Step 2: Define Your Success Metrics

After you have tracking set up correctly, you’re going to want to define some success metrics that you will use to evaluate performance once you start advertising.

A great way to do this is to create a ‘Revenue Model’ and tracking sheet like this one here:

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Don’t worry, it’s not as complicated as it looks. We’ll break it down in a second.

How This Tracking Sheet Works

At the top of the spreadsheet is the ‘Revenue Model’, aka hypothetical model of how you see your numbers playing out before you ever start running any traffic.

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The goal of the model is to establish realistic goals and make sure you know what numbers you need to hit to be profitable before you spend any money on ads.
This way when you start advertising, you have clear goals to aim for and you aren’t advertising blindly.
The model maps out the core numbers you want to track for your campaign.
For example, with the webinar to call funnel we have: 
Adspend >> CPC >> Webinar registration page visitors >> Registration rate >> Leads >> % Scheduled calls >> Scheduled calls, etc, etc, etc.
So you want to set it up so that the cells highlighted in green are numbers that you plug in. The other numbers should auto calculate based off what you enter in the green boxes.
For example, if you change the ad spend then it will change the numbers to the right of it accordingly.

So how do you decide what numbers to plug into the green boxes?

    Option 1: If you’ve ran similar campaigns in the past we recommend taking a look at your historical data and using those numbers since those are most accurate to your business.
    Option 2: If you don’t have historical numbers, then you can try finding some industry benchmarks for the specific industry that you are in. You can try to Google for this.
    Option 3: If you can’t find any industry benchmarks, just make your best conservative guess. It’s better to go conservative when setting up your model so you can see if you can make it work in the “worse case”. “What is the worse that you can do and still hit your goals?”

In general, we like to plan out our model to generate at least a 200% return on adspend (ROAS) to be safe. A 200% ROAS means we’ll make $2 for every $1 we spend. It’s not always possible, but it’s a good goal to aim for.

Let’s talk about budgets for a moment.

    The beautiful thing about the Revenue Model is that it will calculate pretty much all the numbers you need to run your campaign intelligently, including your budget.
    The Revenue Model will tell you how much budget you need to accomplish your Revenue goal at a ROAS you are happy with, based on the historical, benchmark, or conservative estimates you set.
    That being said, this is your “Optimized Funnel Budget”. In other words, how much will you need to spend on ads to generate your target revenue if you manage to hit the goal numbers you set. I.e if I hit my goal numbers I can expect to put $2000 in to make $4000 out.

But here's the kicker...

If you’re just starting out, your funnel may not come out of the gate hitting all of your goal numbers. It may take some time and testing to optimize to those goals. Therefore, the “Optimized Funnel Budget” isn’t an accurate representation of how much you will need to spend to reach your revenue goal in the beginning.
That’s where your “Bottomline Number” comes in...

Calculating Your Bottomline Number

Your Bottomline Number is the max amount you would be comfortable with spending and potentially losing to get the system paying for itself before a hard stop. We recommend $1000-$2000 minimum if you are testing out a brand new offer and funnel.

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When you start advertising, the Profit and Loss column will calculate the Profit & Loss for the day. (Total Revenue - Total Spend). At the bottom of the Revenue model, it’ll sum up your P&L for the month. 
Your goal is to try to make your campaigns work without having the P&L number go under the Bottomline Number that you set. If you get to this number you stop everything and evaluate next steps based on the results so far.
The goal is to get the campaign positive and paying for itself without going below the bottom line so you minimize the downside (i.e you can only lose a certain amount), but maximize the upside (virtually unlimited scale).
You’ll want to keep an eye on this number every day.

Now below the model is where you track your Actual numbers when you launch the campaign. 

The goal is to get the actuals to match up with the model.

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When you launch a campaign, you’ll want to come in and plug in your numbers every day to keep a pulse on your aggregate numbers and trends. We’ll go over this more later.

Recap

    A Revenue Model is simply a hypothetical model of how you see your numbers playing out before you ever start running any traffic.
    The goal of the model is to establish realistic goals and make sure that you know exactly what numbers you need to hit in order to be profitable BEFORE you spend any money.
    When you start advertising you want to have clear goals to aim for so you aren’t advertising blindly.
    Therefore, you’ll want to create your model before you start advertising and then track meticulously when you launch and manage your campaigns.

Action Steps

  • Use the revenue model to define your success metrics and budget

  • Define you bottomline number if you are testing a new offer or funnel

Here’s a link to the revenue model for you to reference.

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Download Revenue Model

(Opens In New Window)

Up Next: Finding Audiences To Target

Proceed To Next STep

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