A colleague opened a website last month and expected orders to pour in. Three months later, the site is live, but the orders never came. He calls and asks: ‘Is this how the internet works?’ This story is repeating itself across small businesses right now. After the 2001 economic crisis, many small companies are looking for new income streams. The internet looks like an answer. But a website without a business plan quickly becomes an expensive display window with no customers.
Building a revenue model is not complicated. You need three numbers: how many people visit your site, how many of them place an order, and how much each order is worth on average. Multiply these three numbers and you get your estimated monthly revenue. Say a thousand visitors come each month and two percent of them place an order — that is twenty orders. If each order averages fifty million lira, your monthly revenue is one billion lira. Simple enough. But this is exactly where most businesses go wrong: they run the calculation without knowing what these three numbers actually are in practice.
The first number, visitor count or ‘traffic,’ does not arrive on its own. You need to register with search engines, arrange links from other sites, and print your web address on your newspaper ads and business cards. In a period when dial-up connections are still common, your site must also load quickly. Heavy pages drive away visitors on slow connections before they even see your products. Setting a traffic target means planning how you will actually generate that traffic. Otherwise the figure ‘a thousand visitors per month’ is just a wish written on paper.
The second number, the conversion rate (the share of visitors who become buyers), is where most expectations meet reality. Two percent is considered a reasonable rate. That means a hundred visitors arrive and two place an order. The other ninety-eight browse and leave. This is normal. But if you do not know this going in, twenty orders from a thousand visitors will feel like a failure instead of a baseline. To improve your conversion rate, your site must be easy to understand, prices must be clearly visible, and the payment process must be straightforward. Bank transfer is still the most common payment method; state it plainly so customers know what to do.
The third number, average order size, depends entirely on what you sell. A site selling books and a site selling industrial supplies can have identical traffic figures but very different revenues. One practical way to raise average order size is to suggest related products: a simple line saying ‘customers who bought this also bought…’ can meaningfully increase the value of each transaction. A small addition to your site layout changes the revenue model in a real way.
Calculating your break-even point (the sales volume at which costs and revenue are equal) works like this: add up your monthly website costs — domain registration, hosting fees, any software maintenance, and the time you spend updating content. Divide that total by the average profit per order. The result tells you the minimum number of orders you need each month. Then use your conversion rate to work out how many visitors you need to generate that many orders. That is the complete calculation. No special software, no complex spreadsheet. A sheet of paper and a pen are enough.
Now ask yourself honestly: can you estimate these three numbers with any confidence? If your traffic source is unclear, if you have never measured your conversion rate, and if your order size estimate is based on hope rather than observation, then what you have is not a revenue model but a revenue wish. Before opening an internet channel, write down your answers to these three questions. If the answers do not hold up, start with a small test: a limited product range, low initial cost, real numbers from real transactions, and then grow from there. After a difficult economic period, cash is more valuable than ever. Spending without measuring is not ambition — it is risk.
This article was originally written in Turkish by Gökhan MERCANOĞLU on April 1, 2002 and has been automatically translated into English and other languages using machine translation.