Posts Tagged ‘economics’
by Dave Baldwin
How much revenue per month, on average, does your web site generate? If you’re in a service-based business or otherwise can’t sell anything directly online, how does your web site bring customers in the door? What mechanisms do you have in place to track the dollars and cents?
It amazes me how often I talk to business owners who have no way to answer any of the above questions. It further amazes me to learn that some businesses spend significant amounts of money every month to advertise their web sites without even knowing whether their web sites work or not. As far as I’m concerned, a web site is “working” when it’s generating more marginal profit than you spend to maintain and advertise it.
For example, let’s say you run an accounting business and charge your clients $150/hour. If you do all of the accounting work yourself, you may not accrue any significant amount of direct expense per hour billed. If your per-client costs are zero (probably not the case, but we’ll pretend it is just for simplicity), your marginal profit is $150. We’ll leave out little details like cash flow, receivables, billing costs, and clients who don’t pay up. To cover your overhead (rent, electricity, etc.), you need to bill a minimum number of client hours per month. Once you reach that point, you’ve broken even and can begin to take money home. For the purpose of evaluating your web site, though, we don’t need to worry about overhead (except for the overhead directly incurred by your web site itself).
In order to be able to run these numbers, we need one critical piece of data: how many hours of billable client work per month does your web site generate?
To calculate this number, you’ll need to know two things:
- Traffic: How many people visit your web site per month?
- Conversion rate: What percentage of the visitors in question #1 become paying clients? (If past or current clients visit your web site, do their visits result in additional hours of work being billed)?
If you don’t know the answer to the above two questions, then your web site is probably not making you any money. If you aren’t doing anything to change that, it’s not going to make you any money. If you aren’t willing to put time and money into developing your web site into an income-generating business asset, you’re better off not having a web site at all. Then, at least, you’ll have to face reality and go back to making money some other way. If you want to make money using your web site, you need to spend at least five hours of your time per week and plan to spend money on advertising to bring visitors to your site.
Turn it around or shut it down.
In the following video, famed economist, Milton Friedman discusses America’s path towards socialism and the possible dangers that it poses. Do you agree or disagree and why?
In a day and age where politics and economics are at the forefront in most business owners’ minds, Thomas Sowell sits down to discuss Obama’s vision for America as well as other political misnomers. How much of what Sowell said back in 2008 was or wasn’t telling of what is going on economically today? Should American business owners and/or households be worried about the direction that the United States is heading?
The following is an educational video on money, banking and the federal reserve- three things that every business owner should know about in detail:
Whether you are a business owner, someone who is thinking of starting his or her own business or just the ordinary ‘average joe,’ it pays to know a little more about the economy in which you live- especially since it affects your checkbook!
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In today’s business world and economy, money has everyone’s full attention now. Things such as the rising cost of health care as well as congressional spending that has spiraled out of control have many of us worried about inflation, our bank accounts and whether or not we will even have a job tomorrow. In the following video clip, famed economist, Milton Friedman, discusses other people’s money as it pertains to the United States economy: