 Hey, what's going on guys welcome back to another video. So today I'm going to show you what potentially could be the most important thing that you see this year that contributes towards your success if you're running paid ads. So it doesn't matter whether that traffic or your paying for ads on Facebook, on TikTok, Instagram, Google, doesn't matter what platform it is. If you want to be successful then you need to understand what I'm about to show you in this video. So where most people go wrong is they'll spend a few weeks maybe even a few months watching some videos on YouTube on how to start a dropship in business and they'll jump head first into it, they'll spend maybe a week or so putting their store together, they'll find a product to sell, they'll run some ads and then when they don't get the results that they're hoping for, that's where the roadblock is. That's where they then become stuck and it's because they don't understand what I'm about to show you today. So if I just make myself a little bit smaller and we take a look at this infographic I've put together for today, essentially what we have in our hands is a funnel. So as we can see at the top here we have people entering our funnel. So it doesn't matter whether you're in e-commerce or you're selling a digital product, essentially the fundamentals and the premise of what you're going to see is exactly the same and you still need to understand it. So people are coming into your funnel via Facebook, Instagram, TikTok, Google, etc and to get people into the top of this funnel, this is what's called your cost per lead, which is just a fancy way of saying the cost to get somebody onto your store. So because I cover a lot of Shopify and e-commerce related things there is going to be kind of like a bias and a focus on that, but it doesn't matter whether you're selling a digital product, whatever it is, like I said, essentially you need to know what your cost per lead is, the cost, what it's costing you to get every single person onto your website. Once somebody is onto your website, so if you're a drop shipper, the next process a customer will take on your store for them to become a customer is to hit that add to cart button and this is your ATC rate. So this is essentially the percentage of visitors. So if you get 100 people onto your Shopify store and 10 of those people hit that add to cart button, then your add to cart rate is essentially 10%. Don't worry, I will be taking you through some examples in a minute to show you why this is so important and why you need to understand this. The next step in the buyer's process as it says here in blue is the checkout rate. So this is the percentage of people who come onto your site and then actually make it to the checkout process and buy your product and that takes us to the final step of the funnel, which is the cost per acquisition or the cost per purchase. It's a fancy way of saying the cost to acquire a customer. So why is this so important then and why do you need to understand this to illustrate it in a great way. I've got two examples. So example number one, we're working on a cost per 100 lead basis. You're not going to be calculating your figures per every single person because otherwise once you get to the bottom, you'll have a cost per 0.001 of a customer. So just to make it easier to work out, we're rounding up per every 100 people we get onto our Shopify store. So at the top, then cost per 100 leads or 100 visitors. Let's say it costs us in this first example, it costs us $100 to get 100 people onto our Shopify store. So in its essence, it's costing us $1 per person. And if you want to kind of translate that into the platform you're advertising on, then it's basically a cost per link click or a cost per page of you to be more accurate. Let's say you have an ad to count rate of 7%. So of those 100 people that go to your store, seven of them hit the ad to count button. And as an overall rate of those 100 people, 2% of them actually convert and actually follow through, complete the process and actually buy your product. So essentially your Shopify store, which you can find in your reporting analytics has a conversion rate of 2%. Now, like I said, the ATC rate, we could skip past this. But what I'm going to do at the end of the video is give you some ballpark figures. So when you kind of plug your own numbers into this system, you'll be able to see exactly where the funnel is kind of failing you. So you know where to kind of put your attention and try and work out why you have a problem at that point. So the percentage of visitors that make a purchase is 2%. So out of those 100 people we've gotten onto our Shopify store, two of them has made a purchase. To get those 100 people onto our Shopify store, it costs us $100 in this example. And therefore our cost per acquisition or our cost to acquire a customer is $50. In example two, we've got better performing ads, we've got better performing landing page or Shopify store. So an example two, we're getting $50 per every 100 people. So essentially our cost per link click or our page view is 50 cents in this instance. Let's say we've got a better converting and optimized landing page, aka product page if you're selling on Shopify. And this will make your ad cart rate 10% then. So out of 100 people that come onto your store, one in 10 of those people is hitting that ad to cart button, which is really good. Let's say we have a conversion rate of 4%. So double the previous example. So for every 100 people now in this example, coming onto our Shopify store, four of those people are actually buying our product. So if we take that number and divide it by the initial cost to get those 100 people onto our store, this will give us a cost per acquisition or a cost per customer or cost per purchase if you advertise on our Facebook of $12.50, which is really, really good. What is the key takeaway from all of this? Why have you watched this video? Why is this important? You need to know what your CPA is or what you can afford to pay for your CPA. And as long as your CPA is less than the price you sell the product for, minus the cost of the product that you pay for, then you are making a profit. And this is super, super important when it comes to scaling your business. So let's say we're selling the product, we're retailing the product on our Shopify store for $50 and we're buying it from our supplier for $10 delivered. So there's $40 of room in there. That is the very maximum. Obviously you have to take into account the running costs of your business, but for kind of simplified terms and for the sake of the video, let's stick to $40. That is how much we can afford or that is the profit once we've sold the product minus our advertising costs. So essentially we've got $40 of room to spend on our CPA. In example one, we're spending $50 on our CPA. So we're actually losing $10 per sale. In example two, we're actually making $27.50 profit after our CPA and therefore we're making a profit overall. So the reason why this is super important when it comes to scaling your business is because you know exactly what you can afford to pay per customer and as long as no matter how much money you spend or where you're spending it, as long as your CPA is lower than that amount then your business is profitable. If you want to get really technical then obviously you need to put into there the cost of your Shopify subscription, any apps like that sort of thing, but for the sake of this video just to make it easier to work out, your business will be making a profit. So how is this relevant to your Shopify store then? How do you plug this in and how do you actually get something valuable to take away from this video which is going to help improve the profitability of your business? If you haven't started your business yet then just make sure you're familiar with this. So when you have started running your business you know exactly what to look for. If you have already been running ads before and you have over 100 visitors to your store then this example plug your numbers into this and it will show you exactly where you need to focus your attention and fix where the system has broken down. And this is the system that I'm referring to. So people coming in at the top they hit the add to cart button, they initiate checkout and then they complete the purchase process. So in terms of numbers then and where you need to be aiming for in an ideal world now obviously this is going to be really difficult to give you guys numbers which is going to apply to your business as well as the next persons, next persons because everybody's selling different products but you want to be trying to aim for somewhere between example one and somewhere between example two. So if you can get people onto your Shopify store for somewhere between kind of 50 cents and a dollar then in my opinion and based on my own experience from the products that I sell I know for a fact that I can make my business is profitable if I can get the right traffic onto my store for somewhere between 50 cents and one dollar. So if you're watching this video right now and you're paying two dollars per lead then you know that's where you need to focus your attention. You either need to change up the products that you're selling, you need to change the audience that you're putting it in front of because they're just not interested and therefore not clicking it and therefore it's expensive. You might need to do both or you might need to do the third thing which is change up your ad creative to get more eyeballs on it to be more attention grabbing so on and so forth. Let's say though that you are achieving this step you can move on to the next one you can tick this one off and move down to the ATC rate. Again try and aim for somewhere between the two you're probably going to be more closer to this seven percent if you can hit seven percent then you will be able to make your business profitable. So go into your Shopify analytics go into your reporting and see exactly what your ATC rate. If it's at two percent then you know that's where the issue is it's where you need to focus your attention and your attention is on your product page where people hit that ATC button is on your product page so whatever it is on your product page is putting people off and it's not converting high enough. You may need to change the price of your products, you may need to have a better offer, you may need more information, you may need more social proof. The list is pretty much endless in terms of the things that go into a really well performing and perfected landing page or product page. Next is your checkout rate. So this is the people who actually make a purchase again somewhere between the two if you can get three four percent then you will be able to make your business profitable as long as you're not selling a product for a crazy price. Most Shopify stores because Shopify has its default checkout system or checkout process this won't be the place in which most stores fail it'll be here at this ATC rate so there's not really a lot to say here you can have custom checkout process installed but I've used the default ones ever since I began and never had an issue with the checkout process being the thing that breaks down the funnel. Last but not least then we have the cost per acquisition so let's say you're meeting all of these numbers that I've spoken about what you need to do at this point basically is increase your prices or sell a more expensive product. You could tweak things and go again and keep tweaking and tweaking and tweaking and trying milk your ads as much as possible to get people on as cheaply as possible but in today's age with how competitive things are you need to be selling a product with at least $20 room in my at least in my opinion the closer you can get to kind of 30 or 40 if you can even get $50 then you can scale your business super super quickly because even in this worst kind of case scenario we can still afford to pay $50 per customer and this is based on front end as well so this is spending $10 to get $20 back if you have a proper business with a proper brand and high customer retention then you'll be able to pay a little bit more per acquisition because each customer will be coming back and spending more money and therefore you'll be able to afford a bit more to pay however that's a different video that's lifetime customer value maybe I'll cover that in a different video not to drone on for hours and hours the takeaway from this video is know what your CPA is and then every ad that you run every ad set that you run whether it's Facebook Google every single platform will tell you exactly what it's costing you to obtain that traffic and you need to make sure that it is less than what that CPA is and if it is then you can scale and scale and scale pummeling more and more money into your business as long as that number stays below that CPA that's it for me today guys I hope you enjoyed the video if you did drop me a subscribe I upload new videos every Monday Wednesday and Friday at 4pm UK time thanks for watching guys I'll see you in the next one