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Key Performance Indicators (KPI) are important when building a business and building an ecommerce business is not a task to be taken lightly.

From product selection and acquisition to supply chain management and shipping, each component of your company needs to be tracked with precision.

Failure to do so can result in serious financial losses, not to mention potential customer satisfaction nightmares and product returns.

If you’re an entrepreneur attempting to build a profitable online business, following are five critical key performance indicators you should be monitoring:

Year Over Year - YOY  YOY

Tracking your year-over-year growth is essential to better understand your company’s profitability. Just because you are making sales each month, that doesn’t necessarily mean your online business is profitable. Know what your sales were for the same time period the previous year and compare that figure to your current year-to-date sales.

Customer Acquisition Cost  CAC

Customer acquisition costs are another indicator of whether your company is in a cash-flow positive situation. Be aware of how much you are spending to acquire each new customer and track your acquisition channels to keep tabs on which avenues are actually generating sales. You don’t want to keep paying for CPC ads on a platform that isn’t offering you a sizable return on investment.

ROI  ROI

Speaking of ROI, you should definitely monitor your return on investment on all expenditures. From your marketing and advertising costs to your payroll and supplier costs, know where your money is going and whether those funds are indeed a wise expenditure.

Cart Abandonment  CAR

Your cart abandonment rates can be a clear indicator that your ecommerce site needs tweaking. If you’re not monitoring your abandonment rates, how can you possibly know if you’re losing potential sales? Be sure to A/B test the copy on your call-to-action buttons, your product descriptions, and even the colors on your site. The smallest factors can have a huge impact on your successful sale ratio.

AOVAOV

Another essential KPI every online business owner should track is their average order value. Making the effort to gradually increase your AOV will help keep you on track towards sustainable revenue. From add-on sales to subscription and bulk-buy offerings, each component can increase your annual revenues.

If you’re not monitoring your key performance indicators on an ongoing basis, you won’t know if your ecommerce business starts to falter. Paying close attention to your business’ financials will ensure you have a clear understanding of opportunities for improvement.

Will you be taking a closer look at your company’s KPIs to make sure your online business is on the right path? Of course you will!

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Simon Hodgkinson

Simon Hodgkinson is a best-selling author, copywriter and conversion optimization consultant.

Simon owns UK based publishing company Hodgkinson Publishing Ltd and is the co-founder of PromoteLabs Inc. and Powerhouse Technology LLC.
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