Is Your Online Business Model Profitable?

If you want to have a viable business you have to work out how you are going to create a profit. Are you going to sell reasonably priced (don’t say cheap) services or products to a large group of people, or are you going to sell high priced services or products to a smaller group?

You’ll need to know who your prospects are and how to reach them. If you are just starting you may find it difficult to reach a large number of prospects, only a percentage of which will become customers.

You’ll also have to decide on the service or products you will offer and work out how many sales you will need to be viable.

Let’s deconstruct the ‘six -figure’ business, so often promised by coaches and mentors online. Let’s keep it simple by assuming you are only going to sell one product. To get $100,000 in sales you’ll need to make

  • 14,286 sales of a $7 product
  • 3,704 sales of a $27 product
  • 1,031 sales at $97 per product
  •  337 sales of a $297 product
  • 202 sales with a $497 product
  • 101 sales if your product is $997 per unit
  •  just 51 sales if you sell a product at $1997

If you’ve been online long enough I’m sure you can match the above price points to common types of products. Short reports tend to be about $7, ebooks may go for as much as $27. Above this price you’re into courses of varying complexity and perceived value. So you should have an idea of the type of product you’ll need to create and how many you’ll have to sell.

But wait a minute. This is revenue. You have to subtract your costs. Physical products have fulfillment costs and so do digital ones when you think about it. Charges from payment processors, autoresponder costs, costs associated with online sales pages, etc. If you are getting traffic via affiliates there’ll also be commissions to pay out. Advertising has costs too.

Whichever model you intend to use to make money online make sure you know where you are going to get your customers, how to contact them, the price points of your first and next products, the number of sales needed and costs. Only then will you be able to decide if the model is one you can make work.

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