Business Blogging: Estimating revenue #blogging

Estimating the revenue you will make in through your business blog is probably one of the most difficult parts of creating any type of plan or strategy. For any blogging projects you have that already earn money, you can just look at the past to help predict the future. But for new blogging projects, you’ll need to look at a number of different factors.

Before looking at tips for working our your blogging revenue estimate, you first need to understand a few of the basic terms:

Revenue. Your revenue is the amount of money you earn before any expenses.

Average Sale. Calculate your average sale by taking your total revenue divided by the number of sales. So, if you have received a total of $1,000 for 50 sales, your average sale is $20. It doesn’t matter if one sale was for $100 and another for $10. You have to take the average of all of them for estimating the future.

It doesn’t matter which online business model you are using, you can still calculate an average sale amount. For example, if you make money from Amazon affiliate sales, just look at the total number of commissions (your revenue) and divide by the number of sales made that earned you those commissions.

Average Revenue. Your average revenue is the average amount you get paid for each sale times the number of sales. For predicting future revenue, you can take the average amount per sale as your standard. Then estimate how many sales you think you can make each week and month. Multiply your estimated number of sales by your average revenue per sale to get the average revenue each month.

For example, say your average sale is $20 and you think you can make 10 sales your first month, 30 the second month, and 50 the third month. That means your average revenue for each of your first 3 months is $200, $600, and $1,000 respectively.

Target Market Size. The size of your target market is the number of people who would be interested in buying what you are selling. If you are selling training programs for owners of Yorkshire terriers, then your target market size is probably the number of people who have recently purchased a Yorkshire terrier and need help with training, not all owners.

Market Share. Your market share is the percentage of your total target market who buy from you rather than your competitors. For example, say there are about 1,000 sales per month of the type of product you are selling or something similar. If you think you can get 100 of those people to buy from you, you will have 10% of that market.

Conversion Rate. Conversion rate is the number of sales that are completed compared to the number of people who see your offer. For example, imagine you have a sales page where you are encouraging people to buy your weight loss product. If you get 500 people to visit that page and 5 people buy the product, then your conversion rate is 1%.

You can also look at conversion rates for other actions you want people to take. For example, you can look at the number of people who sign up for your email list out of the number who actually visit your site. If you are doing offline marketing, you could look at the conversion rate for people who receive your direct mailing vs. the number who respond to that mailing.

Tips for Estimating Your Revenue

When you get down to the nitty gritty of estimating your future blogging revenue, here are three tips to help guide you:

1. Don’t go with your gut

With many things in life, people will tell you to go with your instincts. However, when it comes to business, you need to get as many facts and figures as possible before sinking funds into a project or venture. Thinking you can sell 1,000 ebooks is all very well, but you’d better make sure there are 1000 people who actually want them.

2. Take a history lesson

Find out as much as possible about how much people have earned in the past from the type of business or project you want to start. If you are starting a project similar to one you’ve done in the past, then you already have some of that information. If not, then you’ll have to research data online and ask people who are already in that business. Find out how long it took to start really earning anything and what problems they had along the way. You’d be surprised at how many people will be willing to help you and give advice.

3. Don’t worry about precision

An estimate is a rough guess based on whatever facts you can gather. If you don’t have much to base your estimate on, go with your best guess and move on. Unless you are applying for a small business loan, you don’t have to spend hours coming up with precise numbers. Just make sure you know there are people who are making money from your proposed business or product in the past. Then make sure you have the funds to invest.

Putting It All Together

In order to do your actual bogging revenue estimate, you just need to multiply your average estimated revenue per sale times the number of sales you think you can make each month. Depending on your business blog marketing plans, that number would hopefully go up each month. Plot out your estimated revenue each month for each project and you’ll have your estimate for the year.

As you put together your revenue estimate and other parts of your business plan, remember that it will grow and change over time. You may find that your market share is much larger than you thought and your revenue estimate can go up. With good marketing, you might also raise your conversion rate and increase sales. Go back to your estimates and periodically update them, but don’t obsess over being completely accurate. These figures are for your own planning, not for your accountant.

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Sarah Arrow

Sarah Arrow started blogging to save a business and it worked! She created her first blogging challenge back in 2007, and is the author of many quick start marketing guides, turning Sark eMedia into a publishing business.

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Sylviane Nuccio - a couple of years ago

Hi Sarah,

This is a very good post full of very wise money advice.

I agree that when it comes to calculating what comes out and what should come in, going with your guts might not be the best thing to go by, even though, I will add that if your guts tell you that you shouldn’t start a certain business, maybe you shouldn’t.

I really appreciated how you explained the percentage per sale. It’s very easy to remember and apply.

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    sarah - a couple of years ago

    Thanks for stopping by Sylviane, I find percentages easier to remember too :)

    Reply
Business loans - a couple of years ago

Thanks Sarah for such a nice post.You are doing a very good work to help bloggers and you have defined the basic steps to calculate revenue very efficiently.

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