Once you start promoting your website you will want to find out the value of each visitor so you can calculate how much you can afford to spend on advertising.
In order to make these calculations you will need to know your total number of sales, gross revenues, total expenses, and unique visitors for a set period of time.
Conversion Rate
To calculate your conversion rate you divide the number of unique visitors to your website by the total number of sales you made in a given timeframe.
So if you got 4,000 unique visitors last month and you made 50 sales, you would divide 4,000 by 50 which equals 80 unique visitors per sale.
To find out detailed traffic statistics check the server logs for your website (contact your host if you need help finding this information).
Net Profit Per Sale
To calculate your net profit from each sale you subtract total expenses from gross revenue and divide that figure by the total number of sales you made in a given timeframe.
So if you made 50 sales at $47 each last month your gross revenue would be $2350. If your total expenditure for last month was $500 you subtract it from your gross revenue which equals $1850. You then divide this figure by the total number of sales you made last month which equals $37 net profit per sale.
Visitor Worth
To calculate the value of each visitor to your website you divide the net profit per sale by the conversion rate in a given timeframe.
So if your net profit per sale is $37 and your conversion rate is one out of 80 unique visitors, you would divide $37 by 80 which equals $0.46 visitor worth.
This means that you can afford to spend up to $0.46 to attract a single visitor to your website. So if you spend $50 on advertising it should generate at least 108 unique visitors to break even (if one of them buys your product), otherwise the campaign has failed.
This article was written by Simon Akers who is the editor of the Marketing Oasis newsletter, a free internet marketing ezine packed with tips to help you succeed and increase your profits:
http://www.MarketingOasis.com
