Profitability goal setting for online selling

By Tony Lam

  • SumoMe

Did you set up profitability or residual income goals for this year ? Any plan to achieve your goals. Without the goals, the sellers may easily lose the direction or motivation to move forward.  It is easy said than done. How to set a realistic target and achieve goals of profitability?

Goal setting

If you don’t have one, the first step is to think of your goal of profitability.  Profitability by definition is the net income less all the operational cost and expense.  I did mention how to figure out the profitability at Sales or Profit. For simplicity, you may just focus on net income less the variable cost only (without considering fixed cost). Be honest and set a realistic goal for yourself. The realistic goal is the one that can be achieved only with additional efforts. If you set the goal too high, you may be frustrated after trying all your efforts but still no way to get it. The little baby steps of advancement is your driving force towards the goal.  You target can be reference to last year result. For example, if you set the profitability goal to be 50% higher than last year. If the monthly average residual income last year was $1000, you have to earn $1500 per month on average in this year.

profitability

How to achieve goals

The next step is to assess your current way of working, and figure out what actions to be taken to get additional money per month.  You may brainstorm creative ideas with your partners or do some research on Google. For instance, if you are selling on eBay and want to get additional 50% net income per month, there are several recommendations for your consideration.

Option 1 : Sell 50% more of the items with current profit margin.

If you focus on your existing categories you have while keeping the same profit margin without slashing the price, you may list more items and increase the visibility by promoting your items via different channels . Take actions to list  50% more items per week and promote your listings at Pinterest, Youtube channel or Facebook page.

Option 2 : Adjust or add  items to increase profit margin

You may review your existing products to see if any items have room for higher profit margin. As a rule of thumb, the slow moving items are those with less demand from the market. As a result, the merchant have a longer turnaround time for them. It is not justified to set a low profit margin for those items in the long run unless you want to clear out your stock. Also, try to find some niche products with few competitions in the market, such as antique collectables, they are good candidates for higher profitability.

Option 3 : slash your price with lower profit to double your sales

This is a way to sell more but it should be treated it carefully. Sometimes it works magically. The sales volume may be increased to many times. Periodically check  the net income to see if the increase is justified. By doing so,  your products are being traded down and “on sale” effect may not last long. You will be tied up extra time and money for inventory to keep the same business income as before.

Option 4 : Combination of all above options

Sometimes, a tweak and mix of options 1 to 3 will have powerful chemical effect to boost your profitability. Keep on trying different strategies and find the one that works best for you.

Check your result against the goal

Again, it falls into a PDCA Improvement process. By constantly checking the residual income earned  against the profitability goal. If not as expected, find out the problems and try other strategies or tweet the actions if necessary.

Reward yourself

If your effort pays and you reach your monthly or weekly goal,  don’t forget to reward yourself. Treat yourself with a gift that you are longing for and share the happiness with your friends. This is not only to make yourself happy but also to create a driving force to keep you move forward.  If you have any questions or wonder story to tell, I love to hear.

Category: Online Business


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