use a break-even analysis

When to use a break-even analysis

There are four common scenarios when it helps to do a break-even analysis.

1. Starting a new business

If you’re thinking about starting a new ecommerce website, a break-even analysis is a must. Not only will it help you decide if your business idea is viable, but it will force you to do research and be realistic about costs, as well as think through your pricing strategy.

2. Creating a new product

If you already have a business, you should still do a break-even analysis before committing to a new product—especially if that product is going to add significant expense. Even if your fixed costs, like an office lease, stay the same, you’ll need to work out the variable costs related to your new product and set prices before you start selling.

3. Adding a new sales channel

Any time you add a new sales channel, your costs will change—even if your prices don’t. For example, if you’ve been selling online and you’re thinking about doing a pop-up shop, you’ll want to make sure you at least break even. Otherwise, the financial strain could put the rest of your business at risk.

This applies equally to adding new online sales channels, like shoppable posts on Instagram. Will you be planning any additional costs to promote the channel, like Instagram ads? Those costs need to be part of your break-even analysis.

4. Changing the business model

If you’re thinking about changing your business model, for example, switching from dropshipping products to carrying inventory, you should do a break-even analysis. Your costs could change significantly and this will help you figure out if your prices need to change too.

Break-even analysis formula

Before we start calculating break-even points, let’s break down how the formula works.

Your break-even point is equal to your fixed costs, divided by your average price, minus variable costs.

Break-Even Point = Fixed Costs/(Average Price — Variable Costs)

Basically, you need to figure out what your net profit per unit sold is and divide your fixed costs by that number. This will tell you how many units you need to sell before you start earning a profit.

As you now know, your product sales need to pay for more than just the costs of producing them. The remaining profit is known as the contribution margin because it contributes cash to the fixed costs.

Now that you know what it is, how it works, and why it matters, let’s break down how to calculate your break-even point.

Before we get started, get your free copy of the break-even analysis template here. After you make a copy, you’ll be able to edit the template and do your own calculations.

A template spreadsheet to help you create a break even analysis

Step 1 – Gather your data

The first step is to list all the costs of doing business. Everything from the cost of your product, to rent, to bank fees. Think through everything you have to pay for and write it down.

The next step is to divide them into fixed costs, and variable costs.

1. Fixed costs

Fixed costs are any costs that stay the same, regardless of how much product you sell. This could include things like rent, software subscriptions, insurance, and labour.

Make a list of everything you have to pay for no matter what. In most cases, you can list the expenses as monthly amounts unless you’re considering an event with a shorter time frame, such as a three-day festival. Add everything up. If you’re using the break-even analysis spreadsheet, it will do the math for you automatically.

Fixed costs in your break-even analysis

2. Variable costs

Variable costs are costs that fluctuate based on the amount of product you sell. This could include things like materials, commissions, payment processing, and also labour.

Some costs could go in either category, depending on your business. If you have salaried staff, they will go under fixed costs. But if you pay part-time hourly employees who only work when it’s busy, they will be considered variable costs.

Make a list of all your costs that fluctuate depending on how much you sell. List the price per unit sold and add up all the costs, or use the spreadsheet which will add them up automatically.

Make a copy of the file before you edit it

3. Average price

Finally, decide on a price. Don’t worry if you’re not ready to commit to a final price yet, you can change this later. Keep in mind, this is the average price. If you offer some customers bulk discounts, it will lower the average price.

Step 2 – Plug in your data

Now it’s time to plug in your data. The spreadsheet will pull your fixed cost total and variable cost total up into the break-even calculation. All you need to is to fill in is your average price in the appropriate cell. After that, the math will happen automatically. The number that gets calculated in the top right cell under break-even units is the number of units you need to sell to break even.

 

In the break-even analysis example above, the break-even point is 92.5 units.

Step 3 – Make adjustments

Feel free to experiment with different numbers. See what happens if you lower your fixed or variable costs, or try changing the price. You may not get it right the first time, so make adjustments as you go.

Warning: Don’t forget any expenses

The most common pitfall of break-even analysis is forgetting things—especially variable costs. Break-even analyses are an important step towards making important business decisions. That’s why you need to make sure your data is as accurate as possible.

To make sure you don’t miss any costs, think through your entire operations from start to finish. If you think through your unboxing experience, you might remember that you need to order branded tissue paper, and that one order lasts you 200 shipments. If you’re thinking through your festival setup, you might remember that you’ll need to provide napkins along with the food you’re selling. These are variable costs that need to be included.

Limitations of break-even analysis

Limitations of a break-even analysis

Break-even analysis plays an important role in making business decisions, but it’s limited in the type of information it can provide.

Not a predictor of demand

It’s important to note that a break-even analysis is not a predictor of demand. It won’t tell you what your sales are going to be, or how many people will want what you’re selling. It will only tell you how many units you need to sell in order to break even. It’s also important to note that demand isn’t stable. As you change your price, the number of people willing to buy your product will change as well.

Dependent on reliable data

Sometimes costs fall into both fixed and variable categories. This can make calculations complicated and you’ll likely need to wedge them into one or the other. For example, you may have a baseline labour cost no matter what, as well as an additional labour cost top that could fluctuate based on how much product you sell.

The accuracy of your break-even point depends on accurate data. If you don’t feed good data into the formula, you won’t get a reliable result.

Simplistic

The break-even point formula is simplistic. Many businesses have multiple products with multiple prices. It won’t be able to pick up that nuance. You’ll likely need to work with one product at a time or estimate an average price based on all the products you might sell. If this is the case, it’s best to run a few different scenarios to be better prepared.

As prices fluctuate, so do costs. This model assumes that only one thing changes at a time. Instead, if you lower your price and sell more, your variable costs might decrease because you have more buying power or are able to work more efficiently. Ultimately it’s only an estimate.

Ignores time

The break-even analysis ignores fluctuations over time. The time frame will be dependent on the period you use to calculate fixed costs (monthly is most common). Although you’ll see how many units you need to sell over the course of the month, you won’t see how things change if your sales fluctuate week to week, or seasonally over the course of a year. For this, you’ll need to rely on good cash flow management, and possibly a solid sales forecast.

It also doesn’t take the future into account. Break-even analysis only looks at here and now. If your raw materials cost doubles next year, your break-even point will be a lot of higher unless you raise your prices. If you raise your prices, you could lose customers. This delicate balance is always in flux.

Ignores competitors

As a new entrant to the market, you’re going to affect competitors and vice versa. They could change their prices, which could affect demand for your product, causing you to change your prices too. If they grow quickly and a raw material you both use becomes more scarce, the cost could go up.

Ultimately, break-even analysis will give you a very solid understanding of the baseline conditions for being successful. It is a must. But it’s not the only research you need to do before you starting or making changes to a business.

Strategies to lower your break-even point

What if you complete your break-even analysis and find out that the number of units you need to sell is too high? If the number seems unrealistic or unattainable, don’t panic. You may be able to make some adjustments to lower your break-even point.

1. Lower fixed costs

See if there’s an opportunity to lower your fixed costs. The lower you can get them, the fewer units you’ll need to sell in order to break-even. For example, if you’re thinking about opening a retail store and numbers aren’t working out, consider selling online instead. How does that affect your fixed costs?

2. Raise your prices

If you raise your prices, you won’t need to sell as many units to break even. The marginal contribution per unit sold will be higher. When thinking about raising your prices, be mindful of what the market is willing to pay, and expectations that come with a price. You won’t need to sell as many units, but you’ll still need to sell enough—and if you charge more, buyers may expect a better product or better customer service.

3. Lower variable costs

Lowering your variable costs is often the most difficult option, especially if you’re just going into business. But the more you scale, the easier it will be to reduce variable costs. It’s worth trying to lower your costs by negotiating with your suppliers, changing suppliers, or changing your process. For example, maybe you’ll find that packing peanuts are cheaper than bubble wrap for shipping fragile products.

Free break-even analysis template

Don’t forget to grab your free break-even analysis template. Click here to access the template in Google Drive. To save your own editable version of the spreadsheet, click “File” → “Make a copy…”. You’ll need to be logged into your Google account to do this.

Doing a break-even analysis is essential for making smart business decisions. The next time you’re thinking about starting a new business or making changes to your existing business, do a break-even analysis so you’ll be better prepared.