FUTURE MAP 2025-2045: Discover the Crucial Trends Consumer Brands Must Act on to Prosper in this Massively Transformation Era. See that here.
In the early days of your startup, there are three revenue generating strategies that you want to try and adopt into your business.
First, try to maximize the price of your product to get as much revenue a possible from a single customer.
As an example, if your goal is $1000 in gross sales a week, at $100 per product, that is only 10 customers, compared to a $25 product, which is 40 customers.
It is a lot easier to take care of 10 customers than 40 customers, in terms of processing orders, managing inventory, managing customer service and any returns. You want to make it as easy as possible on yourself when you are starting out and having larger backend operations that add greater costs and complexity don’t help.
The ideal is to get your MSRP or SRP above $100 but below $1000; any higher and it may require personal selling to close a sale, which will add more work for you.
Second, try and maximize your order value. That is, try to get that customer to put as much in their cart as possible.
As a general rule, when selling direct to a customer, you want your average order value to be greater than $100 to really make things work in your business. If your product retails for less than $100, violating the first rule above, then maybe you can make up for it here through incentives to maximize the cart value.
Third, you want to maximize the revenue from each customer over time. This means you want to work hard to retain customers and keep them as repeat buyers, because it is a lot cheaper and easier to keep a customer than find a new one.
As a general rule, try to have 30% or more of your customers give you repeat orders. If it is less, then there may be something wrong with what you are selling that is turning customers off, and you need to find out why.
So, when you are starting out, sell a product or products that have higher price points, try to incentivize your customers to place big orders with you, and do everything you can to retain customers and keep them buying from you.
If all you can do is one, that is fine, but if you can incorporate two or all three, then that will help you out immensely in the earlier days of your startup.
As you grow, get sales, cash flow and profits, then you might be able to better afford to have lower priced products or lower average order values.