When determining just how well your website (or online business) is doing, business revenue and profit come into question. Often, business owners use these terms interchangeably – and while they both play a role in calculating the value of your website - they are not the same thing at all. Understanding the difference between business revenue vs profit is important when you check website worth and need to answer questions (or investigate success for your own personal information) about how much websites earn in your portfolio. Whether you have one website or several, knowing the value of each is fairly important.
What is the difference between business revenue and profit? Business revenue is the total amount of money that your business generates through sales, whereas profit is the what is left once all the business expenses have been deducted from the total amount of money acquired through sales. The difference could be thousands, even millions of pounds!
It is quite a rewarding thing, watching a website grow from nothing into a trusted and respected online authority. And that is the dream for most website owners. It takes work and money to get right though. When asked what your online business is worth, you might be tempted to tout sales figures before deductions. Those would be the revenue figures. The amount of money that you have after you have paid all the business expenses is the profit. It is a simple concept that often gets complicated purely from a lack of understanding. Read on to learn more about how to check your website’s worth and how to boost both revenue and profits naturally.
What is Revenue | How to Generate Revenue Via Your Website
Revenue is something that all website owners and marketers place an exceptional amount of focus on. Revenue is the total amount of money a website makes once it is monetized. This does not take into account any of the expenses that are accrued along the way. Keep in mind that a website has registration and hosting costs, advertising costs, maintenance costs, stock acquisition costs, delivery costs and so much more. What does it cost to keep your online store’s “lights” on?
When you check website worth, make sure that you are not dazzled by the revenue amount. What it cost for the website to generate that revenue is also of importance. Websites typically generate revenue in the following ways online:
- Sale of products via an eCommerce store,
- Affiliate marketing (earn a commission),
- Pay Per Click advertising (PPC) with Google AdSense,
- Content marketing (drives customers to product pages & stores),
- Subscriptions and memberships,
- Drop shipping,
- Featuring sponsored content.
These are just some of the ways in which websites can generate revenue. If you are looking into ways to generate website revenue, you can look into any of the abovementioned options.
What is Profit? | How to Calculate Profit
Calculating the profit that your website makes is a fairly simple endeavour. All you need to do is tally up the total amount of money that your sales generate. Then tally up the cost of the goods you sold, staff wages, website running costs, storage costs, delivery costs and any other expenses that your business is faced with – deduct this total from your total sales amount. The amount that you end up with is your website’s overall profit.
Determining the worth of a website is slightly different to determining the worth of a brick and mortar store. A reliable formula for working out the value of your website is as follows:
Total amount of revenue earned + value of page views and all unique visitors to the website+ value of inbound links + total value of your domain name + value of all website content + total sales generated through the website – all website expenses (stock, marketing, staff, delivery, and other operating expenses) = total value of your website.
How to Increase My Websites Worth
Of course, the number one way to increase your website’s worth is to drive traffic to it. The more traffic you have, the more valuable investors will deem your website (of course your traffic should match up to resulting sales). For your website to get more traffic, you have to work hard at building up your website, not just in terms of product sales, but by incorporating techniques to draw consumers to product pages and attain sales as a result. Below are a few ways in which you can increase your website’s worth exponentially:
Diversify your website’s traffic sources.
Where are your website’s visitors coming from? This is usually something that website owners, who aim to sell their website in the future, focus on. Investors view websites with multiple traffic sources more favourably. If you only receive traffic to your website from one source, think about diversifying to step things up a bit and potentially even make more sales. The best places to drive traffic to your website from include:
- Search engines such as Google,
- Social media platforms such as Facebook, Twitter, Instagram, Pinterest, YouTube, and LinkedIn,
- PPC (Pay Per Click) adverts such as Google AdSense or Facebook Advertising,
- Niche industry forums,
- Email marketing.
When high value or high-quality websites link back to your content, it is an endorsement that ups the value of your website. Create content that industry experts want to link to or make mention of. The more backlinks you have, the more reliable your website is seen as a source of valuable information.
Targeted content marketing.
Creating credible content is one of the biggest tasks that website owners and digital marketers are faced with. The more up to date and truly valuable content you have on your website, the more valuable your website will be. It is not good enough to simply create content that is industry related. You need content that converts. Plan content around what your target audience is looking for and ensure that it is helpful. Content should be posted on a continuous basis – you can draw up a schedule for this. A customer who finds exactly the information that they are looking for will most likely complete the purchase on your website while they are there.
Industry experts say that the best way to increase the overall value of your website (or how investors attach value to it) is to focus on the following areas:
- Increase the traffic to your website.
- Increase your Google page rank and page authority ratings.
- Increase your AdSense income. Most website’s value is considered to be around five times the revenue that the AdSense account generates (this is not a hard and fast rule at all as some websites do not even make use of AdSense).
These are just a few ways that you can increase your website’s value. You could always try things like increasing the cost of your products, but that might just drive customers away. Ultimately this will result in a decline in sales and a subsequent drop in your website’s value.
What Is More Important? Website Revenue or Profit?
It is tempting to place more importance on a website’s overall revenue, instead of taking the bigger picture into account. The simple fact of the matter is that your online business needs to prosper and grow and it cannot do that if the profit margins are too small. Revenue is not a true reflection of the value of a company. For example, if you buy a pen for £100 and sell it for £110, your profit is £10. If that was the sum total of business you did for the week and based your success on your revenue amount, when your profit is only £10, you would be placing value on something that does not really exist. Profit (which in this case is £10) is money in the bank – and that is the only value that matters at the end of the day (when trying to determine value that is).
When it comes to business revenue vs. profit, it’s safe to say that profit should be your focus. When trying to check website worth, remember that revenue plays a role, but is not the complete picture. To attach real value to your website, look at your profit margins. How much money are you actually making at the end of the day? There are various things that you can do to increase the value of your website while decreasing operating costs. To see your website climb in value and online visibility, you can start researching and carrying out various SEO strategies yourself. Alternatively, you can hire a team of SEO experts to boost your website’s visibility, sales, and ongoing support. The value of your website lies in your hands – how you take action is up to you.