The Importance of Setting and Tracking Daily Goals
If you are reading this, then you probably know that commerce is a highly volatile industry. So much so, in fact, that some brands experience over 70% of their total revenues for the year every black Friday cyber Monday. There are VERY few business models that can say most of their revenue comes from one week of the year. Similarly, golf brands are in their peak season, while skiing brands or winter apparel brands are in the dead of summer.
We call this idea ‘high velocity commerce’ where things can change violently day to day with regards to revenues and profits. Even during a normal week, the weekends can be significantly higher, and the hours after work during the weekdays can be busier than when people are at work.
The reality is that this means your store’s daily contributions to a monthly revenue or profits goal are not equally distributed. You may even experience 40% of your monthly revenue for July during a 4th of July sale, or during prime day.
So, you can either set your goal for the month and close your eyes and hope that you hit it – or, you can set a monthly goal, break it down to a daily goal day-by-day, and make sure you achieve your goals brick by brick.
The reason this is an important exercise is because you want to make sure that if you are exceeding or falling short of your set monthly goal – you can adjust accordingly.
For example, if you set a monthly revenue goal of $1M, and a monthly contribution margin goal of $300,000 – you could be halfway through the month and you check your shopify dashboard and you are at $500,000 in revenue – good deal, pacing perfectly. However, if you were to track all the other associated expenses with that revenue, you could also make sure you are on track for your contribution margin goal.
So let’s say you do that – and it turns out your contribution margin month to date isn’t pacing at 50% to goal even though we are 50% through the month (assuming no sales or anything). You may find that you have already hit your goal, in fact, you are already above your goal. That means, you can probably juice more ad spend and capture some growth. Perhaps CAC is lower than you though, or new customer AOV is higher than you thought – those are worth knowing as well, as it can inform your path forward.
There are several variables that are worth tracking on a daily basis:
1) Revenue
a. Drivers
i. Ad Spend
ii. CAC
iii. New Customer Count
iv. New customer Average Order Value
v. Returning Customers
vi. Returning Customer Average Order Value
b. Cost of Goods Sold
i. Product Costs
ii. Other
c. Contribution margin
The reason you want to track all these associated components of revenue and contribution margin is for the exact reason in the example above.
For instance, it’s possible that you could hit your revenue goal, but what if it was because you had more returning customers than you thought you would? That would imply that your customer acquisition cost was actually higher than you anticipated, and that new customer revenue as a whole would be behind your plan. This is important because a rise in customer acquisition cost could be missed if you were only tracking revenue, however if you are tracking CAC and new customer revenue - you would see the increase in CAC and be able to adjust on the fly by employing customer acquisition cost reduction tactics, whether that is reducing spend, increasing creative output, or mixing up your channel allocation for advertising.
Similarly, it is important to track your cost of goods sold on a daily basis, as it has a profound impact on your contribution margin. This can be done by tracking the product mix, or the number of each product that you have sold for the day, and then multiplying the cost per unit times the number of units. Depending on the number of SKUs that your store has, gross margin can change drastically day to day. For example, if you have one product with a gross margin of 60%, and another product with a gross margin of 40%, if you sell more of the lower margin product your blended gross margin will go down. Perhaps you sell a sunscreen product that gets a lot of traction during the summer months, and so your gross margin changes in the direction of the product margin on the sunscreen product. Technically, this should change how much you are willing to spend on customer acquisition - more gross profit means more contribution margin at the same CAC.
All in all, contribution margin has a number of variables that influence it. From product mix, to returning customers, to CAC - every data point matters and in order to scale your business in an effective way it is important to know your numbers, every single day.
This is why we built a Plan vs Actual - a tool that allows you to quickly break monthly targets, by channel, into daily pacing based off a prior time period or completely allocation to reflect promotions and other initiatives. The whole process takes a only a few minutes and Iris updates the Actuals and Variance each day moving forward - you can even adjust targets mid-month to reflect what's actually happening, for example, CAC coming in lower than expected allowing you to increase acquisition spend for a loftier goal.
The Plan vs Actual tool allows you to quickly create and track targets for all of the drivers mentioned above giving you a deeper understanding of what's happening, why it's happening, and where to fix or capitalize upon. Gone are the days of pulling exports, plugging into a spreadsheet, and hoping the formulas are right just to understand how each day is performing toward your monthly goal!
