Every company will have specific metrics for measuring their website performance, and this can vary depending on your type of business: eCommerce B2C, non-eCommerce B2C, eCommerce B2B, non-eCommerce B2B. In this example we'll review how an imaginary eCommerce B2C company can measure their website's profitablity. The idea is to track the following items as they relate to your website:
- Total Costs
- Total Revenue
- The Lifespan of the Website
Then you use the following equation to see if your website is profitable or not:
Revenue - Cost = Profit/Loss
Our imaginary B2C eCommerce company is called Couch Love. They sell all manner of cool couch pillows through their online website.
Breakdown in to "development costs" and "maintenance costs". The development costs represent the final number of hours it took Couch Love and their web team to build and customize the website to Couch Love's specifications. Here are the different development costs they incurred during their website build.
1. Planning, designing, developing and launching the website - $30,000
2. An SEO firm to help plan the content around keywords - $5,000
3. Hiring a copywriter to help with the content development - $5,000
Total Development Costs = $40,000
(these will be one time costs)
Maintenance costs are incurred after the site goes live. General website maintenance can be a relatively low cost, but content marketing and online advertising will increase your annual maintenance spend.
- A medium size hosting package - $1,200/yr
- 5 domain names - $100/yr
- 2 hours/mo @ $150/hr for web updates and maintenance - $3,600/yr
- $500/mo for Paid Adword Campaigns - $6,000/yr
- Hiring a copywriter to produce 4 blog posts/mo @ $100/post - $4,800/yr
Total Maintenance Costs = $15,700/yr
(these may be incurred yearly)
These are the leads that Couch Love was able to convert into customers. If you sell products like this company this is pretty easy to quantify - it's the number of actual sales.
- Leads - Search Marketing pays off and Couch Love generates 300,000 visitors/yr to their store
- Customer Orders - Couch Love is able to convert 10% of the leads that visit their store = 30,000
- Product price = $10
- Actual Revenue = converted business x product price
30,000 x $10 = $300,000 in actual revenue
Actual Revenue = $300,000
PROFIT / LOSS
Once we have the Total Costs and Actual Revenue we can tell if the website is profitable.
Total Costs = $55,700
Total Actual Revenue = $300,000
Actual Revenue - (Development Costs + Maintenance Costs) = Profit/Loss
$300,000 - ($40,000 + $15,700) = $244,300
In addition to the cost and revenue, its important to consider the lifespan of your site when calculating website profitability. And just like a piece of real estate or other investment - you want to determine how long it will take you to recoup your investment. In this example the website paid for itself in the first year and generated a $244,300 in profit for Couch Love. Its hard to say whether or not you should spend $55K+ on a website, but if you can measure the potential opportunity and you're confident in your ability to hire a good team of people to help generate a return then it might make sense.
Did you find this post hard to follow because you provide a service and don't have an eCommerce website where you sell products? Well, there is a way to measure websites for B2C and B2B organizations that don't sell products online, but it requires a different approach. If you'd like to know more about measuring profitability for a service based website or anything about measuring your website's ROI please leave us a comment below, we'd love to hear from you.
Or if you're ready to install some conversion goals on your own commerce website here is a clear and simple walk through of Setting up a Conversion Goal in Google Analytics.