When you’re just starting out in online business it’s easy to get stuck in to all the new things you have to learn and to lose sight of the big picture. But the bottom line is that you need to generate profits from your endeavours.

So in this article in my Online Business series I’m going to talk about the importance of knowing your numbers. In fact, this applies whether you’re a beginner or looking to move your business to the next level.

So what numbers are important? One of the key metrics that you should understand is how much it costs to attract a new paying customer. The difference between your costs of acquisition and the money you make from each customer will be your profit (or loss!).

It’s important to realise that your costs are more than your advertising budget. There are overheads associated with running an online business e.g. hosting, autoresponders, creating content, shopping carts etc. And don’t forget to factor in the time you put in to the business yourself.

It’s a well known fact that the greatest profits are generated from repeat business and you should aim to maximise your average customer value. Once you have this figure you can then make an informed decision about how much you’re prepared to spend on attracting new customers.

Keep track as well of where your new leads and your new customers are coming from. In the offline world you ask customers to quote code numbers so that you can track the source of your leads.

The great advantage of online business and advertising is that it’s so easy to track these metrics. But it’s also easy to ignore all this valuable data – don’t fall into that trap!

If you calculate your return on investment (ROI) from different sources you’re then in a position to tailor your marketing strategy to maximise your profits. But if you don’t know your ROI figures you can’t take action!

Many businesses offer continuity programmes e.g. customers pay a monthly fee to access a membership site or receive a regular newsletter. If this is part of your business model you need to be aware of your attrition rate – the rate at which customers drop out of your programme.

For example, if you have 500 people in your programme and you have a 5% monthly attrition rate you will be losing 25 customers every month. In order to maintain your membership at 500 you’ll need to add 25 new people each month. If you want to grow your membership you’ll need to add more.

When you start analysing your information in this way you can then make strategic decisions about how to grow your business and generate more profits.