WARNING: I’m going to use the F-Word today.   Yes indeed, I’m going to drop some big hairy “DOUBLE F-BOMBS” all over this blog post.  And I promise you not only won’t be able to do anything to stop me, you’ll actually THANK me for the profit-enhancing experience!

In fact, I’m going to introduce a DOUBLE F-BOMB which is viewed as sacrilegious by most internet marketers, so I’m going to have insist that anyone under 21 years old leave the room and read no further.  If you continue to read please be informed this is your legal notice that you’re doing so at your own risk.

OK, here we go…

That “DOUBLE-F-BOMB” for internet marketers is…

FINANCIAL FORECASTING.

It’s true.  Most internet marketers I know just jump into the game and hope for the best.  Sure, they measure opt in rates, sales rates, number of visitors, etc.  And they might spend hours staring at their Analytics account…

But how many of them have an exhaustively detailed spreadsheet with every last variable they can think of which impacts their financial model?  I’m talking about things like…

• Refund rates detailed for all your products and services…
• Up-sell rates (for not only existing products, but those you have planned for future dates)…
• Anticipated affiliate sales take rates and commissions (along with their refund rates, etc)…
• Cost of goods detailed for every product in your catalog (if you even have a catalog)…
• Taxes…
• Fixed costs…
• Customer service costs…
• Legal costs…
• Credit card and Paypal processing costs…
• Anticipated revenue from additional products and services purchased by people who did NOT purchase the front end…
• List growth prediction, asymptotic limit, etc…
• Retention rates…
• Ongoing costs of monthly delivery…
• Labor costs to maintain the product and develop new ones…
• Etc.

The ultimate goal of this kind of model is to forecast Cash Flow (not just how much you make per visitor but WHEN you expect to realize the income as compared to WHEN you expect to incur the expense) Cash Out (how much you’ll have to go negative before the system starts to produce for you), Break Even Points (when do you stop losing money on a given customer AND when do you stop losing money overall), and Profit Levels.

To date I’ve found it’s literally one in a hundred entrepreneurs who are willing to think
this all out and take the time to arrange the financial forecast.

Most assume that if they can make back the advertising costs in one or two months, everything
else will fall into place.  They don’t want to get bogged down in forecasting and would
rather “get to market” quickly so they can get real buyer and prospect feedback.  Moreover,
they point to the fact that such models are almost always woefully in accurate…

But although I will cede most of these points are accurate and valuable, the conclusion one
doesn’t need a comprehensive financial forecasting model is still wrongheaded.  The reason is,
it really only takes a day or so to put one together, and even though I’ve yet to develop one which wasn’t dramatically corrected by real market data as soon as I turned on the advertising,
HAVING the model still provides several incredibly important benefits…

• First, it forces me to think through every last detail of the business model, and kills any
  “happy dreaming” fantasies I may have otherwise been vulnerable to pursuing.  If you don’t
  do the math, your naturally optimistic, risk taking entrepreneurial tendency will almost always prevail, and you’ll be much more likely to get slammed when your fantasy meets reality 🙁
• Second, having the model in place allows me to quickly pinpoint WHERE the problem is, and
  what I need to work on to fix it.  Moreover, because the models I develop include so many variables, it forces me to assess the performance across the whole business model, and not
  get overly involved in and/or depressed about the failure of one piece (e.g. the opt in rate or front end sales).
• And last, the multitude of variables indexed in my financial forecasting models each function as LEVERAGE POINTS.  You may have heard Perry Marshall say “if your marketing
  system isn’t working, break it into pieces.”   Well this is as much of a mathematical truth as it is a functional truth.  If you’ve got a non-profitable system with clicks and front end sales, period, then there are really only two things you can point to in order to fix it.  The problem with that is that market conditions often make it next to impossible to get beyond a certain
  click through rate and/or front end sales rate.  And you can knock your head against the wall eternally with only minimal improvement to show for it.  On the other hand, if your system includes clicks, opt ins, front end sales, two immediate upsells, two back end sales,
  clear labor costs, delivery costs, and the multitude of other variables discussed above…well,
  then each of these variables functions as a LEVERAGE POINT you can use to make the model
  as a whole profitable.  When you come across that inevitable point of diminishing returns
  anywhere in your funnel you can shift to another leverage point.  It’s a much less frustrating
  experience, and lends itself to a much more encouraging and optimistic outlook in your
  entrepreneurial life.

So there you have it.   The cost is an extra day or two of hard thinking and detailed planning
in Excel or a Google Spreadsheet.  The benefit lasts the lifetime of the project…

Kind of a no brainer, don’t you think?

SO… who’s with me?  Who’s gonna start dropping more DOUBLE F BOMBS in their
marketing now?

Onwards and Upwards!

The Very Good Dr. Glenn 🙂

PS – Terry Dean and my Growth Acceleration System is the only marketing certification program I know of where extensive financial forecasting for eCommerce is taught in this way.   If you’re a marketing consultant, business coach, or have plans to be… read through what we’ve got to offer and get on the priority notifications list as soon as you can.

PPS – It’s been almost THREE full years since I’ve taken a new business coaching client.  But because I’m feeling a little rusty with NEW clients (and because I feel a responsibility
to stay FRESH with them given that I’m training and certifying business coaches as part of my core mission at this time) I’m going to open up for ONE DAY ONLY on January 1st, 2016.  Read about how I work here please, and if you’re interested, get
on the priority notifications list at the bottom of the page.