How to monetize a website: 8 ways to drive revenue and build a brand

My Post - 2020-02-24T175013.745.pngA business website doesn’t just exist to advertise your products and services. On the contrary, a well-developed site can actually generate income for your company. But, knowing how to monetize your site is key.

Website monetization refers to the various methods used to convert site traffic into real online revenue. Not all monetization techniques, however, are appropriate for every business. Using the wrong advertising type or failing to take users’ privacy concerns into account can actually result in a reduction of traffic in the long term, so it’s important to know what will and won’t work for your business.

Let’s take a look at how to monetize a site, and figure out which type of monetization is right for you.

8 tips for how to monetize a website

There are a number of monetization strategies you can use, each one with its own pros and cons. Here are eight of the most common methods of monetizing a website, along with tips for deciding which option is best for your business.

1. Affiliate marketing

Affiliate marketing is the process by which a website earns money by promoting the products and services of another business. A good fit for product-centric sites, affiliate marketing affords the host website a commission when a visitor purchases an affiliate’s goods. For example, the Amazon affiliate program is one of the largest of its kind and provides marketers with a commission of up to 10% on product sales.

Although affiliate marketing can be lucrative, it’s important that website managers evaluate whether or not an aspiring affiliate is a good fit for the company. After all, showcasing ads for irrelevant or low-quality products on your website can annoy your visitors and diminish clients’ trust in your business. For these reasons, affiliate marketing is most appropriate for social networks, news sites, and forum sites where customers regularly post product reviews.

2. Banner ads

Banner ads are those rectangular advertisements that appear on webpages to promote another company’s products or services. Depending on the amount of traffic your site gets, banner ads can be a lucrative monetization strategy that brings in a monthly fee from paying sponsors.

High-traffic sites offer invaluable digital real estate for potential advertisers, and they can earn significant revenue from banner ads as a result. On the other hand, newer sites with few page views and those with comparatively low traffic are unlikely to make much money with this technique.

Aspiring advertisers should also note that not all web audiences are created equal. Whereas sites with large, wealthy audiences are typically ideal, smaller advertisers may be able to earn more if they target highly relevant sites. For example, a family-centric blog is far more attractive to a company that sells children’s clothing than a blog that promotes auto parts.

While banner ads can generate helpful revenue for your website, hosts should use their judgment when selecting potential advertisers. In the long run, showing too many irrelevant or intrusive display ads can affect user experience and turn people away from your website. You can only sell ad space on so much of your site, so you want to make sure you’re filling it wisely.

It’s worth noting that you shouldn’t sell pop-up ad space. Pop-up ads already run the risk of annoying site visitors and impacting your site’s Google ranking. If you have a pop-up, it should be focused on your business, not someone else’s.

3. Site sale

While some owners view their websites as passion projects, others are content to spend just a short time developing a page before moving on to the next undertaking. Site flipping involves selling your website to an outside party in order to turn a profit. Many online resources exist for selling websites, including eBay’s page for website and business sales.

Not all websites are suitable for flipping, and salability tends to depend on overall income. To attract potential buyers, a website must generate a great deal of traffic or successfully earn revenue through other methods of monetization.

4. Pay-per-click (PPC) ads

Referring to “sponsored” ads that appear at the top and side of search engine result pages, pay-per-click ads are a great way to drive qualified traffic to your website. While most people in the e-commerce field are familiar with the concept of PPC advertising, website owners may not realize that these ads can offer an effective method of monetization as well.

Just as Google AdWords places business ads on the Google search page, Google AdSense performs a similar function for publishers such as website owners and bloggers. If your website offers tips for healthy living, for example, Google AdSense may opt to place ads for workout clothes or cleanses.

With PPC advertising, advertisers pay the host site for each click their ads receive. As a result, this monetization method is only lucrative if your site generates significant amounts of traffic on a regular basis. Additionally, the type of site you host can affect the value of your PPC advertising, as higher-cost products tend to pay more for clicks than those with lower value.

5. Email lists

Many websites use mailing lists to keep customers informed about new products and upcoming events. Business owners may not realize, however, that they can also earn money by “renting out” their email lists to other companies.

As the name suggests, email rental involves sending online communication to members of your mailing list on behalf of an outside company. If you have a robust mailing list, email rental can yield significant revenue for your business. In fact, a recent report suggested that the average email-list rental fee is $68 per thousand addresses.

Unfortunately, this monetization technique is not without its drawbacks. When you rent out your email list, you run the risk of annoying clients with irrelevant promotions. In the long run, you may even lose customers who opt to unsubscribe rather than continue receiving unwanted communication. Email marketing is a powerful tool at your disposal, and losing your own dedicated followers to make a quick buck can cost you in the long run.

6. Membership sites

A membership website is exactly what it implies: a site that offers users select content for a price. To succeed with this method, however, website owners must build a team of content creators and find users who are willing to pay for that content. VIP treatment, enhanced networking opportunities, and discounted access to products and services are a few of the perks that companies offer to attract premium members.

While membership sites offer benefits like continuous income, they also pose some challenges for site owners. Not only do these sites require more money to set up and maintain, small businesses may also struggle to produce the extra content needed to keep members engaged. Additionally, websites risk upsetting their regular visitors if they put some of their best content behind a paywall.

Monetizing your website with memberships can be a great source of funding. However, if your content isn’t up to the task, you’re far less likely to see a profit. Take the time to develop high-quality content and generate a solid web following before putting effort into membership-based monetization.

7. Sponsored posts

If you have a blogging space on your company site (which you should), you can accept sponsored posts from other companies. These companies will generally reach out to you with a desire to post on your site in exchange for money or a post on their site.

This can be a great way to get quality content on your site without the effort of writing it. It can also bring in additional money and give your brand more credibility. There is of course a huge but here: The brands you grant a sponsored post to need to align with your own company and audience.

You have your own product to sell, so make sure you’re not accepting sponsored posts from companies that directly compete with you or contradict your efforts. It’s also important to ensure the company posting on your site isn’t involved in any underhanded business dealing and isn’t currently the focus of bad press.

Lastly, if you’re going to link to a company’s site, make sure they have a quality site that isn’t filled with content you disagree with. Search engine optimization (SEO) is a huge component of having your content discovered online, and linking to questionable sites can hurt you. – Read more

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How to optimize your order to cash process to avoid cash flow problems

My Post - 2020-02-13T155451.158.pngStrong sales and growing revenue are great, but during periods of growth, cash flow can become tight and create real problems. Take Michigan-based, Murder Mystery Theatre Company, as a cautionary example. As reported in Inc. Magazine, over a period of 3 years, the company grew to $4 million in sales, employed 800 independent contractors, and put on 5,000 performances per year. With the growth, the company soon lost control of its finances with incidental spending ballooning to $8,000 per month and employee travel costs of up to $10,000 per month.

Because the Murder Mystery Company had to rent equipment, space, and pay actors before all ticket sales were reconciled, a lack of a business management solution jeopardized growth and their ability to track and meet growing expenses.

To rectify the situation, the company invested in tablets for video conferencing to decrease travel expenses and installed a customized accounting software on each one of them. A year later, with incidental emergency travel almost eliminated and spending down 75 percent, it seemed the investment in hardware and accounting software paid off for the Murder Mystery Theatre Company.

As the Murder Mystery Company learned, more sales won’t do you any good if you lose control of your cash flow. To avoid cash flow problems, businesses need to build their overarching order management processes with its sub-processes in mind: procure to pay, order to cash, and invoice to payment.

Order management and its sub-processes

The order management process begins when a customer places an order and ends with delivery. It consists of three core steps:

  1. Order placement: A customer visits your online or physical store and selects items for purchase.
  2. Order Fulfillment: Your team picks, packs, and ships the ordered items.
  3. Inventory management: The background process that makes it all work — your team fills the order from a warehouse, updates inventory records to reflect the picked items, and track orders from shelf to doorstep.

But anyone working in order management knows the process is far more complex than carrying out these three simple steps. Order management has many moving parts with implications for both upstream and downstream supply chain operations, not to mention the financial health of your business. It’s therefore useful to take a more focused look at order management sub-processes.

For a more nuanced discussion on macro order management processes, check out our article [parent article]().

Procure to pay (P2P)

Procure to pay, sometimes abbreviated as P2P, can be considered a precursor process to order management. P2P is essentially procurement planning and is driven by the need for raw materials and services as inputs to production. It begins with an internal request for materials or requisition order and ends when the supplier is paid and the transaction is closed in your accounting system. Procurement often represents an upfront expense and eats into a business’s liquidity, and therefore impacts the rest of order management.

The P2P process should be informed by demand forecasting, vendor pricing and reliability, and the cost of shipping. Inventory management software can help collect and analyze this type of data to help improve your P2P process.

To reduce inventory management costs and maximize liquidity, ideally, materials are procured and paid for when they are needed.

Order to cash (O2C)

Order to cash, or O2C, is the key order management sub-process that ensures finished products are moving out and cash is moving in. The process begins when an order is placed and concludes when payment is received in full. As was evident in the Murder Mystery Theatre Company example, taking on new clients or managing longer buyer cycles can make your O2C cycle far more complicated and make it difficult to plan operational expenses — both in the near-term and in the future months.

Having a strong understanding of your procurement costs and landed costs can help you optimize your order to cash cycle so that you can maintain the liquidity and foresight your business requires. For example, if you know that you must settle supplier invoices and pay shipping vendors to deliver a certain order, you can require a partial client payment upfront. Some businesses also require clients to make a down payment when signing new contracts or when placing large orders.

Of course, making sure you tighten up your overall order management processes and having your team follow standard operating procedures is key. Eliminating data entry errors and delivering the right products on time tends to result in faster O2C cycles.

Invoice to payment

Invoice to payment is an even more granular process within the larger order management framework. It involves only the point of time from which the invoice is generated to the time payment is reconciled. The process typically involves the following:

  • Generating the invoice
  • Sending the invoice
  • Applying discounts or credits
  • Sending reminders
  • Receiving payment
  • Recording and closing the transaction.

Depending on your business type, you may not invoice customers until orders have been delivered, and payment may be due 15, 30, or even 60 days from that time. To encourage on-time payment (and therefore compress your O2C cycle), you can offer small discounts of 1 or 2 percent if the bill is paid within 10 days of receipt. If you are concerned about late payments destroying your cash flow, other actions to take include:

  • Refusing clients who insist on longer payment cycles
  • Taking out credit insurance
  • Requiring clients to set up a standby letter of credit so you can recover defaulted payments

If you are trying to keep better tabs on your order management process, it’s important to know where to look for results, or lack thereof.

How to measure the effectiveness of your order management process

In addition to serving as a guiding framework to build your order management process, O2C is an important metric to measure its effectiveness. By keeping track of your order to cash cycle times you can develop company benchmarks to compare client cycle times and optimize processes to achieve more favorable results.

Other metrics to measure the success of your order management process include the following:

Days inventory outstanding: Also known as days of sales inventory, this measures the average number of days a company holds inventory before they sell it. There are industry-specific benchmarks you can use to measure your performance against competitors.

Days sales outstanding: This measures the average number of days it takes to collect payment on a completed sale. A lower ratio indicates a healthy O2C cycle, while a higher number suggests a clientele with credit issues or poor collection processes. This metric helps to identify your more reliable customers and offer them priority accordingly.

Order fill rate: Also referred to as demand satisfaction, this measures the percent of orders that can be filled immediately from available stock. This metric is closely tied to customer satisfaction and serves as a good indicator of how optimal your inventory levels are.

Perfect order rate: This metric considers several factors including order completeness, punctuality of delivery, condition upon arrival, and correct documentation. This metric also contributes to customer satisfaction and can help you earn repeat business and on-time payments.

Order Touches: This is a less conventional but no less useful metric. Companies like Hewlett Packard use this metric to gauge order fulfillment efficiency by literally measuring the number of times order items are “touched” during the picking and packing process. The data is then used to eliminate unnecessary activity. – Read more

The dangers of vanity metrics for client-focused firms and what to measure instead

My Post - 2020-02-11T151140.469.pngWhen Lehman Brothers filed for bankruptcy in September 2008, the firm had $639 billion in assets, making it the largest bankruptcy filing in US history. Up until that point, the firm had been painting a picture of healthy finances even in the midst of increasing signs that they were headed downhill.

Using an accounting loophole known as ‘Repo 105,’ Lehman Brothers presented a positive balance sheet to gain confidence from its clients and investors. This is an extreme example of how vanity metrics can belie reality, and why relying on these kinds of artificial metrics––even when done unintentionally––can create problems for businesses.

Vanity metrics are all too easy to fall for because they look good on paper, leading firms and agencies to believe they’re doing well, when in fact they fail to accurately depict their true status. Vanity metrics don’t measure anything substantial for businesses and can’t be translated into actionable steps to help them grow.

Sometimes struggling firms become more vulnerable to relying on vanity metrics as they may be under pressure to present positive outcomes to both internal and external parties.

Yet in order to grow a business in a healthy way, the focus should shift from vanity metrics to actionable metrics.

What are some examples of vanity metrics?

Sometimes businesses measure metrics without realizing they don’t actually help them grow. They may sound good in a meeting, but with further study they aren’t actually contributing to business growth. Below are some examples of these metrics.

Number of clients

At first glance, this seems like a fairly straightforward equation. More clients equal more money. Client churn is something firms work hard to avoid.

But serving all of your clients is often a tricky act. Too many clients and you may struggle for resources to service clients properly. Too few and you may not generate enough profit to stay afloat. So while it’s important to track your number of clients, that number alone doesn’t give you any idea about how well you’re actually doing.

If you have 10 clients bringing in $1,000 on average, that’s better than having 20 clients bringing you $500 on average. In both cases, you earn $10,000, but in the latter case, you’re doing double the work. Yet that doesn’t give you the whole view either. If every single one of those 10 clients is incredibly difficult to work with and the 20 clients are much easier to manage, it’s valid and important to measure that strain as well.

So when it comes to clients, it’s far better to focus on who they are rather than how long your client list is. Here are some alternative metrics to track:

  • Client retention
  • Average value per client
  • Hours billed per client
  • Referrals brought in per client

If you’re not sure where to begin, here are some ideas on how to define a good client.

Billable hours

Another tricky metric is billable hours. While it’s useful to track, billable hours aren’t something you should base your performance on. That’s because billable hours alone don’t measure your firm’s work quality or client happiness.

A high number of billable hours suggests more work and higher revenue. But if you don’t focus more on project outcomes or client satisfaction you could ultimately end up with clients disputing bills or leaving your firm because they aren’t happy with your services.

Instead, consider metrics like cases or pitches won, client satisfaction, client referrals, and other types of feedback that let you know whether those billable hours are fueling more business.

Total assets

History is full of bankrupt companies with billion-dollar assets, like Washington Mutual with $328 billion in 2008 or General Motors with $82 billion when it went bust in 2009. But total assets can be a less than meaningful metric for measuring your true financial health because it doesn’t take into account underlying liabilities.

A better way to gauge financial health and business value is to track net assets.

Net assets = Total assets – liability

This is important because by including those liabilities in the equation, you can stop operating under an inflated figure which will inevitably lead to poor business decisions.

Other metrics that can help businesses escape the ‘total assets’ trap include:

  • Working capital: Calculating your working capital––exactly how much cash you have on hand to invest and cover expenses––can help you lower the risk of falling short in cash.
  • Overhead ratio: What you’re spending on organizational expenses such as administrative costs, utility bills, etc. divided by total expenses. A good rule of thumb is not to exceed 35% in overhead costs.
  • Accounts receivable: Rather than relying on projections that take into account outstanding invoices, be more conservative in estimating future payments that aren’t 100% guaranteed.

Social media and website page views

Marketing has many potential metrics you could track, but not all metrics are made equal in terms of actionability. In social media, public-facing numbers like the number of followers, likes, and retweets are nice-to-haves that don’t always translate to real results.

They aren’t actionable because you can’t form a game plan based on how many likes you’ve received on a given tweet. By contrast, measuring engagement and clickthrough rates give you a far better idea of how you’re performing with your audience.

Having 10,000 followers but little engagement is less effective than an account with 1,000 followers whose posts are getting consistent likes and shares. In the second case, people are actually interacting with your content, whereas the first case might as well consist of follower accounts that are inactive or bots.

Similarly, having a website with a high number of page views might make you feel good that people have visited your website. But beyond that, there’s no useful information that can help you get to your goal––attract more clients.

An example of more actionable website metrics would be form completion rate, which would measure how many of your website visitors actually contacted you after visiting. If that number is low, you could try featuring the form or contact information more upfront and visible to increase engagement. – Read more