Let Me Show You How To VALIDATE Your Business Idea Before You Kick Off

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How to validate your business idea - Hector

Want to sell online?

I will show you how to validate your online business idea with ZERO cost!

This is simple math, but most people ignore these numbers.

Will your product make a profit or not?


Okay, let’s be business partners!
Let’s consider this very simple example:

  • We want to sell a beautiful shirt at $25 each
    (Our cost $3, amazing margin!)
  • We offer free shipping
    (Our cost $5 postal service)
  • We do this from home. (Zero extra expenses)
  • We need a website. Let’s suppose we do it ourselves.
    (Zero extra expense)
  • We purchase 100 shirts; our total investment is:
    $3 (cost) x 100 (units) = $300

Sounds good?

  • How much profit will we make each time we sell a shirt?
  • $25 (sell) – $3 (cost of shirt) – $5 (shipping cost) = $17 profit/shirt

Now, let’s sell it online!

  • Is the website ready? YES!
  • We are live! Yay!
  • High five!
  • crickets…
  • crickets…
  • Ohh! Surprise, we need to attract traffic to our website!

Okay, let’s get traffic:

  • The easiest way to get traffic?
    • Advertising!
      • Google
      • Facebook
      • Quora
      • Etc
  • Good news! We pay only for those who visit our website.
  • That’s right, these companies who “own” the traffic, use a term CPC (cost per click) on advertisements.
  • Bellow is the average cost per click for Google Adwords on different categories:
  • As we can see, every time someone clicks on our Google Ad, we will pay Google on average between $1.35 and $3.40
  • Let’s make a good deal for our shirt business:
    We will pay only $1 (one dollar CPC)
Also read:  Avoid These TikTok Marketing Mistakes

Okay, now we’re getting visitors to our website! Cool!

  • Now we need them to add the product to the shopping cart.
  • Studies show that the average add-to-cart rate is 8.7%
  • Let’s say we have an amazing website…
    We’ll use an add-to-cart rate of 15%!

Great! Now we have the visitors to our website, we also have them interested in the product and they have added it to the shopping cart! Amazing!

  • Now let’s check out!
  • Studies show that a typical shopping cart abandonment rate for online retailers varies between 60% and 80%, with an average of 67.91%
  • Let’s use the average for our numbers: 67.91%

So, how much is each customer costing us?

Below I did the numbers for us:

Starting from the top left corner on the image below:

  1. We have the traffic source
  2. We will pay $1 for each click
  3. People get to our website and only 15% will add the shirt to cart!
    1. This means that every 100 visitors we have to our website, 15 will add to cart
    2. We pay $100 for 100 visitors at $1 each and only 15 add to cart
    3. The cost of that 15 add-to-cart was $100
    4. How much per customer?
      $100 cost /15 add to cart = $6.67 per add to cart
  4. Now we need to check out
    1. Average 67.9% of customers leave the item in the shopping cart and don’t check out.
    2. For every 100 add-to-cart shoppers, 67.9 leave, that means that only 32.1 people check out.
    3. Remember our cost-per-add to cart customer was $6.67?
    4. The real cost for each checkout is ($6.67 *100 people / 32.1) = $20.77!

In summary:

  1. We paid $1,000 for Google to send us 1,000 customers at $1 each
  2. 15% added the shirt to the shopping cart = 150 customers
  3. 32.1% of these 150 customers paid $25 per shirt = (150 x 32.1%) = We closed 48.15 sales x $25 dlls each = $1,203.75 total income!
  4. Expense: we paid $1,000 for traffic.
  5. Expense: we bought 48 shirts at $3 our cost each = $144 total cost of product sold
  6. Expense: we paid 48 shipments of $5 each = $240 total cost of shipping costs
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HOW MUCH PROFIT DID WE MAKE?

$1,203.75 (sales) – $1,000 CPC Ads – $144 cost of shirts – $240 shipping =
Negative $180.25

OH NO! WE LOST $180.25 PARTNER!


To validate your idea, it’s critical to KNOW YOUR NUMBERS and strategize your sales before you get too excited!

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