What Percentages Define The Health Of Your Online Business?

I have been offering marketing services to online business owners for more than a decade, and I must admit that I am sometimes taken aback by the lack of business sense that most bring to the table.

When I was in my 20's, I worked in restaurant management, and part of my paperwork included me calculating the costs of doing business by the day.

We knew that our fixed overhead costs were X,XXX dollars per month, so we divided those fixed costs by the number of days in the month, then we divided the fixed costs for the day by the sales for the day to determine how close we were to our Target Fixed Cost Percentage.

We also had to calculate how much we were paying for employees on that day, and we had to figure out what our Labor Costs were in a percentage format, so that we would have an ongoing estimation of how close we were to our Target Labor Costs Percentage.

If we found the labor costs for the month running high, we needed to adjust our employee's schedules accordingly, to make up some percentage points on our estimated labor costs.

At the end of each month, we would have to calculate our Food Costs for the month, to determine how close our Food Costs were to our Target Food Costs Percentage. This was valuable in a more long-term planning, so that we could identify potential problems in unexpected Food Losses.

I remember a time when we noticed our Food Costs running extremely high, like almost 50% higher than it should have been. We then noticed that meat was disappearing from the store within days of a new truck bringing supplies.

We rotated the schedules, and tracked meat at the end of every shift, so that we could determine where the leak was in our food costs.

It only took us a few days to figure out the "who" of our high food costs. Next, we had to catch him in the act, so we could terminate.

LOL This was a little harder to manage... It took us a full three weeks to catch him in the act, so that we could terminate him with extreme prejudice, and be positioned so that we did not have to pay him Unemployment Benefits.

We did all of those things that most people do when these things are happening. We locked the back door and only allowed trash to leave the building after we manually checked the trash cans for food. We would not let cashiers leave the cash register so that no one could take anything out the front door without being seen. We posted someone to watch the food deliveries being unloaded from the truck, to make certain that everything we bought reached our food storage.

And still food kept disappearing...

We finally broke down and sat in our cars a few parking lots away from our own parking lot, with binoculars in hand, watching the store while he was on shift, trying to figure out how the food was leaving the store.

And we would have never had caught him if we did not watch the parking lot when he went to leave the store!!

I had just spent my day off watching the store from the parking lot of the Holiday Inn across the street. When his shift ended, I decided that I would go to the restaurant to grab a bite to eat before I went home for the day.

I just happened to be pulling into the parking lot after his wife had arrived to pick him up and he had gone to his car.

I noticed that he came out of the building when his wife pulled in. He got into her car, then she drove to the back of the building. She stopped the car, and he got out.

I was flabbergasted as I watched him walk up to the building and start climbing the bricks on the outside of the building to the roof!!

I called the cops, then the store manager. The store manager went to the front door and waited for me to signal him when to come outside.

When the employee started climbing down the outside wall with a ham under one arm, the store manage and I confronted him. And we held him until the cops arrived a few minutes later.

As it turns out, we would inventory the meat at the end of his shift, then he would leave for the day.

Right after the truck would come in, he would leave, pretend to leave the premises, climb to the roof, enter the building through the service door on the roof, then go to the fridge, get the meat, carry it to the roof, then climb down the outside of the building, load the meat into his car, climb back up and get the rest of the meat, climb down again, load it into the car and then leave.

I suppose you could say we were lucky to confront him as a pair, because six months later, he was arrested for murder during a burglary of someone's house. They eventually gave him 40 years. But I digress...

The point is that while managing a real business, we monitored real percentages. We tracked internal data. And we knew exactly what food, labor and overhead should cost as a percentage of our gross revenue.

I got thinking about this a few minutes ago when I was describing to someone the structure of my ghost writing business model.

The point is that some people "operate businesses", but they really don't treat their business like a business. They don't understand how to break down costs or how to run their business at a profit...

So with this story as a template, let me ask you a very important question...

If you don't know the answer to the question, think about it, and answer it for yourself. It will be one of the most important exercises you will undertake for the benefit of your business.

So here is the question:

As an example to others, how do the numbers for your business break down for your business?

In other words, at what percentage do your standard costs break down as a whole of your revenue?


I will look forward to hearing some of your answers.


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