Are you Focusing on Vanity, Sanity or are you Ignoring Reality?

Revenue is vanity, etc.There’s a saying in business that revenue is vanity, profit is sanity.  Actually there are a number of variations with volume or turnover also being vanity and cash flow or margin being sanity.

The basic idea is that it’s not how much you sell that really matters, it’s how much money you make. It’s no use making hundreds of pounds or dollars in sales if your expenditure runs into thousands.

It’s a cautionary saying about what you should focus on and what shouldn’t distract you. It’s about which business metrics really matter.

That started me wondering if there are any equivalent vanity and sanity numbers in internet marketing. It turns out there are quite a few.

The number of people on an email list, the number seeing a blog post or how many readers leave a comment, how many views a video gets, and the number of times a free report is downloaded. Perhaps the most common vanity numbers are the number of Likes a Facebook post receives or the number of times content is retweeted.

These numbers may be of interest if your online presence is a hobby, but not if you aim to run an online business.

None of the metrics I’ve mentioned above are directly linked to making a profit. There’s no point having thousands on your email list if they rarely open your messages or click on links. There’s no use having an in depth discussion on a blog if they ignore your calls to action.

So if these are the vanity numbers, which ones are sanity?

The number who complete making a purchase and the numbers that make up your expenses. These could be advertising costs, payments to outsourcers, the commissions you pay affiliates, and so on.

To learn how well your offer is converting so you can work to improve your profitability you will also need to know the number who click on links that lead to an offer and the number that click on a buy button. If you use affiliates you will also want to know the EPC. This is the amount of money an affiliate can expect to make for every click he sends to your sales page. A good EPC can attract the attention of some of the best affiliates, and that can mean a substantial jump in profits.

So that covers vanity and sanity. Some versions of the saying add a third part: cash is reality.

If your sales page is not hooked up correctly to your account you won’t receive any money, you may have to wait for commissions owed you to be paid, or perhaps your merchant bank will find a reason to hold on to the money while they investigate something. Your business can’t keep going if it doesn’t have money when it’s needed. If that happens you’ll truly understand why ‘revenue is vanity, profit is sanity and cash is reality’.

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