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:
Don’t worry, it’s not as complicated as it looks. We’ll break it down in a second.
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.
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?
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.
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...
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.
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.
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.
Here’s a link to the revenue model for you to reference.