Predictable Revenue For Ecommerce Businesses
Growing an ecommerce business is a difficult venture, which is why things like predictable revenue are so vital. Revenue forecasts can give you the certainty you need in order to properly manage and expand your subscription business. So if you want to make the right decisions for your company, you’ll need to be able to plan ahead of time.
Making plans to scale your business is good and all, but you’ll need a way to execute your strategies. Fortunately, there is a subscription management software like Upscribe, which makes customizing and improving customer experience (CX) easy and efficient.
But for now, let’s dive into the world of predictable revenue.
What Is Predictable Revenue In Ecommerce Startups?
Predictable revenue is simply a strategy that companies employ in order to create consistent revenue growth. This allows you to predict your income on a monthly or yearly basis, which means it’ll be easier to scale and manage your ecommerce business.
Many ecommerce businesses adopt the subscription model since you can get streams of steady income every month or year. Whilst it’s not guaranteed, when customers purchase a subscription plan, it’s safe to assume they’ll stick around for at least a few months. You can use this certainty to forecast your future revenue for the next 6 months or so.
Predictable revenue usually centers around set amounts of income coming in periodically, which is why subscriptions are a popular choice. Ecommerce startups can use their current forecast to estimate future earnings and make business plans based on that information. For example, you can plan to scale your subscriptions to increase your profit.
Why Is Predictable Revenue Important?
It Creates Consistency
Predictable revenue helps you gain some consistency with your earnings, which can help you grow your ecommerce subscription business in the long run. Being able to estimate your revenue means you can make better-informed business decisions and plan ahead to increase your future earnings.
You can create consistent growth with a forecasting system in place, even if it’s not the most accurate. Having some kind of foundation to plan around is better than blind guessing. Just make sure your estimations are backed up with data as opposed to sole intuition.
It Helps Establish Benchmarks
Predicting your revenue helps you set benchmarks for the minimum amount you’ll earn every month or year. This prevents you from overspending or going into major debt due to poor planning. You can use the benchmark to create reasonable budgets and keep from going under.
You can also use this baseline to decide whether you can risk scaling your prices. For example, if you’re currently hitting above your baseline, it may be time to change your pricing tactics to try and grow your revenue.
Plan For New Hires
You can use predictable revenue to help you make hiring decisions. For example, if you’re making a good amount of steady income or you’re expecting to increase your earnings in the next year, you can afford to hire more employees and expand your business.
Tools You Can Use To Predict Revenue
Upscribe is a subscription management tool that allows you to create and customize subscription models. You can create predictable revenue by setting up your own subscription plans, which can also improve customer loyalty and reduce churn rates. You can also view your analytics dashboard to accurately forecast your earnings.
Inventoro is a sales forecasting tool used to predict future revenue for you based on past data. You can edit your past data by removing things like anomalies to improve the accuracy of your forecast.
How To Create A Predictable Revenue Model
Now that we’ve discussed what predictable revenue actually entails, it’s time to talk about how to create your own revenue forecasting framework.
Step 1: Create An Action-Driven Marketing Strategy
First of all, you must create a marketing strategy in order to promote your product. Before you can start predicting your revenue, you need to actually have past earnings to base your forecast on. When devising your marketing scheme, remember your target audience. These are groups of people you think will be likely customers.
- Who would benefit from using your product?
- What demographic are you targeting?
- What platform should you be advertising on?
- How can you reach your target audience?
You should also keep in mind your competitors and the marketing strategies they’re using. Your business should be able to stand out amongst your competitors — this means highlighting your USPs (unique selling points) and excelling where your competitors have failed.
Look at the flaws in their marketing and improve upon that — learn from their mistakes. Likewise, you should also look at where they’ve succeeded and use those methods in your own marketing.
Here is an example of some more questions you can ask yourself when devising a general marketing strategy for your business.
- How can you explain your product to viewers?
- What should your slogan be or trademark be?
- How will you make viewers remember your product?
- What CTAs will you include?
- What are your strengths or weaknesses?
- What pain points does your product solve?
- How will you appeal to potential customers?
Step 2: Experiment With Different Ways To Price Your Product Offerings
Along with a marketing strategy, you’ll also need a pricing strategy that helps you increase your earnings. This can be a short or long-term strategy based on your needs at the time. You can test out different methods to see which one works best.
This is one of the more common pricing strategies. A product is priced based on how much it costs for you to obtain plus how much profit you wish to make off of it. It’s simple to calculate but doesn’t guarantee you any revenue growth.
This method involves pricing your products based on your competitors’ prices. There are a few ways you can go about this — you can:
- Lowest Cost Offerings: Offer prices lower than your competitors.
- Premium Price Points: Offer prices higher than your immediate competitors to imply a higher level of quality.
- Price Match Promises: This involves promising customers you will match any lower prices they find from your competitors.
This gives customers an incentive to choose your product over others.
This method prices products based on what you think customers are willing to spend on them. You have to determine how they value your product and attach a number to that value. This is a more flexible pricing strategy that can change based on your brand’s popularity, the current market situation, and competitors’ pricing, among other aspects. .
This involves pricing products based on how popular they are. For example, if they’re high in demand, you can increase the prices to gain more revenue. If they’re low in demand, you can decrease prices to give customers an incentive to purchase your product.
Step 3: Use Data From The Past To Build Momentum
The more past data you have to work from, the more accurate your predictions will be. You can collect such data by observing your annual sales and locating any patterns or trends you see. Use your analysis to forecast your future earnings for the next year.
After predicting your revenue, you can start formulating business plans and increase your income to above what is predicted. Or, you can plan ahead to avoid any pitfalls, such as lowering demand and an upcoming economic crisis.
Step 4: Set Ecommerce Benchmarks
Now, it’s time to set some ecommerce benchmarks — these are metrics you can use to measure business success, such as:
- Traffic Sources by Revenue
- Traffic Sources by Visitors
- Average Order Value by Traffic Source
- Bounce Rate by Traffic Source
You can use these benchmarks to identify business goals, such as increasing traffic. This gives you a sense of direction and can help you develop useful strategies.
Step 5: Systematize Your Business
Organize your business by keeping track of things like your regular tasks and functions, such as:
- Customer Service
Then, write down your company’s regular tasks and organize them according to how often they occur (e.g. daily, monthly, etc.) This helps you create a framework for how your business usually functions, so you can keep track of activities and increase overall efficiency. You can also look for ways to combine different tasks to streamline your workflow.
Creating predictable forms of revenue is common amongst ecommerce businesses, especially those who make use of subscription models. Being able to forecast revenue gives you great insights into how you can improve and grow your business.
Tools like Upscribe allow you to create and manage subscriptions so you can begin receiving regular, predictable income. Book a demo today to take a look at how you can scale your subscriptions and track analytics.