Decoding Website Revenue: The Napkin Math Guide to Achieve Your Annual Revenue Goals
In this guide, I’ll walk you through the process using my own website, The Wired Nomad, as an example, focusing on affiliate accommodation bookings as the primary revenue stream.
1. Define Your Annual Revenue Target
Let’s set a tangible goal: $500,000 per year. While it may seem ambitious, it’s entirely feasible given the vast market potential of the vacation rental industry, which boasts an estimated worth of $83 billion, with a significant portion stemming from direct bookings.
2. Assume an Average Payment per Month per Customer
For our calculations, let’s assume that each customer booking accommodation through our website spends an average of $1800 per month on rentals.
3. Define the Commissions Percentage Received per Booking
Commission percentages can vary across different platforms, ranging from 2% to 10%. To err on the side of caution, let’s conservatively estimate our commission at 2%.
4. Calculate the Amount Earned per Booking per Person
With a 2% commission on a $1800 monthly rental, we earn $36 per person per month. Here, we assume users book, on average, 30 days worth of accommodation(s).
5. Determine the Number of Sales Needed to Meet Your Annual Revenue Target
To reach our $500,000 annual revenue goal at $36 per booking, we would require a total of 13,889 sales, equating to approximately 1,157 sales per month.
6. Utilize Click-Through Rate (CTR) to Determine Daily Unique Visitors Required
The effectiveness of converting website visitors into customers is encapsulated by the click-through rate (CTR). Let’s explore how different CTRs impact the number of daily unique visitors needed to achieve our revenue target.
- At 0.01% CTR: We’d need a staggering 370,000 unique daily visitors to secure our target sales.
- At 0.1% CTR: The requirement drops to 37,000 unique daily visitors.
- At 2% CTR: A more manageable 1,850 unique daily visitors would suffice.
Clearly, CTR plays a pivotal role in achieving revenue goals. Not only does it underscore the importance of driving traffic to your website, but it also emphasizes the significance of conversion optimization.
