You know what to sell, the site is being setup or you’re already trading.
But how much revenue will your Direct To Consumer (DTC) eCommerce brand do and what will your expenses be?
Excel is demanding answers, and your pulling more figures out of the air than Trump!
You’re not a lone. To make things worse it’s the most important thing you’ll do in your eCommerce business.
However, to create an accurate forecast you need previous sales data.
If you’re a start up, you don’t have that.
Start up DTC brands need to take a different approach to forecasting
Ideally you’d know your eCommerce conversion rate and how many visitors you can get with all your marketing activity (you have a marketing plan right, course you do).
However, until you start selling you won’t know these figures, and averages, in this case, are about as useful as a drunk bogan at an economics convention. Entertaining but ultimately a distraction.
Every site performs very differently.
You’ve told me all the things I can’t do, what is the answer?
All smart DTC eCommerce sites buy and hold stock so they have higher margins and quick delivery times.
If you’re drop shipping I suggest you pay an online guru who works from a hammock far to much money to help you and find out it doesn’t work. See you in 6 months.
Anyway, you have or need to commit to certain amount of stock. The more stock you buy the greater the opportunity for sales.
Buuuuuut the more stock you buy the greater the risk.
Time to put on the big girl/boy pants and commit some cash. Otherwise this thing will never work.
Take your stock cost amount (what you paid for it), lets just says it’s $10,000AUD (At Boom Ecommerce it’s always AUD, because we’re about helping Aussie Ecommerce stores).
Work out how much you plan to sell that stock for. Lets say your gross margin is 50% your retail value is $20,000AUD.
You can only sell the stock you have, so until you order more, your revenue will be $20,000AUD.
Now split that into months.
The amount of months will be depend on how aggressive your marketing is.
If your approach is “I’ll build my site and they will come”, then forecast those sales to be over 120 months or 10 years. Because unless you get so lucky that you should buy a lottery ticket, you won’t be selling much anytime soon.
Not sure where to advertise? Watch this Youtube video on “Where to advertise your eCommerce business in Australia” (That’s me in the video, hi Mum!).
Back to the forecasting.
You should now have sales by month for the stock you have, but what are your other major costs?
- Technology fees (Shopify, Xero etc)
- Staff or warehouse fees
- GST and other super fun taxes
- Usual business costs
These will vary on your setup.
How much you spend on advertising will depend on your Gross Margin and how aggressive you want to be.
After 3 months of trading you’ll have some data to work with that will make for better forecasts.
If you’re not sure of any of the figures (start-up eCommerce costs or % of marketing spend to revenue) or terminology i.e. Gross Margin, how much you’ll need to get your DTC eCommerce business started, signup for the Boom Ecommerce Training course. It has everything you need to know.