Learn · Lesson 01 of 12
The four numbers a store runs on
Every online shop, at any size, resolves to four quantities. Learn them first and every later decision becomes arithmetic instead of opinion.
What this lesson teaches
- Name the four quantities that determine whether a store makes money
- Separate a revenue problem from a cost problem from a traffic problem
- Write down a store's position in five lines
A shop that sells one product to strangers on the internet is not a complicated object. It has four numbers, and everything anyone will ever tell you about selling online is an attempt to move one of them.
- Traffic — how many people arrive, and what it cost to bring them.
- Conversion rate — what fraction of arrivals buy.
- Contribution per order — what is left from one sale after every cost that only exists because that sale happened.
- Fixed cost — what you owe each month whether or not anyone buys.
Monthly profit is then a single expression. Traffic multiplied by conversion rate gives orders. Orders multiplied by contribution per order gives gross contribution. Subtract fixed cost.
profit = (traffic × conversion rate × contribution per order) − fixed cost
worked: 8,000 sessions × 1.8% × £14.20 − £520
= 144 orders × £14.20 − £520
= £2,044.80 − £520
= £1,524.80The value of writing it this way is not the answer. It is that the expression tells you which arguments are worth having. If contribution per order is £1.40 rather than £14.20, no amount of conversion-rate advice will save the shop: 144 orders would produce £201.60 against £520 of fixed cost. That store does not have a marketing problem. It has a product problem, and it had it before the first visitor arrived.
Why the third number is the one people get wrong
Traffic is counted for you. Conversion rate is counted for you. Fixed cost arrives as invoices. Contribution per order is the only one of the four you have to construct yourself, and it is the only one that is routinely constructed wrongly — usually by subtracting the supplier price from the retail price and stopping there. The next two lessons are about constructing it properly, because a store built on an overstated contribution figure fails in a specific and cruel way: it looks like it is working, and it grows, and it loses more money the better it does.
Diagnosing with the expression
| Symptom | Number at fault | What actually helps |
|---|---|---|
| Plenty of visitors, almost no orders | Conversion rate | The offer, the price, the objections the page fails to answer |
| Orders arrive, the bank balance falls | Contribution per order | Sourcing, shipping method, price, or abandoning the product |
| Everything works but the totals are tiny | Traffic | Channels — and only once contribution can pay for them |
| Good months are barely better than bad ones | Fixed cost | Subscriptions, retainers, anything charging monthly for optionality |
Do this before you read on
Write the five lines above for a shop you know — yours, or one you are considering. If you cannot fill in contribution per order without guessing, that is the finding, and it is the most useful one you will get today.
Figures in this lesson are illustrative inputs chosen so the arithmetic can be checked. They are not measurements. What FlowFinds Solutions actually measures is published, with its artifacts, in research.