How Does Your Audience Size Affect Your Revenue?
Now I want to look at how does your audience size affect your revenue? This is really the number that's going to tell us how close we can get to our production ceiling and how much energy we have to put into marketing. So at the very beginning of this particular class, we talked about your fears and setting your income goals, and we heard from a couple of people, I think both martha and annette mention that one of their fears is that they're on at sea, and so they feel like they really have no control because you're at the whim of what's happening there, and that is absolutely true there because you can't control your audience. And so what we want to look at here is how being more intentional and cultivating our audience is actually the real driver of our revenue. So your marketing tasks are divided between list growth and selling more selling is making an offer, and lest growth could look a couple of ways, it could be growing your email marketing list of retail customers, it could be ...
growing the number of stores that have actually bought from you, so you're your retailer list are gonna be building your store prospect list, the number of stores that you're going to reach out to, so those are all different kinds of lists, and then, of course, selling to those lists actually making an offer and depending on how big your list is that it was going to tell you how much time you spend on list growth versus selling now it's never one hundred percent because even if you have an email list with twenty people I want to get in the habit of making them an offer now this is one of the other things that I see people make is a mistake with email marketing as they think well, I'll email my list when it gets bigger who's thought that I'm just gonna let it everyone's like young may okay here's the problem so first of all that's neglecting the fact that even if you have twenty people on your list those air twenty people who said I like you enough to want to know more and that's valuable so you want to get in the habit of reaching out to them right away plus if you wait until your list is bigger to start reaching out, you're going to let your list to grow cold and those twenty people who initially found you are not going to be excited to hear from you if you waited until you got to two hundred or four hundred or thousand or whatever it is before you start e mailing so even if the on ly person subscribed to your email list right now is your sister email your list all right? Okay so really our big question here is, well, your existing audience support you hitting your production ceiling this year because if they can't get you there then we have to go into audience growth mode if they can that's fantastic because then all you have to do is strategically make great offers so first of all, who is your audience and how big is your audience so in retail technically your audience could mean two things social media followers versus your mailing list I am very, very, very partial toe one over the other in terms of the way it impacts your business mailing list is just more valuable this is especially true the higher your price point if you have an impulse buy price point you can sort of get away with a little less of this you can kind of let some sales roll in through organic traffic you can probably drive a little bit more from your social media but here's the other flip side of that if you have a lower price point, you need a heck of a lot of people to come through right? You really need a lot of traffic, so but the higher your price point the less likely someone is to make it impulse buy and that means that you need to get them on your list so that you can keep them warm and toasty until they're ready to make that purchase so I want to actually sit down and calculate the value of your mailing list, right? So what you're gonna do is you're gonna take the number of mailing list subscribers, and this is a ballpark number. This is another one of those things that we're going to figure out once you start tracking. So at the end of the year, I sit down and I take the amount of money may amount of sales in my online store, and I divided by the size of my email list and that's the value per list and my list it's twenty two dollars a person. Now I realize that not every sale that comes into my online shop comes through my mailing list, and I realize that obviously it's not every one single person spending twenty two dollars, but because my mailing list is the biggest driver of my sails, far more than anything else, it's a pretty good estimate now I've heard people say kind of his lowest ten dollars, like I said, minds about twenty two this is annually, so if you haven't been keeping your list warm, I would probably run this number a little lower. I'd run it in like the ten to fifteen ballpark if you I know that you can convert a little bit better you can run it a little higher and of course if you do this math and you find out you're even higher than that then run it higher than that but if you've never done this math before this is a good place to start so for example let's say that you have two hundred twenty five people on your list and you're going to say ok I think that annually they're worth about fifteen dollars a person I haven't let them go completely cold but I probably don't email as much as I should so that means that the value in your list is going to be a little bit over thirty three hundred dollars right so obviously earlier we did a calculation so if our start ups hold production ceiling was twenty seven hundred dollars or fifty four hundred dollars retail what does this tell us that they need you a lot of list growth right that's where we're spending our energy because our the value on our list is nowhere near our production ceiling remember as these are just examples just the math we're playing with you're going to run these numbers for yourself now I know that some of you are like but meghan social media isn't that my list to ok first of all remember I talked about your list of people you can directly contact you cannot directly contact your social media followers now that said, that doesn't mean that you can't build a successful business selling off of social media, particularly if your price point is a little bit lower and susan peterson from freshly picked she makes the baby moccasins she's a good example of this I talked to some people that have worked in her company she really does most of her selling through social media is about sixty our price point, but based on what I've heard susan say about her business and the size of her list, I did a little math and this is I think probably pretty true for most people is that the number of social media followers the value per follower is much lower you're looking at between a dollar and five dollars annually per follower and again, this is a ballpark, but I think time and time again this is what we see is that social media just converts far less people because it's so much easier to get lost. So if you actively have built your social media and you're selling off of it and you want to calculate that list size that's fine, but you're probably gonna want to run it at this size it's not going to get you I think the ten to twenty five a person that is kind of generally standard for email and again track these numbers as the year goes on because your numbers might be very different but I'm giving you buy some ballparks to start out with so let's say that our start of example, has three hundred fifteen, followers on instagram, they're probably remarks about dollar to follower, right? So that's six hundred thirty dollars. So even if we combine those two audiences that's definitely not getting us close to that example production ceiling. So what that tells us is that that audience size you're spending your spent a lot of time on list growth in order to hit your production ceiling, all right? And then we can run these numbers for wholesale as well, and in wholesale, you actually have two different lists, and actually I'm going to give you three different lists because I think there's different levels of engagement. So you have your existing stores that stores that have ordered from you in the past. We're currently order from you and then your prospect list. This is the list that you've learned that you've built over time as you've been doing your store research on def, you don't know how to do that. I've got a whole class on that gold. Sell your products to retailers here on creative, live on, and I actually do by this into a warm and cold. So a warm prospect is, say, someone you met at a trade show and who handed you a card and said, I'm interested in the future, or maybe they saw you on social media and said, hey, can you send me a line sheet? Those like, how does warm prospects? Because they've heard from you before cold prospects are the ones that you found strictly through your research and your first pitch it's completely cold so you can calculate the value of all of these lists so you might have your number of current stores, and I like to multiply it times point eight, because they're not all ordering from you, you're not keeping all of them. So thinking about eighty percent of your sixteen accounts is a good place to do this math again. Pay attention to your numbers. This may look different for you that multiply times your average wholesale order volume, and then I like to you about one and a half times assuming that most stores or at least some of your stories going to order more than once in a year. So I like to think that our your warm prospect list it's really the same calculations, but the difference is you're going to convert a lot less of them, so I would say about five percent is a good estimate. They're warm but there's a reason they haven't quite bought yet and again you might convert higher it depends but that's a good place to start and then I think you're cold prospect list I would want to buy that buy that one percent you're going to send out a lot of pitches and not get a ton of results it's just the nature of pitching anything so start their run those numbers and again see what your results are because that number might come up for you if you're doing a really good job or you have a really great product so just to kind of give you an example here so in the case of our sweet spot they might have forty existing stores stores that have ordered from them in the last couple of years setting about eighty percent more this year six hundred dollars average order value times one and a half that's about how many times stores average ordering then they've got one hundred twenty people on their warm prospect list. These are people that they have met at a trade show or talked to online and the same thing with cold prospects. And so right here we're looking at about somewhere in the you know, close almost forty thousand dollars range so that's not again, not quite at the production's healing in our example, but they can say that based on who they've got right now it's, about forty thousand dollars in revenue for the year makes sense. Awesome. So as you learned your numbers again, you can adjust these formulas. You might find out that your email list is more valuable. You might convert ten percent of your warm you warm store prospect list. So start tracking these things because it makes revenue planning so much easier in the future.