Make Money Online Masterclass:  How to Test Ideas

 Get your nerd glasses on because this is going to be one of the most valuable posts on starting a successful online business that you’ll ever read.  Today I will share with you the tool that has helped me launch my most successful campaigns regarding e-commerce and affiliate marketing.  And the best part about it?  It’s free. 

I promise you that this tool is based off of more than just luck and hope.  In fact, I’ve used it again and again for years with insane selling results.  Essentially, it will validate any idea you have and mathematically calculate if it will be prosperous in the long run, all without spending a dime.  The concept is simple but the result is revolutionary.  

Before I used data to back up my business ideas, I was naturally a very passionate and energetic entrepreneur.  I will admit that with every campaign, business, website, or blog post I pursued, I went into it with a very naive yet optimistic attitude.  I soon learned that passion alone cannot drive anything and came across failure, upon failure, upon failure.  Hindsight is always 20/20 and I know exactly what I was doing wrong.  

So, in this mini masterclass I will teach you how to take your awesome (and much needed!) passion towards your idea and back it with real data.  Say goodbye to crushed dreams and wasted ad money; the Winning Idea Calculator is here. 

The Tool

To use the Winning Idea Calculator, all you have to do is plug in your idea and run your numbers.  From there, your boxes will either be green or red.  Green means that you’ve got a sick, solid idea and that you should go for it!  Red, on the other hand, warns you that the data and the math doesn’t quite line up.  Onto the next idea.  

I’ve made this resource completely free.  No opt-in, no upsell, no cost to you.  It is a simple Google sheet that you can find here.  Once you open it up, you will want to click ‘File’ and then ‘Make A Copy’ so that you have your own version to edit.  

How To Use The Winning Idea Calculator

Like I said before, this calculator is a money-making and money-saving game changer.  Let’s quickly walk through what each of the sections mean.  

Note:  the only boxes you should be typing numbers into are the gray ones.  The green and red boxes are embedded with formulas so make sure to only type in the gray!

Entering your Data

The next box over is titled Mark Up Quantity.  Here you will type in how much you are marking up your product by and selling it for.  You will start to see the boxes below change color based on how many times you upcharge your product.  Both decimal and whole numbers work in this box.  

The two rightmost boxes on the top are titled List/Selling Price and Profit.  These are outputs of the previous two boxes based on your inputs for cost and markup.  DO NOT type in these boxes!

The next data you will enter has to do with your Estimated CPC (Cost Per Click).  One of the main reasons that I start every marketing campaign on Google is because with Google, you can research an extremely accurate cost per click.  From there, I usually scale to Facebook.  

The Cost Per 100 Clicks box tells you how much you will be spending in ads for every 100 clicks.  Remember that the lower the cost per click, the better.  

Lastly, you will enter your Conversion Rate in order to determine how much one unit will cost you to sell at the end of the day -- A.K.A. the Estimated Cost Per Acquisition.  If you send 100 people to your site, how many of them actually buy?  The higher the conversion rate, the lower cost per acquisition.  Keep in mind that underestimating your sales is safer than overestimating.  

Reading Your Outputs

In order to be a streamlined e-commerce operator you need to know 3 things:  how much it costs to get a customer, what the average order value is of that customer, and the customer lifetime value.  Then, you can consider yourself in the 1% of master marketers.  

The first column calculates your profit or loss if each buyer on your site bought a quantity of 1 unit at list price.  You can see below how your numbers would play out if this happened 10 times, 25 times, 50 times, and 100 times.  Making a sale is never a bad problem to have.  However, as we can see here, sometimes only selling one unit per order doesn't cut it.  If you can get your buyer to spend more on your site by purchasing multiple units or products, your numbers will be in much better condition.  

The middle column calculates your profit or loss if each buyer on your site spent 1.5 times more than the list price of your product.  This means you would be doing some sort or upsell or cross-sell.  Again, the end goal is to increase the average order value of your buyer.

The last column calculates your profit or loss if each buyer on your site were to buy 2 units at list price.  This means that you are technically making the profits of 2 sales in one without paying any CPC for the latter.  

Note:  accounting for returns is essential in the figuring process.  It is a cautious way to plan ahead and gauge your numbers including a few refunds.

Finally, the bottom section is the Initial Lost Testing Budget.  This box accounts for the money you spent on product testing in order to find the perfect item to sell.  Chances are you had to do some research and investing to get where you are today.  And you most likely weren’t making from day one, right?  Just below you can see how many days it would take for you to break even at list price, 1.5 AOV, and at 2 times the list price.

My Real-Life Example

Now that you have a lay of the land, let’s dive into a real-life example that made me thousands.  Here were my initial inputs:

Cost of Product: $4.70 (the Winning Idea Calculator is very conservative so this will round up to $5)

Mark Up Quantity: 4.7x

List Price: $22 (I was selling for between $20 and $25)

CPC: $0.30 (you can use the Google Ads Keyword Planner to forecast this number)

Conversion Rate: 5% (I tell my new students to put a 2 in this box, as converting takes experience)

Testing Budget:  $25 (Google gifts free ad spend when you create a new ad account!)

As you can see, there is lots of green (hence why this campaign worked so well!).  But let’s play around with the numbers a little.  

What if Google was wrong and my CPC ended up being closer to a dollar?

Yikes -- now we see some red.  This doesn't mean game over though.  All I have to do is make sure my conversion rate is higher or mark up the price a bit and I will be back in the green.  

What if I mark up the price by just 3 times, change my CPC back to 30 cents, and lower my conversion rate to 4%?

Hey!  I’m still making 2 dollars off of each sale.  Not bad.  But hold on… it’s going to take 132 days to earn back my testing budget of $250?! That's not going to work.  

With the help of some fine tuning and more number crunching, here’s how the data played out in the end:

Cost of Product: $4.70

Mark Up Quantity: 5x

List Price: $24

CPC: $0.28 

Conversion Rate: 8.5% 

Testing Budget:  $0  (This campaign was based off of a trend and made money from day 1)

I ended up with an average AOV of around 1.5x and sold somewhere between 500 and one thousand units with a revenue around $18,000 in the first 30 days. 

You're probably thinking that these numbers are crazy or unobtainable, but let me let you in on a (not so) little secret.  All you need to be a great, strategic marketer is data driven research.  In fact, I’ve had students who have had sales within their first 3 clicks -- 2 is the record, to be exact.  

I think what stops a lot of people from being successful entrepreneurs is not having confidence.  You can be so close but if you don't have the data and backs up your idea, you’ll never know if you should take the risk and run the ad.  With the Winning Idea Calculator, you will know whether or not you're in the green.  The threat of false intuition is gone.  

So, congratulations!  You've made it through nerdy training!  I hope you now understand the value of data, how to use it, manipulate it, and how to actually take your data and say “hey, I’ve validated my idea and can take the next step”.    I anticipate that this tool and philosophy changes the game for you whether you're just starting out or have been doing e-commerce for years.

If you want to learn more from me, I have multiple courses of all different levels located on my website, here. 

As always, peace and God bless.