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Chrome, Edge, Firefox, Opera, or Safari: Which Browser Is Best?You probably take your web browser for granted, but you have real options: Performance, feature sets, and privacy tools vary wildly among internet-surfing apps.The browser battle has been raging almost as long as the internet has existed. But with new competitors in the fray and longtime entries revving up new technologies, the stakes have never been higher.In the late nineties and early aughts, it was Microsoft’s Internet Explorer versus Netscape Navigator. Fast forward 20 years, and IE’s proprietary technologies for enabling interactive, application-like websites have given way to W3C standards-based features for delivering the online experience.Meanwhile, the browser landscape has a new dominant force: Google, the search and web advertising behemoth that delivers the most content of any source on the internet (according to comScore), also claims nearly 70 percent of the browser market with Chrome (based on both NetMarketShare and StatCounter numbers). That’s for desktop use; if you add in mobile, Chrome is still king at over 60 percent.Chrome may be leading in usage (except, of course, on Apple devices), but it’s not ahead by every measure or by number of capabilities. Firefox, Edge, Safari, and Opera all have features not found in Google's browser. That’s not to say that Chrome isn't an excellent piece of software, but you should know there are worthy alternatives. This article examines the top five browsers in the U.S. in order of popularity. Unfortunately, that rules out Brave and Vivaldi—both first-class and unique choices—but you can read about them in my article covering the best alternative web browsers.So what’s important in a browser these days? Speed and compatibility remain the top requirements. But in this day of the ever-present smartphone, the linkage between your desktop browser and your phone has become increasingly important. Indeed, some browsers now let you send a webpage from one device to another, and all let you sync bookmarks between them.A rough measure of standards compatibility is the HTML5test website, which scores browsers’ compatibility with the moving target of web standards. The maximum possible score is 555, with points awarded for each standard supported. The new Chromium-based Microsoft Edge has taken over the lead from Chrome on this test with a score of 535 compared with Chrome's 528. The difference? Support for Dolby Digital and screenshots. Opera and other Chromium-based browsers hew closely to Chrome, while Firefox gets 491, and Safari 471. Just a few years ago, a score in the 300s was considered excellent, and Internet Explorer (still used by millions) is stuck at 312.For speed testing, I ran each browser through the WebXPRT 3 benchmark, which tests the speed of internet applications such as photo enhancement, stock option pricing, encryption, and text manipulation. I tested on my Asus Z240IC 4K touch-screen all-in-one PC with a 2.8GHz Core i7-6700T processor running Windows 10. For Safari I used a 3.1GHz Core i7-4770S iMac (I realize the hardware is not completely comparable, but it’s sufficient for a rough comparison). Take benchmark results with a grain of salt, however, since purely synthetic tests don’t measure every component of actual browsing conditions.In terms of disk space usage, on my Windows test system (after a cache clear) Edge took 319MB, Firefox 187MB, Opera 191MB, and Chrome 437MB. Since Chrome and Opera don’t report their storage use in the Settings / Apps & Features page, I used the size of their folders. I noticed that Chrome installs itself in the Programs (x86) folder, which is normally only for 32-bit apps; nevertheless, typing chrome://version/ in the address bar showed I was testing with the 64-bit version.Privacy, customization, convenience features, tab and start-page tools, and mobile integration have replaced speed and standards support as today's primary differentiators. All browsers now can remember passwords for you and sync them (in encrypted form) as well as your browsing history and bookmarks between desktops or laptops and mobile devices. Chrome by default signs you into Google services like Gmail and YouTube, which some consider presumptuous.Privacy mavens like to use VPNs (virtual private networks) to hide browsing activities from ISPs and any other intervening entities between you and the site you’re visiting. Opera is the only browser that includes a built-in VPN. Firefox also has a good privacy story, with a private mode that not only discards a session’s history and cookies but also hides your activities from third-party tracking sites during the private session. In addition, Firefox and Safari include fingerprint protection—preventing trackers from identifying you based on your hardware and software setup. Firefox also has built-in Content Blocking to fend off known trackers and cryptocurrency-mining ploys.Useful browsing tools can play a part in your decision, too. One, Reading Mode, strips webpages of clutter—mostly ads, videos, and content pitches—so you can focus on text. Another is the Share Button. With this era’s obsession with social media, it’s nearly an essential convenience.Opera is alone among the popular web browsers included here with a built-in cryptocurrency wallet, though the aforementioned Brave browser also includes one. Opera is also notable for its Speed Dial, which consists of pinned tiles on your home screen (though the other browsers have similar functionality) and a toolbar for accessing frequently needed services such as WhatsApp.Microsoft Edge offers voice-reading of webpages with remarkably realistic speech, a helpfully customizable homepage, detailed privacy settings, and (soon) a Collections feature for web research. Firefox lets you instantly save a page to Pocket or open a new Container in case you want to be logged into the same site with two different identities. Screenshot tools are making their way into browsers, with Edge, Firefox, and Opera for starters.If you feel strongly about one browser or another, as is likely the case if you’re reading this, please feel free to let us know about it in our social channels.Google ChromeMost web users need no introduction to the search behemoth's browser, Google Chrome. It’s attractively designed and quick at loading pages. At this point most every website’s code targets it, so compatibility is usually not an issue. That said, every browser is occasionally flummoxed by a particular site or two, and sometimes a browser update breaks even well-crafted sites.As mentioned earlier, Chrome gets top marks on the HTML5Test website. It also does reasonably well on the WebXPRT 3 benchmark, which tests the speed of internet applications like photo enhancement, stock option pricing, encryption, and text manipulation. It uses more RAM than other Windows browsers, but some of that is for speeding up operation by preloading content. It also creates far more program processes than the others, to ensure stability by isolating not only tabs, but also plug-ins and frames from other domains on the page.Google is constantly working on security and feature enhancements, but as with all software, bugs happen, so make sure you stay updated. Another benefit of using Chrome is that you won’t have to dismiss those messages urging you to switch to Chrome every time you visit Google News, Gmail, YouTube, and so on.Chrome can no longer boast any unique browsing features: There’s no built-in VPN, no fancy tab organization tools, no cryptocurrency locker, no Reading Mode, no share button, and no screenshot tool. That’s just fine for most web consumers, apparently. The Android version of Chrome has been getting more love from Google lately, with tab groups and dark mode.Google has lately made two seemingly contradictory announcements, both concerning privacy. In May, it announced that it would be removing the API function that allowed ad-blocker software to fully block ads. Then in August it announced a set of open standards intended to enhance privacy on the web, called Privacy Sandbox. It’s just in the planning stage at present, and it tries to cater to both ad targeting and user privacy.There are loads of features in Chrome that are only available to web geeks who can tinker in the about:flags settings. Examples include the recently announced password leak detection, a distilled page view, and forced dark mode for websites.The Chrome mobile browser is very capable, and offers syncing of bookmarks, passwords, and settings. Like the desktop browser, it includes voice input when using Google search. The mobile browser also suggests content that may be of interest to you based on your browsing.ADVERTISEMENTMozilla FirefoxFirefox, an open source project from the nonprofit Mozilla Foundation, has long been a PCMag favorite. The browser has pioneered many web capabilities and the organization that develops it has been a strong advocate for online privacy. It’s also notable for its wealth of available extensions. Pocket, the synchronizable site-saving service, is built in, and the unique Multi-Account Containers extension lets you sequester multiple logins to the same site on different tabs—without this, you'd have to open a private browsing window or another browser to sign out of all your web accounts and start a fresh session.Mozilla’s browser is in the vanguard of supporting new HTML5 and CSS capabilities, and the company is working on open-source AR and speech synthesis standards. The organization now offers a full password management service called Lockwise, which can generate complex passwords, sync them between devices, and secure everything under a strong master password.The mobile Firefox apps offer excellent interfaces, and you can send a webpage tab from any device to any others that are logged into your syncing account. That’s right: You can be reading a webpage on your desktop PC, and have it instantly open on your iPhone or vice versa—a slick and useful feature.If that’s not enough, Firefox has a Pocket button in the address bar, letting you save a page for later viewing anywhere with one click. The Reader View button de-clutters a webpage loaded with ads, promos, and videos, so you can peruse it with no distractions. Finally, the browser is ultra-customizable, letting you select and arrange buttons on the toolbar to taste.ADVERTISEMENTApple SafariThe default Mac and iOS browser is a strong choice, though its interface has some nonstandard elements on both desktop and mobile. Safari was a forerunner in a few areas of browser capability: For example, it was the first with a Reading mode, which cleared unnecessary clutter like ads and video from web articles you want to read. That feature debuted in 2010 and has made its way into all other browsers except for Chrome.More recently, with macOS Catalina and iOS 13, Safari adds fingerprinting protection—preventing web trackers from identifying you by your system specs. The new version also gets Apple Pay support and a Sign in with Apple feature to replace Facebook and Google as web account authorizers.If you use an iPhone and a Mac, Safari integration makes a lot of sense, since Apple’s Handoff feature lets you continue your browsing session between devices.Safari has trailed other browsers on support for emerging HTML5 features, but I haven’t run into or heard of any major site incompatibilities with it. It performed faster than the other browsers here on the WebXPRT 3 benchmark, even though I was using an iMac with a Core i7 CPU a generation earlier than that of my Windows machine.ADVERTISEMENTMicrosoft EdgeThere’s a new Edge in town. The Microsoft developers in charge of Windows’ default web browser got tired of chasing compatibility issues resulting from site developers’ only targeting Chrome for compatibility. So, they decided to switch to using Chrome’s webpage-rendering code, Chromium, in the Edge browser software. That freed them up to add unique features instead of putting out compatibility fires. Notably, Edge now runs on Apple macOS and earlier Windows versions, in addition to Windows 10.The compatibility is certainly now there in spades: For the first time since I’ve been reviewing browsers, another browser edges out Chrome on the HTML5Test measure of supported web standards. See the intro and table above for the actual scores. What pushes Edge over is support for Dolby Digital, ObjectRTC, and the Screen Capture API. In general, however, you won’t run into the kind of site incompatibilities that the previous Edge incarnation occasionally encountered.Amusingly enough, Google still prompts you to download Chrome on its websites, even though there’s no difference in compatibility or performance when using Edge on those. If you’re a Netflix watcher, Edge is the only web browser that lets you view shows in 4K, and also the only Windows browser that supports Dolby Digital audio (Safari supports it, too).But compatibility isn’t the only benefit of the new Edge: As you can see in the table above, it’s also a leader in performance as well as thrifty memory and disk usage.What new features has the Edge team been working on, you ask? The initial focuses have been privacy, the customizable start page, and the intriguing Collections feature for web research. For enterprise customers who still rely on Internet Explorer to run legacy programs (and I still run into these at places like insurance and doctors’ offices), Edge offers an IE Mode, but this won’t be available in standard consumer setups.Another new feature worth highlighting is Immersive Reader mode. Not only does this offer distraction-free web article reading, stripping out ads and nonessential eye candy (or eye poison, more aptly), but It can also read webpage text aloud using lifelike Neural Voices. This is really something to try: It reads with sentence intonation, rather than simply word-by-word, as we’ve come to expect text-to-speech audio.The Collections feature presents a sidebar onto which you can drag webpages and images, write notes, and then share the whole assemblage to Excel or Word. This feature hasn't appeared in the released version, but works well in the beta and Microsoft says it's coming soon.Maybe you don’t want a colorful corporate logo burning itself into your consciousness every time you open your browser? Edge offers four Home page options: Focused, Inspirational, Informational, and Custom. Focused is a blank page with search and buttons for your most-visited sites; Inspirational adds the gorgeous Bing photos that change daily as backgrounds; to all this, Informational adds customized news, weather, sports, and finance cards.The browser offers three preset privacy levels: Basic, Balanced, and Strict. As you move from the first to the last, you increase privacy but possibly disable site features. The private browsing mode, like that in all browsers, doesn’t save any history from a private session.Mobile versions for Android and iOS with syncing smooths moving from desktop to mobile, and I find that password management works more reliably than in most other browsers, though it’s still a good idea to use a separate password management utility such as LastPass.For a more in-depth look, read my hands-on preview of Microsoft’s Edge web browser.ADVERTISEMENTOperaPerennially hovering around the 2 percent usage level, the Opera browser has long been a pioneer in the segment, bringing us innovations as basic as tabs, CSS, and the built-in search box. Some people got scared of Opera when its parent company was bought by a Chinese investment coalition, but the firm is now publicly traded on NASDAQ, so the move was clearly just an investment and not some scheme to send data to Beijing.In fact, Opera can make a bigger privacy claim than any other browser—if you’re a believer in VPNs, since it includes a built-in VPN that works well and quickly. Some consider Opera’s VPN to actually be an encrypted proxy server, but the only real difference between it and a standard VPN is that it only protects and reroutes traffic from Opera itself, rather than from any internet-connected app on the computer or smartphone.Opera uses the Chromium page-rendering engine, so you'll rarely run into site incompatibilities, and performance is fast. Opera also takes up far less drive space and memory than Chrome—hundreds of megabytes less in my testing with 10 media-rich websites loaded.Beyond the VPN, another unique feature in Opera is its built-in ad blocker, which also blocks crypto-mining scripts and trackers. Note that Opera added crypto-mining protection more than a year before Firefox did. (Google is still mulling adding similar protection to Chrome.) Ad blocking also means less data consumed, especially of interest for those using metered connections or mobile plans with data caps.More unique features in Opera include its Speed Dial start and new-tab page, its quick-access sidebar of frequently needed services like WhatsApp, and its cryptocurrency wallet, which supports Bitcoin and Tron.On mobile, Opera Touch is a beautifully designed app that connects (via quick QR scan) to your desktop. My Flow is the result of this connection, letting you send webpages and notes between devices easily.ADVERTISEMENTAlternative Web BrowsersIf you want to go beyond the mainstream for your web browser choice, these options includes ultra-privacy and ultra-customizability. For more, read our appraisals of seven alternative web browsers.

Cheers Quora -After a year of this article being available free to the public, I have turned this answer into a 70-page book that you can purchase to support your favorite Quora guy - http://fail-harder.com/products/e-commerce-financial-model-for-startups?utm_source=Quora%2B-%2BLearning%2Babout%2BForecasting%2BRevenue%2B%26%2BExpenses&utm_medium=Quora%2BAnswer&utm_campaign=Quora%2B-%2BFInancial%2BModeling%2BAnswer. The model has been shared with over 300 different startuppers and has been extremely influential in dozens of e-commerce startups raise their rounds and jump into the startup game.Support Matt producing great quality content by purchasing a copy of the model here: http://fail-harder.com/products/e-commerce-financial-model-for-startups?utm_source=Quora%2B-%2BLearning%2Babout%2BForecasting%2BRevenue%2B%26%2BExpenses&utm_medium=Quora%2BAnswer&utm_campaign=Quora%2B-%2BFInancial%2BModeling%2BAnswerA little feedback on the model from:---------------------------------------------------------------------------------------------Section 1INTRODUCTION---------------------------------------------------------------------------------------------More than almost any other year previously, 2013 will be an exceedingly challenging year for startups, as Fred Wilson discusses in Advice for 2013: Deliver On Your Promises. In such an uncertain funding environment it is critical that startups of all sizes intimately understand their actual performance. This means that startups need to pull together all of their parts into a fully integrated picture that tells the full story of the next 18-months of your startup and adjust for your successive performance. The deep insight enables startups:Flexibility: A clearly defined and well-understood financial hurdle brings everyone together for a shared sacrifice. For example, maybe VPs defer 50% of salary for next 3 months to save a team members job during a tight cash flow period.Alignment: the knowledge of challenging periods in the next year creates a definite enemy to rally the company and team around and unifies the entire team around sinking or swimming togetherAccountability: Communicating clearly defined metrics holds leaders accountable for the performance of the company to the team and to its board.This article illustrates the framework for how to build a fully integrated financial model from the ground up, make monthly adjustments, and utilize it to clearly communicate the three goals above. This article is a refined version of the 400+ Quora Answer: Financial Modeling: Where can web startups learn about financial modeling that accounts for the important metrics and costs? that I wrote last year because this does not exists really anywhere else on the interwebs.---------------------------------------------------------------------------------------------Section 2BACKGROUND & OVERVIEW---------------------------------------------------------------------------------------------This article is going to give you a broad framework for how a fully integrated financial forecasts is built out for an e-commerce Startups producing their own products a la Bonobos or Warby Parker. It was built to clearly illustrate the process for methodically analyzing a startup, crafting a detailed strategic narrative of the 24-mo growth cycle (the qualitative aspect), and quantitatively applying this story in an integrated product.The foundation of the model of this model is rock solid surviving several battles at 500 Startups (company), a couple of AngelList (company) financings, and has been used to raise nearly $11.0 million in venture financing for E-Commerce Startups over the last 24-months. When it comes to the amount of analysis and strategic narrative imbued in this process, the most important thing about this model is that it’s designed to transition into an operational model that I have used to run three different e-commerce startups.The company these financial forecasts are based on is my last Men’s Outdoor brand, VÆL Project. After launching the footwear line, we expanded the product offering by building a full bag division of super-durable leather and weatherproof waxed canvas bags and accessories:There are three main categories in this company:The company has completed product development at a factory in ChinaThe first month of the model is the first selling month - meaning that the first purchase order (PO) was placed with the Chinese factory 90-days prior and will be delivered in Month-0 for selling in Month-1We are going to systematically break down every step of this process broken out over several posts to keep the explanation focused:---------------------------------------------------------------------------------------------Section 3SALES BUILD---------------------------------------------------------------------------------------------Support Matt producing great quality content by purchasing a copy of the model here: http://fail-harder.com/products/e-commerce-financial-model-for-startups?utm_source=Quora%2B-%2BLearning%2Babout%2BForecasting%2BRevenue%2B%26%2BExpenses&utm_medium=Quora%2BAnswer&utm_campaign=Quora%2B-%2BFInancial%2BModeling%2BAnswerThe process begins by putting the foundational elements together in the Sales Build sheet. The Sales Build methodically breaks down store visitors based on the unique factors of each marketing channel driving them to your store. Each channel has its own unique behavior in terms of the number of visitors it creates, inbound traffic from click-throughs, engagement rate, and conversion rate. Although each channel's behavior can differ dramatically, over time you will notice that a given channel’s metrics average to fairly reliable numbers.The foundational unit of this model is the visitor – everything is based on her behavior in each of the channels. The logic is that a visitor represents an opportunity for converting a visitor into a customer during that session. The model treats returning visitors the same as new visitors for the sake of simplicity in the forecasting model. Additionally, the model automatically makes some assumptions that visitor behavior from the sales build will be responsible for the segmenting and metric performance increases in the “Email Build” – so this all works together. At the core though, we are always talking about the visitor on site.Steps for the Traffic Build---------------------------------------------------------------------------------------------Section 3aTraffic Build---------------------------------------------------------------------------------------------Revenue for an online retailer is a function of the number of visitors coming to your site and the rate of conversion of those visitors into paying customers. The relationships that retailers cultivate with consumers are extremely interesting in the consumption based culture of the US – the retailer sells highly desirable products that ignite the pleasure centers of the brain (i.e. retail therapy as my sister commonly refers to Fridays releases dopamine to make people feel good) when a purchase takes place. Retailers are focused on using the dopamine release to cultivate deep relationships with customers that can insulate the retailer from competition for huge chunks of time and annual spending dollars.Organic traffic refers to traffic that comes to a website via unpaid links from other sites such as search engines, directories, and third party websites. Organic traffic tends to build over time in direct correlation to the amount of topical content on the website and its number other sites that link to yours (backlinks) based on how they are scored for authority by search algorithms (authority). For purposes of this model, we lump search, SEO, SEM, and Direct traffic into organic because it essentially means that the traffic came by virtue of the user conducting an action (i.e. typing in the domain – direct – or searching for the brand – SEO).The term "organic traffic" is often used to refer to all traffic that is not directly paid for (as opposed to PPC, CPM, CPA, or other paid models). A website will tend to receive organic traffic as a natural result of its quality as viewed by search engines and regular Internet users. It is considered the most valuable form otraffic not only because it is free, but also because visitors who arrive naturally are a self-selecting group, more likely to have a real interest in the website's subject.Because organic traffic is supposed to be natural, it generally cannot be built extremely quickly. While it is certainly possible to obtain a large number of backlinks for a website in a short amount of time, this is not necessarily advisable, as it may appear to the search engines that the website is attempting to artificially inflate its rankings. This perception on the part of the search engines, even if inaccurate, will often trigger rankings penalties that can be severe and long lasting.Organic traffic is:FreeNaturalHigh-QualityReliableSlow BuildingSustainableAs a store operates over a period of time, gains customers, and promotes itself - the number of visitors will increase over time. Organic traffic relates to visitors that:Directly navigated to your online store by typing the address directly into their browserSearch engine traffic for direct brand keywords (i.e. an organic traffic would be “Fail Harder's E-Commerce Financial Model for Startups ” for this document where “E-Commerce Financial Model” would be different because the user is not explicitly searching for this document)Directories are like the phonebook of days of yore that provide a quick overview of your site and allow the user to make an informed decision on navigating to your siteOrganic traffic is a fundamental driver that encapsulates all of the growth drivers associated with the store – since it covers such a wide breadth of underlying drivers a simple monthly growth rate is a reliable way to forecast visitors from this channel.1. Organic Growth RateThis is % change from one month to the next that you are forecasting to grow based upon your company organically growing from people randomly searching for something related to your product on Google (company) (this is why SEO is important), users talking about your company with their friends, or stumbling across previous marketing campaigns. This is a variable figure that you can toggle in this model based on what you see fit.2. Organic VisitorsThe number of monthly organic visitors to your site is stored in Google Analytics (product) – a monthly export from Google Analytics (product) will give you this number. You need to start somewhere and this row calculates the compounded impacts of the previous month’s Unique visitors * (1 + Organic Growth Rate). In the example template, the baseline figure is 2,000 unique visitors (a figure that I pulled from one of my old company’s VÆL Project - a men’s footwear line - analytics). Therefore in Mo-2, we had 2,000 unique visitors from last month and we grew 5% organically - so 2,000 * (1 + 5%) = 2,100 forecasted unique visitors.---------------------------------------------------------------------------------------------Section 3bInbound Marketing & Promotion---------------------------------------------------------------------------------------------Businesses need to market their products in order to let potential customers know that they exist and how their product/service solves a problem or a customer’s want/need. In online retail, the most common way to “get the word out” and market/promote your store is to contact blogs & publications that your target audience reads. The goal is to get the blog to write about your product/service retailed by your store in front of the correct target audience that will want to purchase the products. There are two examples that demonstrate how this works:TechCrunch Covering a Startup’s Product Launch: TechCrunch has a highly educated, tech-focused audience that makes it the premiere platform to talk about a new tech startup's launch. TechCrunch writes an article about the launch to inform their readers and the Startup gets the word out about their company driving a ton of signups.Tumblr (website) Style Bloggers Showcasing Looks: In terms of fashion, one of the largest promotional channels for retailers is the Tumblr (website). Due to the incredible network effects of the platform, a small independent Tumblr (website) blogger can build an audience of tens of thousands of followers in a matter of months. In this case, a retailer would contact a cool blogger with a large audience to add their products to a couple of images & write a story about the products.All of these different blogs & publications will send different amounts of visitors to your site following a promotional article. The industry heavyweight, TechCrunch, prided itself in the early days with being able to crash startups applications with the volume of traffic a single article could generate. Every month there will be new blogs promoting different products and sending traffic to your store – after a couple of months, you will see that there are 3 generic profiles that construct the traffic being driven to your site. Meaning that all of different blogs with widely disparate numbers of readers, followers, subscribers, and fans will break down into three general segments.Note: Don’t waste your time in getting super analytical about this metric - after 10 marketing pieces are posted about your site take a look at when the marketing piece was posted & annotate your Google Analytics (product) with the event. You will notice a general trend in # of visitors to your site.For the purposes of this financial model, I averaged three traffic categories (Premium, Moderate, Niche) from four fashion brands for which I had access to their Google Analytics (product) data. The three categories that promotional traffic breaks down into:PremiumThese are the marketing pieces that have the highest viewership bases of the source breakdown. They are comprised of highly engaged readers who admire / respect the content creator.ModerateThis channel is characterized by second tier blogs and publications that are not as popular as premium and have a more superficial relationship with the reader. For example, VentureBeat would be a moderate-type blog relative to TechCrunch – the writing is good, it has decent distribution, and talks about the same type of issues as TechCrunch but has not engendered the same scale loyalty & engagement. Blogs and publications that are Moderate would:Send less referral traffic to for any given post or articlePosts have a lower viral coefficient of k (see: Quora, Wikipedia, and ForEntrepreneurs)The weaker the bond between reader & publication translates down into conversion rates on this referral sourceNicheNiche channels are probably the most fun, engaging, and valuable channels to work on – although the audience maybe small, very high signal to noise ratio means that you can learn a ton about the customer in relatively short order. A niche channel refers to an audience that is:Highly valuable customers that will promote your product & are open and amenable to changes / delays (compared to Walmart-style, price-focused customers that complain, constantly about slight deviations in the retail experience)FailHarder on Quora (product) is a Niche ChannelThe model breaks out these channels into two different sections:Monthly Channel Posts: As you revise your marketing strategy create a list of blogs, contacts, and estimated reach of each prospective blogger. Lay out each of those prospects based the month you think this is going to drop.Traffic by Source: This is the estimate number of visitors that you can reasonably expect to come to the site following a marketing post over the course of a month. You’ll notice how the number increases by the “Organic Growth Rate” based on the logic that people will hear about you from other channels or friends and be more inclined to check out the site. This number compounds over a couple of months a people who saw article 1 will end up clicking through on article 3 in month 3 - you don’t know when its exactly going to happen so it’s just an average.Below is the traffic build that illustrates how to pull this all together in the model:Retailers constantly need to be working with blogs and promotional channels to get the word out that---------------------------------------------------------------------------------------------Section 3cConversion Rates---------------------------------------------------------------------------------------------A conversion is a customer that “purchases” from the site or, in other words, “converts” from a visitor into a customer. We want to break out the conversions by source because each source has unique behavior and converts at different rates.DefinitionThe conversion rate is a metric that measures the number of positive outcomes for a specific event out of a total possible number of occurrences. For examples, last week Fail-Harder.com received 88 visitors & 4 orders – here is the conversion rate:The conversion rates for 4 orders out of a total possible of 88 visitors (it’s not possible to generate a sales when the visitor does not go to the site) is 4.54%. IBM’s Coremetrics (product) analytics suite is a tracking tool for major sites to track user behavior online – they release a report covering tens of millions of US consumers on e-commerce metrics for holiday buying:OrganicOrganic visitors are people casually have become aware of your site and have landed on your page through search. As with any store, there are a certain percentage of people who will arrive at your store, discover a product, and purchase it without any on-going effort by you. In general, your organic conversion rate (the number of visitors that place an order and convert into paying customers) will hover around 0.50% - 2.0% for a typical e-commerce startup.To see why this happens, let’s take an a person who just learned about your site from a friend, Googled your brand, and arrived on your site is simply discovering and learning about your brand and products. In our case, let’s say they Googled for “Canvas & leather, shoulder duffel with 15” laptop sleeve”. Sounds like a perfect fit for our, VÆL Shoulder Duffel:Just by virtue of the product details optimized for Google – this bag will “sell” a certain percentage of visitors simply by them seeing it. This traffic was organically developed (i.e. without direct investments by you to generate this demand) and converts at typical rate of 0.50% - 2.0%.Marketing & PromotionalMarketing & Promotional traffic is driven to your site via direct links on another site. This happens when a fashion blogger writes a review or creates a post rocking your gear. Here is a sample post of a dope LOOKBOOK.nu. (a hip fashion social network) of a guy rocking the VÆL Rucksack:The differentiating factors of this segment are that another party creating content online and linking back to your product to generate inbound traffic. This traffic is landing on your site ‘primed’ on the value of your product / brand based on the explicit or implied endorsement of the referrer talking about you and linking to you. If you are cool enough to be written about on the referrer’s blog then you are cool enough for the reader to pay attention to evaluating.Thus traffic from these types of sources generally stratifies into three different segments Premium, Moderate, and Niche (as explained above). Likewise, their conversion rates reflect the qualitative and quantitative aspects of the referral source. As you work with moreEmailEmail is hands down the most valuable marketing channel that you have because it’s a direct workflow interjection into your customers daily lives – if you deliver an engaging communication experience, your brand and products will proactively be in front of your customer. The brilliance of email is that you have a blank canvas to dynamically craft personalized marketing messages to the exact person that you should speak to at the exact time.For sites with hyper-engaged customers like customers like Huckberry & Gilt Groupe (in the ’08 – early ’10 period), the conversion rate can reach as high as 15%. The point of breaking this segment out is that it behaves substantively different from other channels based on the direct line of communication & customizable medium.SocialIn March 2010, when Facebook launched Fan pages, they were going to revolutionize e-commerce by integrating the shopping experience directly into the social experience of Facebook. After a year or so of lackluster performance – most major retailers like GAP and Macy’s pulled their Facebook stores because people just weren’t buying.You need to think of your social channel as a conversation – you get your brand in the information stream of your customers and building mindshare to set yourself up for a sale in the future (i.e. open the email or be the site they think of when they get their paycheck). However on any given day, your followers will click through a link and purchase from your site. This traffic converts into orders at a pretty poor rate anywhere from (0.15% - 0.65% or about 1 sale on 1,000 visitors).Here are some stats from the IBM Coremetrics Holiday report:PaidGoogle has built a massive business on paid search because it delivers results. Your most valuable customers will come from organic conversions, but it is possible to drive revenue growth through paid search. As with most things, there is inordinate value in understanding this channel as a company. Keeping a small budget for you and your team to play with, test out strategies and learn how to drive revenue is a powerful learning experience that will benefit your company in the long run.Paid search lands visitors in a different frame of mind on your store and, as such, they behave differently from a conversion perspective. For visitors who have clicked on “Canvas & leather, shoulder duffel with 15” laptop sleeve” as a search term is evaluating if they can trust you as a business and learning about your brand. Contrast this with people who searched for VÆL Project, they will arrive on your site with previous knowledge of your brand and are probably more likely to make a purchase.This rate will increase over time as you get better at communicating your brand message, refining your keywords, and building your company.One of the most important things to know about building a financial model - is that you don't want to look like an ass - so saying that you have a 15% conversion rate is cause for someone to completely discredit your model. I ran into this problem when I was at a Bulge iBank training for new bankers - basically serving as the entrepreneur for the youngsters to argue against. In the Saturday session, I used Salesforce as a comp & screwed up the EV calculation because of the shares outstanding calculation from that super complex convertible note that they brilliantly issued in Jan '10. Basically, the rest of the session the banker (smartly and to my dismay/irritation) a comment about the mistake to drastically reduce any clout in the argument that I was making.So the most important thing is to present yourself and your calculations as reasonable, logical, and prudent. To do that, you are going to need some comparable statistics to demonstrate that you know what you are talking about & that your build is sound.We pull all these different categories down into a special conversion rate section. For each of the sections, there are two rows to help tweak the performance of your store:OptimizationAs you start running your store, you will notice aspects of your site that could be better, creating different landing pages, and simply get better at online retail. This optimization toggle is a variable that accounts for this by steadily incrementing your performance over time. For example, your organic conversion rate will steadily increase over time as the market gains more experience with your site, more customer reviews of products offering social proof, and you widen your customer base. This is why we increase the conversion rate by 5% every month – that is 5% of the existing conversion rate, not 5% increase.However, you will notice that there are certain segments that increased at intervals like Inbound Marketing & Promotion, Email Conversions, and Social. This accounts for site elements that require investments like landing pages (items that need to be designed, coded, and implemented). There are a couple of examples here to show you how to do it & you should customize them based on how they fit in your narrative.Conversion RateThe first value is a blue variable or a fixed variable that has been added based on the low end of what I have seen for each of these channels. This is a calculated row based on the optimization rates from above.Weighted Average Conversion RateKeeping track of each channel individually is super complicated and makes the model prone to errors as you use it while running your business. This metric:Sums the orders by channels defined by their respective conversion rates (the weighted part)Divides the orders by total possible selling outcomes or total visitors (each visitor is a shot on goal or an opportunity to sell).---------------------------------------------------------------------------------------------Section 3dSales Mix & Pricing---------------------------------------------------------------------------------------------Sales Mix is the weighting average order value for your company's sales. A simple average is misleading because smaller $ value items will compromise a higher proportion of sales #s than the larger ticket items (most likely).Shipping AnalysisPurchases by SegmentLeading up to this section, we forecasted two important variables:Segment TrafficIn the first section of the Sales Build, we forecasted the estimated traffic for each given channel. This traffic represents a potential sale so it’s our total population of people that we could realistically generate sales from.Segment Conversion RateIn the Conversion Rate section, we broke out the conversion rate for each channel based on the behavioral factors that make each channel unique.Revenue BuildFor the purchases by segment, we multiple the traffic by conversion rate for each channel to arrive at the orders by channel.---------------------------------------------------------------------------------------------Section 3eLong Term Value per Customer---------------------------------------------------------------------------------------------*** A more advanced version of this article and Excel Version of the model can be purchased at: http://f4il.co/RgOA9s ***Some of you have noted in messages that there is this huge portion of the Sales Build that I omitted from explaining in the Long Term Value per Customer. It is a contentious issue that is very difficult to quantify, but I will explain it in more detail here.LTV LogicBuilding brands is an intensely emotional process of connecting with your customers and creating an ongoing dialogue that makes your customers feel like you are really friends IRL.Customers want to feel like they are close to small brands almost to the point where they can say "Oh this shirt? It's my buddy's brand.." For small brands, the first customers are going to be ideologically similar to the founders and the branding/external communication will support this. In fact, some people who I would qualify as good friends began as customers of one of my old brands, VÆL Project.As such, there are a certain portion of customers that will love the product so much that they will look to purchase additional products from you to fill out their collections / purchase complementary goods (Dopp Kit with Overnight or Category C when the original purchase was Category A).Long Term Revenue is reflective of two main segments - Secondary / Complimentary purchases & Replacement Purchases.Secondary Purchases are purchases based on super satisfied customers & those strongly connected to the brand. Most likely they are purchasing downstream so if they purchased the big bag (Cat. A) then they would purchase a Dopp Kit for the overnight bag. Most likely, this purchase will take place after the initial purchase because they will have the opportunity to feel & use the product & have a time to experience it (like a trip).So to calculate the Secondary Purchases, we need:Repurchase RateThe % of customers in each cohort that will purchase another item. I set this rate at 10% because that is a good baseline forecast. For apparel companies this is way different, but for a leather goods company like the one I built in the model - it's kind of all that we have.Secondary Purchase ValueThis is a modifier from the Average Order Value that will be used to calculate LTV rev. Above I mentioned that customers will most likely be purchasing complementary goods, so category C is a safe bet as to what they will be buying next. OR if they are a Category B who purchased the backpack, they most likely will purchase the messenger for different occasions. Either way a forecasted secondary purchase value of $220 (or 75% of Average Order Value (AOV) for the monthly of the cohort) is pretty safe assumption.Secondary Purchase TimeframeThe timeline when the vast majority of purchases will be taking place. This is an arbitrary # based on experience, but I think that 6-months is going to cover the vast majority of the cases. Since we can't really forecast a distribution - we should assume that the secondary purchases are evenly distributed throughout this 6-month window. For example:Now we know that the timeframe is 6-months. In this simple example, the incremental monthly from Cohort 1 is $220/mo for periods (Mo-2 through Mo-7).Now that we have the 2ndary purchases calculated, there is going to be a lifetime customer. This is essentially the same calculation as a secondary purchase just the logic is different.Replacement Timeframe:The lifecycle of the product when the customer will most likely be in the market for a replacement. I arbitrarily set this as 18-months so that it fits on my 24-month forecast. But this is the time when you start to see people returning to the site to pick up the same good or more.Replacement %This is the # of customers that were stoked on the product that want to get another. This # is going to be different than the secondary purchase rate so it has it's own toggle.---------------------------------------------------------------------------------------------Section 3fSales Build Overview------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Section 4Email Build---------------------------------------------------------------------------------------------Support Matt producing great quality content by purchasing a copy of the model here: http://fail-harder.com/products/e-commerce-financial-model-for-startups?utm_source=Quora%2B-%2BLearning%2Babout%2BForecasting%2BRevenue%2B%26%2BExpenses&utm_medium=Quora%2BAnswer&utm_campaign=Quora%2B-%2BFInancial%2BModeling%2BAnswerOne of the most important things to do as a young startup is to communicate & engage with your consumer. At least today, the primary & most valuable way of doing this is through email. The goal is to build a direct & engaging dialogue between you and your fans in a private format with the visual and content freedom (READ branding) that most effectively communicates your story & builds the relationship. This section is where you work to systemically build out how this list will generate revenue for your startup.Newsletter Reach is the total # of people that are subscribed to your email list. If you previously worked at a brand, have a personal blog/email list, or had a bad ass pre-launch strategy that got a ton of emails (a la hipster.com) - 4,500 is a decent # to start. As we go down this build there will be additions & subtractions to this # reflected in the changes shown for the following month.Campaigns are the # of emails that you are sending to each member of the newsletter. This number grows fairly slowly (1 → 1.3 → 1.5) due to the fact that you are going to invest more time, cash, and energy on capitalizing on this opportunity as it becomes a more substantive revenue source. In addition, over the course of two years you will learn what your subscribers want to read and customize the content & message to deliver on their expectationsSegments are the qualitative differentiating factors that compromise your subscriber list. All customers fall into broad customer segments that you will learn more and more about as you gain experiential knowledge from working with them. For purposes of this model, I arbitrarily put the numbers to 1, 2, 3, 4. You can get as complex as you want, but keep in mind that this takes a lot of time building custom content in a way that delivers positive ROI for the time invested - don’t go nuts here.Click Through Rate (Engagement)Definition:An email click-through rate is defined as the number of recipients who clicked one or more links in an email and landed on the sender's website, blog, or other desired destination. More simply, email click-through rates represent the number of clicks that your email generated.Click Throughs are newsletter recipients that opened the email & clicked on something within the link (performed an action), thereby placing them within the medium to purchase something from your site. If you create more engaging emails & more clear about what actions you want the recipient to take, then you will have more people clicking & coming to your site. To get better at something relies on experience, knowledge, and trial & error - hence why in the 6th month, the model adds a second customer segment (meaning you have learned what you did well & poorly over the last 5 months and are positioned to capitalize on those mistakes in month 6)1. Optimization Gains from SegmentationCTR Optimization Gains (2.5%)X # of Monthly Segments (Segments = Optimizing Emails)Total Optimization Gain (2.5% * 2 Segments = 5.00%)2. Total Click Through RateBase Rate (15.00%)+ Optimization Gains (5.00% = 2.5% * 2 Segments)Monthly CTR Rate ( Mo-6 = 20.00% = Base Rate 15.00% + 5.00% Optimization GainsIn order to effectively forecast the Click-Through Rates for your startup, we need some comparable stats to benchmark your performance against:---------------------------------------------------------------------------------------------Email Benchmarks - Apparel Retail------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Email Benchmarks - General Retail------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Email Benchmarks - Specialty Retail------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Campaign PerformanceHow different types of emails performed in Q3 '12 based on the type of content in each email and the goal of the campaign.------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Campaign Performance - Editorial EmailsEditorial emails are messages that include content that provides value to the reader without a purchase (may and should also include some marketing calls to action).------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Campaign Performance - Marketing EmailsStraight promotional email: sole purpose of the message is to drive a purchase (or in some cases, generate a lead that can drive to the purchase)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Campaign Performance - Editorial & Marketing Email - Open & Click Rates------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------CTOR - Click to Open Rate:The aggregate # of clicks / # of Opens. This number is a reflection of the effectiveness of emails based on "engaged parties". If the subscriber doesn't open the email it's not really fair to include them in the analysis of the effectiveness of the email.---------------------------------------------------------------------------------------------Just found this little neato article on Click to Open Rates... Obviously the metric is not perfect, but it does give you a pretty sweet quick view of the company (versus using <div> show/hide for open rate tracking) - Measuring Click-to-open Rate (CTOR) for Email Marketing CampaignsForward RateThis is an area that I was hesitate to initially build into the model, but it was something that I saw very often in myself and a behavior that is systemically different from the open & engagement rates of other asks of the forecast. The logic is that the email marketing will excite to a certain % of your subscribers that they will want to forward the message onto to their friends - something maybe more applicable to someone else or simply to show off something cool. Think of it like sharing on Facebook & tagging a friend in the post.Forward Rate: The % of readers that will forward the campaign to someone else (they could be a subscriber but most likely not). Based on the campaigns that I have run & the campaigns of companies that I work with, I set this # at 4.5% - this # could trend up over time, but for illustrative purposes let’s keep this constant since it’s a more difficult variable to conceptually quantify.Forward Rate is based on “Open Rate” because conceptually the original recipicient may see it and think “Wow, this is perfect for John” and subsequently forward the email to John. It doesn’t necessarily rely on that recipient engaging with the email or clicking through him/herself - only that they saw it.Forward Click Through Rate ( FWD CTR): The % of users that will click on the email and go to your site. In the model, the CTR rate is 75% - this may appear high, but odds are that this person is close friends with the recipient as implicitly the sender has some understanding of the forwarded person’s personality that this email will appeal to them. Hence why they will open it.Email Traffic to Site (Calculated Summary)This is a calculation summary section to provide explicit #s of visitors going to your site.Net Additions to Email List (Newsletter Reach Growth)The goal is obviously to build your email marketing channel and more effectively generate revenue from your customers → serve as a controlled demand source for your business.Site Signups: When a visitor comes to your site and enters her email into the “Newsletter Signup” box & successfully signs up for your list.Signup Optimization Rate: A toggle metric that reflects that you will get better at signing up visitors to your site as you gain more experience & deeper understanding of what they are doing & how you can effectively capture their email.Signup Rate: The conversion rate of visitors to your site that signup for the newsletter. This number can be found in your KissMetrics or setup as a Goal in Google Analytics.Purchase Signups:Think about when you enter your billing information on a standard shopping cart, there is generally a check box selected by default to sign up for the site’s newsletter list. Since this enabled by default, there is a strong possibility (i.e. 75% of the time, which is what I have in the model & my average experience of successful cart goal completions in my analytics for Purchase Conversions + Email Signup) → This becomes important for Long Term Value per customer.Unsubscribes: As easily as users signup to follow your company - they can likewise unsubscribe. One guiding principle to govern your strategic decisions about your email marketing initiatives - every email is a touch point with your consumer that you give them the power to say “do I really like this? Do these guys “get” me? Do I really care about receiving these emails?” This is why I add the segmentation & the campaigns to the main section to reflect that you will learn how to better target your customer. However, prudence is your friend - often times it is better to not say anything at all, if you aren’t sure that you will say the right thing to grab the email subscribers attention & bring them closer to the brand.Saturation Rate: As you send more emails, you are increasing the natural churn rate in email subscribers. This # increases based on the fact that a certain % of users will simply just “get tired” of getting your emails. This is okay - don’t be upset, it’s normal. But it’s your job to learn from this to understand why and how to better tailor your emails to reduce this riskUnsubscribe Rate: The % of the your email list that unsubscribe on a monthly basis. The number that I used here .25% begins low because you are a small brand (read: cool, new, you are cool because you are new). So you have a low # in the beginning - this sample variable is the average from 4 companies in fashion that I have run or been a part of for the last 5 years.---------------------------------------------------------------------------------------------Section 5Social Build---------------------------------------------------------------------------------------------Support Matt producing great quality content by purchasing a copy of the model here: http://fail-harder.com/products/e-commerce-financial-model-for-startups?utm_source=Quora%2B-%2BLearning%2Babout%2BForecasting%2BRevenue%2B%26%2BExpenses&utm_medium=Quora%2BAnswer&utm_campaign=Quora%2B-%2BFInancial%2BModeling%2BAnswerThis is fairly rudimentary approach to calculating the impact of social virality as a traffic source. The foundation is approach this:1. An article is written about your company ( # of articles from the Marketing & Promotions section from the Sales Build Sheet)2. The assumption is that of those who click through (i.e. Premium: 1,500) to your site a certain % will share it on Facebook or Twitter (illustrated below by Rebroadcast rate by Source)3. Do a Twitter search / SocialMention.com / Klout search for a good idea for the distribution of average # of followers.4. Take the sumproduct to establish the total potential # of people that could become aware of your company by virtue of their followers5. There is a fairly low engagement rate these days from social sources. Hence the 0.5% traffic inbound to your site.Rebroadcast BuildA rebroadcast is essentially a "Tweet" based on the original content marketing piece that references your company. Considering the tech-focused community on Quora (product), I will use a TechCrunch example:1. TechCrunch posts an article about your company.2. 000,000s of people see this article and think it's cool, so they Tweet a link to the article - this is what I refer to as the "Rebroadcast Rate", meaning that readers of the article promote the content piece to their followers.3. Followers of the "Rebroadcaster" (readers of the TechCrunch article who tweeted/shared on Facebook) - then come to the site.4. In order to get a proxy for how many users could, we have to calculate the average # of followers by source. Obviously, the premium source (TechCrunch) has techie users who are more inclined to have lots of followers.[Note: Don't get bogged down in a super detailed data analysis of average twitter followers by source - just look at like 20 or 30 profiles (this will take all of 5 mins I know) and get a general picture - then use that #. This number changes over time & as the more followers build on Twitter or Facebook, hence why this Figure reoccurs monthly]5. We calculate Rebroadcast rate by the following: TC Reader Tweets, then one of the followers of the Rebroadcaster clicks on the shared link & goes to TechCrunch. In turn a certain % (in this cast we forecast it at 0.50%) will click through from the TC article to your site.I know this is a little confusing but it's important to begin to format the framework for understanding how traffic & subsequently sales will grow as references diffuse through the social-sphere.Sphere of Influence BuildIn the same way that we built the newsletter reach, we are going to quantify the net gains of Facebook/Twitter followers of your site.We start at the Organic Follow-Rate - or users who just came to your site & started following you. This rate is generally very low because although their are 100m Twitter users only a small % of those users are "active" - hence social is not within their workflows.We can see that a connecting with brands & companies via social is "catching on" so let's take a look at some research that was just research about demographics of users that are following brands.---------------------------------------------------------------------------------------------Section 6PAID SEARCH BUILD---------------------------------------------------------------------------------------------Support Matt producing great quality content by purchasing a copy of the model here: http://fail-harder.com/products/e-commerce-financial-model-for-startups?utm_source=Quora%2B-%2BLearning%2Babout%2BForecasting%2BRevenue%2B%26%2BExpenses&utm_medium=Quora%2BAnswer&utm_campaign=Quora%2B-%2BFInancial%2BModeling%2BAnswerPay Per Click (PPC) (also called Cost Per Click is an Online Advertising model used to direct traffic to websites, where advertisers pay the publisher (typically a website owner) when the ad is clicked. With search engines, advertisers typically bid on keyword phrases relevant to their target market market. Websites that utilize PPC ads will display an advertisement when a keyword query matches an advertiser's keyword list, or when a content site displays relevant content. Such advertisements are called sponsored links or sponsored ads, and appear adjacent to, above, or beneath organic results on search engine results pages, or anywhere a web developer chooses on a content siteGoogle (company) AdWords is hands down one of the biggest strategic advantages to online retailers because you have access to basically an unlimited market of new customer. This section will primarily be focused on using the tools in your Google (company) AdWords account for analyzing how this will drive revenue for your startup.To explain this section, we are going to use the VÆL Project Travel Duffel that we have used in several examples previously:The essence of Google (company) Paid Search is based on using keywords to provide context to the search algorithms for users. The first step is to log in to Google (company) AdWords and go to their “Google Keyword Tool” that will give you traffic estimates for the volume of monthly searches for the keyword that you select for the product. For this product, here are the search terms that were input into the Google (company) Keyword Tool:Canvas Travel DuffelTravel Duffel BagMens Shoulder BagMens Outdoor LuggageHere were the results from these keyword:Now these are not very large numbers, but the power of the Google (company) Keywords tool is that it gives you tons of ideas on search terms. Here were all of the different categories that Google (company) recommended to me based on those four search terms:After looking at some of the suggested search terms, here were the additional keywords that quite aptly refer to this item – the yellow highlighted sections are the terms that I selected to include in the search:After you generate a list of keyword ideas, you move on to the Google (company) Traffic Estimator Tool – here were the results from the Google Traffic Estimator:This process will give you a general idea for how much you will need to spend based on your budgetary restrictions and revenue goals. After you input your data for your keyword results, you will have your averages for your product.In order to forecast how this channel will perform, we need to aggregate all the information from the Google Traffic Estimator toolHere are the relevant definitions:Ad ImpressionsThe total number of times your ad was seen by a user conducting a search. An impression is counted each time your ad is shown on a search results page.Click-Through Rates (CTR)The ratio of the number of clicks that your ad receives divided by the number of times your ad is shown (Ad Impressions).ClicksThe traffic generated by Click-Through Rates generated on each ad group’s impressions. Clicks on a Paid Search ad become a visitor to your site.Cost Per ClickThe average cost that you will pay for each click generated by Google (company) on one of your ads. This is calculated by taking your total budget ($150 in above graphic) divided by the number of clicks that money generated. Here is an example:CostAs the name Pay Per Click (PPC) implies – you only pay for the clicks that are generated by Google. This is in contrast to Cost per Thousand Impressions (CPM) advertising model that Facebook (product) uses and charges you based on the number of times that your advert shows up on the screen regardless if any action is taken. Additionally, there is a third model called Cost Per Action (CPA) (CPA). CPA places the highest risk on the advertiser because they only pay when an action occurs, which is generally an order is placed.MonthlyGoogle (company) AdWords provides you with daily figures that are helpful to understand simply how Google (company) AdWords will function as a valuable tool for your startup. However, we have to project that daily figure into a monthly number to get a high level view of this channel. There are on average 20.92 working days per month, so we assume that we are only going to be aggressively using paid search when there is someone in the office (i.e. someone to watch the program).Historically, e-commerce traffic plummeted on the weekends as people didn’t have the same quality of Internet connection at home as they did at work. However, since the iPad zoomed to mass popularity – this trend is reversing. Weekend traffic to retailers is progressively rising as the iPad is an incredible shopping tool for those lazy Saturday’s on the couch or, while watching the Food Network, you can pick up a tool from Amazon.com (product) for the kitchen.You can toggle this figure to anything you want, but 20 is a good round figure that you can control and learn from. The most important aspect of Paid Search is learning – once you know it, you can hire someone else to do it for you. Maybe those additional 10 days can be spent reviewing and analyzing your performance to create an even better strategy for next round.Cost of Customer Acquisition (CPA)The most important number that you want to base your analysis on is your cost per acquisition or the average cost it takes to acquire an order. CPC represents the cost to get a user on your site, but it does not account for performance of this paid channel. The Cost per Acquisition takes the amount spent on clicks and divides it by the number of orders (i.e. the performance aspect of the metric). Here is what the CPA formula looks like:Weighted Average Metrics - CTR, CPC, CR, & CPAWhen analyzing a group of metrics that do not all equally contribute to the metric, the weighted average method provides on of the best ways to simply analyze a metric. Think about this logically in the case of the Average CPC rate for the month – if you did a simple average, each value ($2.74, $2.79, $2.37, $2.27) would be totaled and divided by four. That means that the average is equally based on each of these 4 values.This approach does not take into account the fact that these CPC rates performed very differently in terms of number of clicks (i.e. visitors). When thinking about a metric that depends on various weights of factors – we use the weighted average method to get a more informed view of the metric. The weighted average takes the amount each value contributes to the whole and then totals those contributions up. Here is how this looks visually:Here is the overview for all the different aspects of the Paid Search:Now that we have the build metrics added to the model, we can now begin to flush out the budget to this model.In order to forecast the Paid Search Model, we need to break down this section into four main components:Budget: The monthly amount of money allocated to be spent on Paid Search MonthlyCTR Build: The improvements in click-throughs on ad impressions that will be made overtimeConversion (marketing) Build: The progressive improvements to the site, checkout process, and customer experience that will increase conversions from Paid SearchCPC Build: Your weighted average CPC cost will get progressively higher over time based on the constant improvement & targeting new segments – we call it optimization because the metric refers to getting better.Budgets & Budget GrowthThis represents the increase in budget that you will allocate based on your success with the channel. The Budget Growth variable is a fixed value that you can adjust monthly based on the story that you are telling in your startups vision narrative. For example, leading up to the holiday season, you will be increasing your spend to generate new sales for the end of the year. Additionally, as you have a new shipment approaching, you can increase your budget to drive sales to drive down inventory levels in preparation for the new stock coming into the warehouse.This is a blue section because you can change each of these numbers based on your budget. It might be worth having a negative month to drive through some extra inventory in preparation for a major shipment. This situation can be risky – but you have the ability to toggle this as you see fit.CTR OptimizationIt’s incredibly important that this activity be managed form inside the company and preferably by each person on your team play a role in driving revenue through paid search. After each campaign, review the analytics, content, and demographics to build a “drivers list” – what were the magic components of this particular text copy with demographics of the audience that make this successful or not. Every month, you will be making tweaks to the terms, headline, copy, and pricing based on what’s working for your products.The model increments the conversion rate monthly based on a percentage because of these tweaks that you will be making. To understand what you should increment this number by monthly – let’s go back to out Google (company) Traffic Estimator tool and plugin two sets of numbers that demonstrate the possible range for the quality improvement.After you have a good idea of what the market looks like at various levels, we need to bring it home to our model:Now although our Click-Through Rates (CTR) increases way more than the rate on the Google Traffic Estimator tool, we see that the ending CTR metric of 4.43% is more inline with the CTRs Google estimates that we should be seeing. Well-done Paid Search should yield between 2.50% - 5.00% CTR – so this range would be fairly average for a startup.Conversion (marketing) OptimizationOne of the most difficult aspects for most new founders to understand is that the rules are completely different for a new startup than they are for “everyone else”. Most founders think that their experience running marketing for a previous employers means that their old conversion rate benchmarks should connect – the answer is “No!” The fight to convert the customer is completely different for a brand/startup that no one has ever heard of than it is simply for a company that has been around for a couple of years.As such your conversion rates will start relatively low for a new e-commerce startup and rise fairly quickly over the first couple of years. In this analysis, we estimated that we would generate a 50% improvement from the month when we start. These numbers are on the conservative side, but give you a “good” look at how the range performs over time.Cost Per Click Optimization (CPC)As your budget expands, gain more experience with Google (company), and build your brand presence – you will progressively be able to move up the CPC budget world and fight bigger fights in more expensive keyword groups. In this forecast we stay fairly conservative for the sake of building a highly engaged customer-base.---------------------------------------------------------------------------------------------Section 7Production & Expense Build---------------------------------------------------------------------------------------------Support Matt producing great quality content by purchasing a copy of the model here: http://fail-harder.com/products/e-commerce-financial-model-for-startups?utm_source=Quora%2B-%2BLearning%2Babout%2BForecasting%2BRevenue%2B%26%2BExpenses&utm_medium=Quora%2BAnswer&utm_campaign=Quora%2B-%2BFInancial%2BModeling%2BAnswerThe Production & Expense Build is where the we breakdown the demand estimates (from the Sales Build) into their cost pieces and forecast how these expenses will connect with pricing & margins. The main aspect of this model is that all goods are purchased FOB Hong Kong. This means that the factory assumes all aspects of the production process (sourcing materials, labor, cartonizing, containerizing, and transport to Hong Kong as the port of export).Production CostingThe foundation of any model is the cost to produce the product that you are actually selling because the selling price is determined as a markup on the cost on the cost of the product. This makes logical sense because simply selling a product by your competition without taking into account the cost can lead to selling products at a loss (i.e. not making enough profit to run the company).This model is an e-commerce consumer direct brand that produces product in China and sells directly to consumers here in the US. Here is a quick overview of all the steps in the product costing build:Each of these steps contains a direct cost for the product that we need to understand in order to properly account for the profitability of the company.Demand ForecastIn each of the four previous sections, the model lays out the strategic narrative of the company – it tells the story for how it’s going to go and what the results are going to be. This is all necessary because they create our demand forecast or the amount of units that are forecasted to be needed to meet our sales goals. The Sales Build pulls together all of the order forecasts from each marketing channel and creates a simple table telling us how many units in each category we are going to sell.We need to breakdown the forecasted orders by category and by unit to properly account for how each category will be distributed for production. For this demand forecast, we look at our Sales Build to find the sales distribution by category (on the Sales Build Sheet Rows 67 – 73), the Total Orders (from the Sales Build Sheet Rows 82 -90), and the average units per order (Sales Build Row 73) for all the data needed to calculate each category’s unit forecast. This is how the calculation is done:Fill this formula down for each category and across for each month and you have a breakdown of the unit sales by month.Forecasting Future POsThis model simply breaks down the production volumes into purchase orders placed every six months. However, our model only forecasts 24-months of the growth cycle meaning that in Month 24, the 5th production will be landing at your warehouse. The model accounts for this by using a simple regression forecast for the 6-months not covered by the in-depth Sales Build. There are far more complicated ways to calculate this production run, but it’s so far off in the future that using these more complicated forecasting. For methodologies creates unnecessary complications.A simple Regression Forecasting is used to create a best-fit trend line based on our in-depth demand forecast. The primary reason that this cost is included in the model is to demonstrate that we at least know it’s coming and have allocated resources for the expense. Additionally, this model is built to be an “Operational Model” that is constantly updated and tweaked as the company launches. Thus as you input actual sales data and performance metrics, the model will adjust to fit the unique criteria of your firm.This is how each of the 6 future periods for PO-5 are calculated:This calculation will give you a simple regression forecast for each unit in periods 25 – 30:To create the final purchase order, simply total up the units for each category and for each month and bring it all together in a simple table that breaks out each purchase order by category and production:Additional Production RequirementsOur production forecast is based explicitly on our forecasts that represent the most logical case for the realistic development of the firm. If everything goes exactly according to this forecast, we are going to be running pretty lean by most standards of inventory. In order to account for the “fudge factor” (a technical term), we need to add a couple of arbitrary toggles to account for two additional factors:OverbuyOverbuy simply means the number of units that you “buy” over and above the demand forecast. An overbuy represents a pro-growth, riskier managerial strategy that places more value on gaining customers and sales over the financial constraints of allocating additional capital to inventory. This places considerably more value on the opportunity cost of a stock-out causing a customer to leave versus the inventory sitting on the store shelves.This is also why Paid Search is designed to be an “in-house” managed process to ensure that the firm can drive sales should inventory turn slow down (i.e. you increase your AdWords budget to drive sales directed at the products that you need to sell to generate cash or reduce inventory positions for a new production order getting ready to hit your warehouse).Samples, Promo, & MarketingWhen you have a brand, the oldest marketing method is to give the product away for free to get the “buzz” started. In order to get the “Inbound Marketing & Promotion” blog hits rolling on your brand, you have to give them gear – if they like it, they will snap some photos, write a post, and promote it to start getting the word out.I will never forget this quote that my old business partner M Coleman Horn told me about something Phil Knight, the founder of Nike, told him while he was heading up Women’s Technical, “never underestimate the value of a free pair of shoes.”You get people to fall in love by getting the product in their hands, connecting with the brand, and now you have an audience to bring into your story and fall in love with you!Final Purchase Order BreakdownNow we bring everything together to create our final purchase orders that we will use to calculate the rest of our expenses.This is how it all comes together:Shipping & Landing ExpenseCoordinating logistics for a production is one of the most frustrating aspects of running a brand because of the dearth of information regarding the exact stage of production makes this process a headache. The majority of production in China is still managed by paper with some of the better factories using Excel as their MRP (Manufacturing Resource Planning System – an industrial enterprise software system that plans all aspects of production – this is an Oracle-type platform/application that is 100% of the time the most miserable piece of shit to use).This section is to serve two goals:1. Provide a rough framework for coordinating number of containers with your logistics partner2. Forecast the cost of shipping these containers.Here is an overview of the Shipping & Landing Expense section:There are three main aspects of this build:CartonizationCartonization is the process by which finished units are packed into cartons for shipping. For this model, I took the actual shipping details from the VÆL bag launch to give you an idea of how this all stacks out:Category 1: 5 Units per CartonCategory 2: 10 Units per CartonCategory 3: 50 Units per CartonContainerizationContainerization is the process of packing the cartons into containers for loading onto ships for transport. This section has the most complicated formulas to make the model work for everyone, but its built for people to simply input numbers without all the excel complexity. This has been broken out into it’s own section because of the length of explanation required for this all to make sense.This section breaks down the cartons by the container it fits in – it fills up a 40’ container, then fills up a 20’, and if there is still cartons that are inefficient to ship via a container it ships via LCL (Less than Container Load) loose freight.Shipping Cost BreakdownAll Screenshots---------------------------------------------------------------------------------------------Margin Analysis for Distributors, Brick & Mortar Retailers, and Online Retailers---------------------------------------------------------------------------------------------This section is from another answer that really adds value to this answer & I wanted you fine Quorans to have the info regardless of where you came across it!Matthew Carroll's answer to E-Commerce: What's the average Profit Margin earned by apparel distributors? Brick & Mortar Retailers? E-Commerce / Online Retailers?( This answer has been completely revised & expanded in light of some awesome holiday reading)Let’s get some definitions dialed in prior to launching into a deeper investigation of your question.Background & Overview: This section will give you a quick background how Distributors, Retailers, and Brand Direct E-Commerce work as businesses and their corresponding relationship to the brand who makes the products available for retail.Distributor:A distributor is an entity that engages into a formal business relationship with a brand for the rights to serve as local representation and (most of the time) to be the exclusive purveyor for the brand’s products. In fashion, distributors are generally the international partners lending their relationships, understanding of the intricacies of the local market, and financial resources to effectively capitalize on a brand’s market opportunity. Therefore, distributors are primarily involved in B2B relationships - they purchase a large quantity of goods (a min. # set by the brand in order to grant distributor status pricing discounts) and primarily sell to retailers in the local market. However, distributors are increasingly capitalizing on the e-commerce by managing the local e-commerce presence for the brand in that territory.An example of one of best international distributors in the world for fashion startups is Jack of all Trades (JOAT) Co for Japan. I have worked with JOAT over the years with several companies and one clear value propositions for their organization is Lloyd Seino. Lloyd is a Biz Dev / Brand Manager (as we would call it in the US) and truly has one of the best eye’s for a fledgling brand’s market potential in the crowded Japanese fashion industry. JOAT is also regarded as one of the leading companies for identifying and building a brand into a Japanese powerhouse (as Lloyd has done with dozens of brands).[ Note: You can generally find any brand’s distributor by going to brandxyz.com -> Contact & look for International. This section will have the names of the international companies that distribute the brand’s products. ]In other industries there are domestic local distributors that have regional territories - a two good examples are food and alcohol. Due to the large geography of the US, food was most commonly broken down into regional distribution because of the large number of customers per region and difficulty in coordinating the logistics of food delivery. Let’s take the example of a buddy’s health bar company that he purchase 2009:1. In 2009, Ryan, my buddy, purchased the rights for Southern California to distribute energy bars to local and national chains in that region.2. By purchasing the rights to Southern California, Ryan could purchase the energy bars at a special distributor price3. Ryan could focus on building deep market insight into Southern California, developing great relationships with retailers, and maximizing the effectiveness of his advertising spend in based on what’s going on there (i.e. He could setup a booth at a local music festival to sell his energy bars while the kids are dancing in the perpetual summer sun of Los Angeles - where this festival would fall under the radar of the national marketing goals of this company)Retailer:[ Note: I have written an extremely in-depth analysis of the relationship between Retailers & Brands and how this dichotomy drives retail prices that you see online and in-store - How do designers set prices for dresses and why do dresses often cost more on a designer's website than on purchase through an online retailer? ]This is a vendor, generally within the home market for the brand, who purchases goods at wholesale (about 52 - 55% below what you see at retail for). The retailer issues a purchase order (a legally binding document to purchase X # of goods at Y price to be delivered at a specified time frame) to a brand. The brand takes all of the POs and goes to production for deliveries roughly about 4 - 6 months after the PO was issued. Upon completion the brand ships the goods from their warehouse or factory (depending on the size of the retailer).This is what the stages look like from the Brand’s perspective:The Retailer’s job is to focus:Building brand equity with the customer to be a shopping resource.Create a customer experience that derives long term value from investments in customer mindshare (i.e. ‘I think that I am going to stop by Bloomingdale's after work,’ said the proverbial customer)Develop extensive local customer insights that enables the retailer to optimize their merchandising assortment to reflect the local trends, fashion, and personality of a store’s retail presenceUnderstand local advertising mediums & methods to maximize the effectiveness of advertising dollars based on how local trends (i.e. San Francisco may work extremely well with clever Facebook Posts while West Texas can do well sponsoring a High School Football team)Let’s take a look at how this process looks for a single retail store or a simple model:When we are talking about a major retailer like Nordstrom, this model gets a little more complex. Since the retailer has to manage inventory between multiple stores, the retailer will often have a brand’s shipments delivered to their Warehouse. At the warehouse, the shipment will be broken down and allocated to each store based on forecasted demand. Additionally, you will see that a certain allotment will be held back in the warehouse to cost effectively manage fill-in orders.*This is what the retail logistics process looks like:* The San Jose store runs out of a medium green t-shirt, it’s more cost effective for Nordstrom (company)'s to combine that medium green t-shirt in addition to all the other orders routing through the regional distribution center. This is in contrast to the San Francisco store pulling the out of stock size & shipping the one unit to the San Jose store.E-Commerce:There is little difference fundamental difference between a Retailer & an E-Commerce relationship. Both are responsible for creating an engaging retail experience, building defensible customer relationships, gathering customer insights to guide merchandising decisions, and manage demand generation & advertising investments. However they differ in three main ways:Digital Medium: Obviously the biggest difference is the fact that retailers sell products via a website while retailers deal with physical stores.Zero Transportation Costs: Purchasing online is a much easier experience due to the fact that you don’t need to get in a car, drive to the store, fight for parking, deal with sales staff that hates their jobs, wait in a checkout line, and then get home.Deeper Customer Insights: Shopping online enables retailers with much deeper customer insights on purchasing patterns & products at the individual customer level - where brick & mortar retailers must make a concerted effort at checkout to gather billing zip code at checkout.E-Commerce retailers leverage two huge advantages:Massive Population: Obviously the biggest difference is the fact that retailers sell products via internet to the entire country (technically the world, but that’s another whole can of worms) while brick & mortar retailers are limited by the customers geographically in a given store’s territory. As of 2012 there is an estimated 154.6 million people that will purchase something online in 2012.Targeted Demand Generation: If an online retailer have slow moving inventory that you need to sell (commonly referred to as turn), then they can send a target email to your customer base of highly targeted people that have purchased a complimentary product (i.e. a jacket that would go great with that shirt). Alternatively, an online retailer can level the power of Google to increase their keyword spend to drive up their paid position on the brand’s keywords to generate sales.---------------------------------------------------------------------------------------------Section 2Understanding the Cost Basis---------------------------------------------------------------------------------------------Brands traditionally employ a “Cost X” model that takes the loaded costs for producing, landing, and fulfilling their goods & services by a multiple - commonly referred to as a Keystone markup. One of the biggest mistakes you can make in pricing is not having an educated idea of what your cost basis will be. If you don’t have an idea - then it’s easy to misprice an item and kill your business because you’re not making enough money on each unit to finance your operating expenses.Keystone Markup is a pricing methodology that multiples the cost basis by a factor of two (sometimes can be up to 5x in the case of jewelry) to dictate the price for next rung in the value chain. Keystone markup arose as the simplest way to universally markup goods across the retailer to a profitable level. Generally speaking, it is logistically impossible to uniquely price each product (from 100s or even 1,000s in a given retail location) to reflect market conditions and retail demographics. The theory being that retailer profitability was more of a function of units sold versus maximizing each product’s price. Subsequently, this approach normalized prices across the marketplace (i.e. everyone is pricing a shirt at $100).What does the costing build look like for a typical brand:Landed Cost: The represents the total cost of paying for the item, shipping to the US, tax & duty, receiving in the warehouse, and getting on the shelves ready to sell.Fulfilled Cost: This is the cost basis that I generally like to always keep in my head because it represents the fully-loaded cost basis of selling an item & gives me a better idea of how much cash I will have at the end of the day.Wholesale Price: The Wholesale Price of a product is the revenue in one channel for the brand, but it’s the cost basis for the retailer who purchased it from the brand. For retailers like Urban Outfitters, Finish Line, Journeys, or Amazon the wholesale price is the baseline inventory cost for them.This is quick graphic to show you how this relationship works:To put this all together into a graphic of a real product with real world pricing, let’s take a look at the pricing of one of the old boots from one of my old brand’s, VÆL Project:---------------------------------------------------------------------------------------------Section 3Distributor Margin Analysis---------------------------------------------------------------------------------------------A distributor is an entity that enters into a legal relationship with a brand to provideThis explanation (obviously) gets more complicated as the company grows - but let’s keep it simple. There are two models than create the pricing landscape (once we know what the distributor is charged product, we can more acutely understand how they charge for it). There are two predominate pricing models:“Cost +” ModelDistributor Price = FOB + x%“Wholesale -” ModelDistributor Price = Wholesale - x%Cost + ModelFOB is the cost to the Brand to produce the good or service. This represents the baseline cost to the brand to produce good and is the starting point for analyzing the revenue model to the brand and thus do a margin analysis. When you are growing a fashion brand, the typical range for the markup % or the “+” in the model is anywhere from 25% - 40%. After working a lot of brands and speaking with loads distributors, you end up starting at FOB + 35% and progressively this % gets smaller as the brand does more business. The logic is as follows:Volume of units to the distributor will be small in the beginning and the brand needs to 35% to boost contribution margin to OpEx as the burn rate is particularly high for startup brands (you just need a lot of people to do all of the stuff required to build a brand properly).As the brand grows the cost/unit (FOB) is driven down. Therefore, the margin $ value of the contribution margin is driven down also.The realization of scale is good for the brand and good for the distributor so this model incentives the distributor to help grow the brand in the particular country in a responsible manner.The logic is that you demonstrate transparency by showing your Cost Basis in efforts to build a partnership where the distributor & the brand benefit by realizing scale economies. However - BE CAREFUL - if you don’t choose the right partner they can screw you over by virtue of your honesty.Important qualifications about this perspective:1. FOB means that the distributor is responsible for coordinating logistics from FOB Destination (most likely Hong Kong) to their host country. FOB is an old legal term for “Free On Board” meaning that ownership of the product changes once the product is delivered to the shipping carrier - make sure that you get paid T/T Advance (a fancy way of say a “wire”) prior to shipping. If you don’t get paid first, they legally own the goods and have fun trying to collect from a company in Japan or UK.2. Tax, Duty, and Quota is a very tricky art that should be the responsibility of the distributor. Japan has horrendously high tariffs and their Quota system requires intimate understanding of the inner workings of the system along with the experience to account for the screw ups.This is why you want to work closely with your Distributor to figure out the right pricing for the brand for that particular market. This will require the brand to spend time over there and figure out the market (what products are priced where & what’s the market feeling). However, this doesn’t mean that you don’t need a distributor to enter a country - there are an insane amount of factors that require you have someone with relationships to the retailers and their pulse on the culture to nail down properly.Wholesale - ModelThe Wholesale - Model is more common with larger brands like K2 or Patagonia (I reference these two brands specifically because I have worked with them in the past). Elements of the Wholesale - Model:Pricing for the product is indexed to US Wholesale (which is the largest revenue source for most brands) thereby obfuscating the true cost basis (think Apple & COGS).You generally see a range of Wholesale - 30% to start with. As the distributor achieves the performance hurdles of the “distribution agreement” they will realize greater discounts (duh!).If you have the clout to be able to employ this model - you should do it. But most likely you will get beaten up so badly in the beginning that this model is prohibitively challenging for most new brands (anything younger than 3 years).This a real world example of a pair of shoes & the margin from one of my old distributor relationships from VÆL Project.Distributor Revenue & Margin AnalysisMargin from the distributor’s perspective is rather complicated. For small brands, you want to allow the distributor to set pricing - however, you need to make sure that their distribution timeline is both aggressive, yet prudent. You won’t build any “staying power” in a foreign country’s fashion scene if you don’t have clean & controlled distribution. Many of you can relate to Ed Hardy from the early-00s when it was moderately cool - now it is literally trash.Distributors’ negotiate exclusive rights to sell a brand in a country because it creates an exclusive value proposition that ensures the highest possible price that they can charge for this cool “American” Brand. When you have exclusivity you reduce the ability to price check for comparable goods and thereby stronger positioned to be a price setter rather than a price taker (ie empower consumers).In the beginning, you will see that prices are fairly inelastic for cool brands (however, these barriers are falling rather quickly in the globalization of fashion) - pricing models trend on 2.7x to 3.5x Landed Cost.Distributor Pricing Model for Men’s Shoes in Japan under Wholesale - ModelCheck - If a standard 2x markup on Wholesale in a foreign country is employed a $100 Shoe US can be as high as $300 in Japan. Remember a 63% duty rate for imported goods from China.This pricing can vary immensely by the deal & by the country - what are the tariffs that the distributor is responsible for? What does the market command? There are brands here that are “meh!” but are gold overseas - this can often float a brand in between fashion cycles.---------------------------------------------------------------------------------------------Section 4Retail Margin Analysis---------------------------------------------------------------------------------------------Retail Price: This is the price that the ultimate consumer of the product pays when you purchase a product from Urban Outfitters, Bloomingdales, Finish Line, etc. This price is also generally “keystone” or Wholesale Price times 2. For Example:[NOTE: Keystone is the general rule, but certainly Wholesale Price can be 2.1x Landed or Retail could be 2.2x Wholesale. This all depends on the retailers pricing power, brand positioning, and market position to be able to make these tweaks.]For purposes of moving forward, I am going to assume that you understand what Gross Margin is (Gross Profit / Revenue) or the % of each $ of Revenue that drops down to fund OpEx. Let’s run through a quick example, from the Retailer’s Perspective:This is an oversimplified margin analysis. Let’s take it one step further to account for the realities of life. Two items that can be used to better exemplify try margins are the Credit Card Fees (you can push CC fees into OpEx under Bank Fees, but we won’t go there) & Shipping & Fulfillment costing.CC Fees: Credit Card Fees are pretty straight forward as they are a % of Gross Sales that the CC processor charges to the Retailer for use of a CC or Debit Card. They range from roughly 1.65% - 5.4% (for a small retailer processing an AMEX or Discover card - now you know why a lot of bars / convenience stores in SF & NYC don’t accept cards?)*** This may not seem like a big deal, but a 2% reduction in Gross Sales is a BIG Deal. Assume that a retailer sells 1,000 units/week & there are 52 weeks/year.One of the more interesting aspects that you should take into account is the shipping & fulfillment analysis for this margin analysis.Brand Warehouse -> Retailer Warehouse -> Individual StoreWe live in an age characterized by the economic realities of lean inventories. If you read Nordstrom’s quarterly or annual SEC filings, one important aspect to note is that management highlights increasing profitability because of more effective inventory allocations & stock optimizations. As a brand when, regional chains function in a fairly decentralized manner - meaning that brand shipments go directly to each store.**** Assumption: The shipment will be sent FedEx Ground from Zone 1 to Zone 5 (CA to NYC) @ a rate of $24/carton or $2/unit (footwear is the unit - shoes take up a lot of space).(Remember this shipment is going directly from the brand’s warehouse to the individual Retail Location)Shipping truly is an industry of scale economies and this new world of lean inventories requires major retailers (like Nordstrom) to leverage these cost efficiencies by having brand shipments routed to their hub & then ship individual stores (driving costs down by having one bulk shipment to each individual store, of demand forecasted product compositions).Active Margin Management:One of the more interesting things that I began to do was implement a proactive management strategy for retail distribution in the US. Generally, a brand let’s it’s sales reps control most of the communication with the people that the brand is selling to. This really didn’t make a whole lot of sense because if I am running the bloody company - I need to actively know how the product is performing at retail for small boutiques. Boutiques are your leading indicator for pricing & sizing (two hugely important aspects).Every two weeks, I would call every independent boutique that I worked with - that was about 117 doors in the US. I focused primarily on the top 30% that I found were the most interesting.After chatting with all of them, I would build maps of what I was seeing. I would hear that a certain product was not performing well in Baton Rouge, LA at $210 retail but was absolutely killing it at $240 retail in Colombus, OH. In addition, retailers would actively express their frustrations with heavy product positions on say Nike Dunks in that same Baton Rouge, LA shop - but the shop in Orlando, FL was drying to get some but http://Nike.net (nike’s wholesale management system wouldn’t hook them up with an allocation).Based on this feedback, I would build full pricing analyses for each of the biggest bell-weather retailers - generally 10 - 12 every 2 weeks (Generally, I did this at night from 12 - 2:30am which is my last conference call of the day 2:30am PST is 5:30pm in China end of work day).In the above example, I would have the Baton Rouge, LA retailer reduce price of $195 from $210 but structure increases in other products to compensate for Margin Reductions. Basically testing price sensitivity to create an optimal margin structure for the retailer.In addition, I would use the credit that I extended Baton Rouge, LA store & the different Orlando, FL (My relationship with them is the only common factor between these two guys and they both owed me $$) and shift Baton Rouge store’s Nike Dunks (that he was long on) and get them to the Orlando guy.What did I gain:Boosted Cash Conversion (If I spent that much time caring about their business, who the hell do you think that they are going to pay first?)Increased Rev/Account (I have multiple touch points with my customer and I gave them something that no one else really could give them - they are of course going to give me a larger merchandise location at their store)Deep market insight ( simply just knew more than anyone else about market dynamics and could apply that knowledge throughout all aspects of the organization - thereby building the human capital endemic to the organization).---------------------------------------------------------------------------------------------Section 5E-Commerce Margin Analysis---------------------------------------------------------------------------------------------Now let’s get to the fun part - online retail is near & dear to my heart and this is the part that I really wanted to answer. E-Commerce is an incredible channel because you have the ability to:Create the Retail Environment: Being online means that retailers have the power to design the retail narrative that visually communicates the retailer’s story. Think about it - a brick and mortar retailer will maybe remodel the story once every five to seven years. With an online store - you can dynamically change the homepage, create a new theme for the season, add “sub-shops” for designs/styles, or with a little html & CSS you can tell a totally different story.For a more in-depth version of this story, check out: How Retailers Can Replicate the 'Magic' of the Apple Store... Online (I am really proud of that piece)Tell the Story: Being online provides the retailer with the ability to tell the product’s story to bring the customer in the world of the retailer. Online retailers can add “looks” to augment the retail experience - the story enables online retailers to tell a story that would be challenging for a brick & mortar. Did the sales associate get busy and forget the brands background? Were they too busy and didn’t get a chance to connect with the customer? Online gives the retailer to tell the story that gives the customer a reason to buy stuff.Deeper Customer Insight: The luxury of e-commerce is that we have an incredible number of tools to track & analyze user behavior in ways that brick & mortar would only dream of. Although it’s challenging to nail down your e-commerce analytics - it’s extremely powerful to have a detailed customer profile to tweak your merchandising & promotion strategies.Regular Engagement: The era of using Facebook & Twitter to simply promote your products is dead. Modern e-commerce social strategies involve crafting a narrative that makes your fans want to engage by NOT talking about yourself. For example, a music blog will use a new mix to engage fans & readers & then subsequently sell tickets to the show after they are on the page.This all leads up to the point of analyzing the costs of the costs of e-commerce and gather some insight on the associated margins of online retailers.We are going to look at this first from the perspective of a ‘typical’ Online Retailer like Nordstrom (company) or Urban Outfitters (retail brand).You might be wondering why the costs of shipping & fulfillment must be included in the Cost of Goods Sold - well that’s a good question. Most retailers have to offer free shipping as a normal course of competing online today. The IRS says that when a promotional expense is a standard practice (i.e. free shipping on all orders) it must be calculated as a COGS expense. Here is a little graph that shows you the prevalence of free shipping as a norm in online retail:Therefore, when an online retailer utilizes free shipping it must be allocated to COGS.In Financial Modeling: Where can web startups learn about financial modeling that accounts for the important metrics and costs? I take you through the costing build of Customer Acquisition costs. But here is a quick summary:This should give you all the tools you need to more fully understand the costing build & Margin for an e-commerce retailer.Support Matt producing great quality content by purchasing a copy of the model here: http://fail-harder.com/products/e-commerce-financial-model-for-startups?utm_source=Quora%2B-%2BLearning%2Babout%2BForecasting%2BRevenue%2B%26%2BExpenses&utm_medium=Quora%2BAnswer&utm_campaign=Quora%2B-%2BFInancial%2BModeling%2BAnswer

1Find a reputable download service or program. There are a large variety of programs and websites that will allow you to download copies of YouTube videos to watch later. Typically a website will ask for the URL (address) for the YouTube video, and will then make it available to download. Software programs can provide download options when you visit the video.KeepVid is one of the most popular sites for converting YouTube videos into a downloadable format. They often offer several quality options and file formats, depending on the video.DownloadHelper is an extension for the Firefox web browser which will automatically provide you with download links for the video you are currently watching. Click the DownloadHelper icon in the top right corner of your browser when viewing the video for download options.2Select the proper format. When downloading the video, you are often given several options. Typically you can choose between FLV (YouTube’s native format) or MP4, a universal video format. The iPod cannot play FLV videos, so be sure to download an MP4 version.3Download a quality that’s compatible with your iPod. Different generations of iPod touches have different supported video playback options. In general, if your iPod Touch is older, it most likely won’t playback HD video.The iPod Touch through the 3rd generation only supports video up to 480p.4th and 5th Generation iPod Touches and the 7th Generation Nano support video playback up to 720p (HD).All iPod’s can only playback video at 30 frames per second.If the video is not compatible with your iPod, you can try converting it with another program.4Save the file. Once you’ve picked the right format, save it to your computer. Make note of where the file was saved to so that you can easily track it down and add it to your iTunes library.Method2Transferring the Video to Your iPod1Connect your iPod to your computer. Use the USB cable that came with the device. Your computer should recognize your device automatically.2Open iTunes. If your computer does not automatically open iTunes when you plug in your iPod, you will need to open it yourself. Make sure that your iPod appears in the left frame listed under DEVICES.3Add your downloaded video to your iTunes library. Click and drag the video file that you just downloaded into your iTunes library. You can drag it directly to the library icon and it will be added to the Movies section of iTunes.4Sync your iPod. Once your video has been added to your library, you can sync it to your iPod by selecting the Movies tab of iTunes. Check the box that says “Sync movies” and then choose the movie from your list of available videos.5Wait for the sync to complete. Once the sync process is complete, select your iPod in the DEVICES menu, and click the Eject icon next to the name. Once you have ejected the iPod, you can remove it from your computer.