The Importance of Disclosure Schedules in Mergers and Acquisitions

Disclosure schedules are an integral part of any merger or acquisition (M&A) transaction. The disclosure schedules contain information required by the acquisition agreement-typically a listing of important contracts, intellectual property, employee information, and other material matters as well as exceptions or qualifications to the detailed representations and warranties of the selling company contained in the acquisition agreement. An incorrect or incomplete disclosure schedule could result in a breach of the acquisition agreement and potentially significant liability to the selling company or its stockholders. Indeed, a well-drafted disclosure schedule will provide substantial protection against post-closing allegations that the selling company breached its representations and warranties.

Because poorly prepared disclosure schedules have the potential for significant liability, it is important that they be compiled carefully and thoroughly. Disclosure schedules prepared at the last minute are likely to be incomplete or inadequate, creating problems to closing a deal or injecting unnecessary risk into the transaction.

Typically, the disclosure schedule process is undertaken by employees of the selling company together with outside M&A legal counsel. But the disclosure schedules can require a significant amount of time to assemble, and the initial drafting should be undertaken early on. It is not uncommon for disclosure schedules to go through a dozen or more drafts and negotiations with the buyer's counsel.

Common Mistakes Made in Preparing the Disclosure Schedules

There are a number of mistakes often made by a selling company in preparing the disclosure schedules. Here is a list of the more common ones:

• The seller fails to include the right employees who have the knowledge necessary to assist in the preparation of the disclosure schedules. Although it is understandable for many reasons why a selling company limits to a very small number of people the group which is aware of a possible deal, that small group frequently does not have access to all the information necessary to complete the disclosure schedules.


• The seller fails to carefully review every sentence of every representation and warranty of the seller in the acquisition agreement, to determine what is required to be disclosed. The language and thresholds for disclosure are extremely important, and will be negotiated between buyer and seller. Ideally, thresholds will be established so that the burden of disclosure is not overwhelming (e.g., requiring disclosure of any contracts over $500,000, as opposed to disclosure of any contracts).


• The capitalization table is incomplete (such as incorrect amounts for stock, warrants, options, etc.).


• The schedule for subsidiaries of the company is incomplete or doesn't list the jurisdiction of incorporation or percentage of the subsidiary owned.


• The list of material contracts is incomplete.


• The description of the material contracts is inadequate (such as including the wrong title of the contract, not listing all amendments to the contract, or not listing the parties to the contract).


• The schedule of leases for the company does not contain all required information (such as title of the lease, landlord, date of lease, location, rent and other payments, security deposit, etc.).


• The intellectual property disclosure is incomplete (such as missing information about patents, trademarks, service marks, domain names, etc.).


• The list of software used in the business (including any open source software) is incomplete.


• The schedule for employees is missing salary, bonus, or other key information.


• The schedules are missing the listing of any employment agreements or officer or director indemnification agreements.


• The schedules on the largest customers or suppliers are missing key data (such as dollar amounts involved or a description of the relationship).


• The disclosure schedule listing any key contracts that have a “change in control” provision is incomplete.


• The disclosure schedule listing all employee benefit plans (medical, dental, vision, life insurance, disability, stock options, bonus plans, ERISA plans, 401(k) plans, PTO plans, etc.) are incomplete or not descriptive enough.


• The disclosure schedule for insurance policies is incomplete (such as missing information on the type of insurance, the carrier, the policy number, the term, the deductible, and the annual premium).


• There is an incomplete schedule of any required disclosures regarding litigation, arbitration, investigation, or other governmental proceedings.


• The schedule of any liens on the company's assets is incomplete (such as failure to list the secured party, what contract it relates to, the date of the contract, and other relevant information).


• The tax disclosure schedule is incomplete (such as failing to disclose all income tax jurisdictions the company is subject to, any pending or past tax audits, any delinquent tax returns, or any unpaid tax liability).


• The disclosure schedule for bank accounts is incomplete (such as missing information about the type of account, the account number, the bank, and the authorized signatories).


• There are incomplete financial statements or liability disclosure, which are required by the seller's financial representations and warranties.

See also: 22 Mistakes Made by Sellers in M&A Transactions

Tips to Make the Preparation of the Disclosure Schedules Less Burdensome

Given that disclosure schedules are so important but yet so time consuming to prepare, here are a few tips based on my experience:

• The seller has to start preparing the disclosure schedules very early on in a deal, even before the acquisition agreement is finalized. At the end of this article, I link to a template that the seller can start with, and then modify as the acquisition agreement is finalized.


• Management team of the seller has to be alerted as to the high importance of the disclosure schedules.


• Key knowledgeable employees within the seller have to be involved in the preparation of the schedules.


• The disclosures need to be coordinated and tied in to what is contained in the seller's online data room.


• Over-disclosure tends to be better than under-disclosure, but this has to be tempered with an understanding of the likely reaction to a disclosure from the buyer.


• Every new redlined draft of the acquisition agreement must be circulated to the parties involved in preparation of the disclosure schedules, so that they can make appropriate modifications.


• The seller must be cognizant of developments in the business that may require updates to the disclosure schedules (such as new contracts, new litigation, new intellectual property developed, etc.).


• The seller's M&A counsel has to qualify as much as reasonably practical the representations and warranties of the seller in the acquisition agreement by “materiality” and “knowledge” qualifiers, so as to make the disclosure schedules less problematic to prepare.


• The seller's M&A counsel also should endeavor to limit disclosures to lists of documents or matters rather than descriptions of the contents of documents or matters (such as requiring a list of pending litigation rather than a description of each pending lawsuit); again, this approach lessens the work involved in preparing the disclosure schedules.

Sample Template of Disclosure Schedules

Below is a link to a sample template of disclosure schedules that will often be required for an M&A transaction. Note that the exact scope and language of the schedules can be subject to extensive negotiation, and thus the final form of the disclosure schedules will often vary significantly from what is contained below. But this is a good starting point for the seller's employees to prepare the first draft of the disclosure schedules. The disclaimers at the beginning of the disclosure schedules are important.

> Download free Disclosure Schedule template (Word document)

 

Copyright © by Richard D. Harroch. All Rights Reserved. Many thanks to Richard Smith, an M&A partner at Orrick, Herrington & Sutfcliffe, for his helpful input into this article.

Richard D. Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a large venture capital fund in the San Francisco area. His focus is on investing in Internet and digital media companies, and he was the founder of several Internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, FoxBusiness, and AllBusiness.com. Richard is the author of several books on startups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal-bestselling book on small business. He was also a corporate partner at the law firm of Orrick, Herrington & Sutcliffe, with experience in startups, mergers and acquisitions, strategic alliances, and venture capital.

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5 Common Blunders Small Businesses Make When Selling Online and How to Avoid Them

By Scott Fitzgerald

Making sales and bringing in revenue is the goal of any business large or small. If you're a merchant selling online, this means accepting credit cards and/or alternative forms of digital payment. And while that may sound simple, there are many aspects of online payment processing, that if not optimized properly, can really eat into your sales.

Here are five common blunders that new and small businesses make when accepting payment through their e-commerce stores.

1. They don't accept multiple forms of payment.

In order to maximize conversions, it is essential that online retailers allow customers to pay in the form that is most convenient to them. That doesn't just mean accepting traditional forms of payment such as MasterCard, Visa, and American Express, but also accepting alternative payment methods such as iDeal, ACH and Sofort, and mobile wallets such as Visa Checkout, MasterPass, PayPal, Apple Pay, and Alipay among others.

Not only will accepting mobile wallets allow you to convert more shoppers to buyers, but some payment systems may even offer you an additional marketing tool by offering coupons or discounts to shoppers that use their wallets when making purchases at your store. Mobile wallets are especially useful in converting mobile shoppers, where abandonment rates are traditionally the highest, hovering around 80 percent.

2. They don't optimize for cross-border e-commerce.

Think your business is too small to attract international shoppers? You might be surprised at how your sales will increase once you optimize for a global market-which shouldn't be hard, assuming you have a robust, globally-minded payment processor. Currently, the cross-border opportunity is estimated at $300 billion and forecasted to grow. So if you want a piece of the pie, jump on the international opportunity early, while your business is small and growing.

To optimize for cross-border e-commerce, ask your payment processor if they are able to do the following-and if they can't, it may mean it's time to start looking for a new payment processor.

• Offer prices in local currency: If you are selling to shoppers around the world, the prices on your website need to be presented in a shoppers' local currency. Make sure you work with a payment processor that will not only be able to present local currencies for multiple countries, but will also be able to pay you in your preferred settlement currency, USD for example.

• Present a checkout page in the local language: If a shopper can't read your website, the chances of them sticking around long enough to convert is slim to none. Utilizing hosted pages through a global payment processor is often the easiest way to present the local language of almost any country.

• Offer local payment types: Each country has different preferences and popular payment types. For example, in Germany Sofort is one of the most popular payment methods, while in China shoppers prefer Alipay. That's why it is important for merchants to think locally and consider the buying habits of shoppers across multiple regions and demographics.

3. They don't use intelligent payment routing.

Intelligent payment routing allows merchants to increase their percentage of approved transactions by connecting to multiple acquiring banks and utilizing failover capabilities.

An acquiring bank is a bank that processes credit and debit cards on behalf of the merchant. Once a customer makes a purchase on your e-commerce site, the payment request goes through the payment gateway via your payment processor to an acquiring bank where it is either approved or denied. When your business is connected to multiple acquiring banks, your shoppers' purchases are routed to the bank where they are most likely to be accepted.

Similarly, if a purchase is denied at the first acquiring bank, it can be rerouted to a second acquiring bank for approval. This process of rerouting purchases for a second or third attempt at approval is called failover.

4. They don't offer coupons or free shipping.

Free shipping may sound like a minor detail but it can be the difference between a shopper buying from you or your competitor. Amazon Prime is a good example of the power of free shipping. According to Statista, 78 percent of respondents joined Amazon Prime in 2015 because of its free two-day shipping. In addition, 56 percent of shoppers abandon shopping carts because of unexpected costs at checkout. And the most common unexpected cost shoppers encounter are shipping charges. So if you can, offer free shipping; if it's not possible, make sure you are clear about your shipping charges up front.

Similarly, everybody loves a bargain. Offering coupons can help to increase conversions by giving shoppers that extra incentive to purchase. And by auto filling coupon codes on the checkout page for shoppers who have clicked a certain promotional email, banner, or CTA, you make the checkout process even easier. Plus, offering coupons is a great strategy to boost repeat purchases and increase customer lifetime value.

5. There is too much friction in the checkout process.

Removing friction from your checkout process can increase sales by as much as 40 percent. Friction on checkout pages can be defined as all the noise that gets in the way of a smooth and seamless checkout experience for your shoppers, and ultimately can result in high abandonment rates. Examples of friction include too many form fields, no security logos, and no live help option.

In today's ultra competitive digital age, shoppers can be on a competitors' site with the simple click of a mouse. And if they experience friction on your site, that's just where they will be. So remove the friction and keep your shoppers happy-it's one of the easiest things you can do increase revenue.

About the Author

Post by : Scott Fitzgerald

Scott Fitzgerald is the SVP of marketing at BlueSnap, a full-stack global payment gateway provider. Scott's background is a strong blend of marketing, sales, and general management experience in payments and enterprise technology. Before coming to BlueSnap, Scott most recently worked at ACI Worldwide where he held VP-level positions in product management and marketing. During his tenure at ACI, Scott was instrumental in the company's global rebranding and in expressing the vision and strategy for ACI Universal Payments. Prior to joining ACI, Scott held senior sales and marketing positions at CA Technologies.

Company: BlueSnap

Website: www.home.bluesnap.com

Connect with me on Facebook, Twitter, LinkedIn, and Google+.

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12 Unique Ways to Build Brand Loyalty Through Social Media

Social media is an invaluable tool to help market your brand, but what good is it without a target audience? There are plenty of unique ways to engage your community and boost your social following, each of which helps customers get to know the names and faces behind your brand and stay loyal to your product or service.

That's why we asked 12 entrepreneurs from Young Entrepreneur Council (YEC) the following question:

Q. What's one unconventional way I can use social media to increase customer loyalty to my brand?

1. Use More Video

Video is an effective way to increase your customer loyalty on social media. It brings out your personality much more than a photo or text can. There's also more nuance and feeling in a video, and you can even leave people with a smile. It breaks the redundancy of content-driven posts and creates more energy and excitement for your feed. This helps followers feel more connected to you and your brand. -Andrew Thomas, SkyBell Doorbell

2. Create a Compelling Story

Social media is an opportunity to create a compelling story that your audience can become emotionally invested in, beyond their need for the product or service. Take consumers along for your brand's journey and make the experience interactive so that they have a say and feel like they are a part of the brand's success. -Rakia Reynolds, Skai Blue Media

3. Be Active on Facebook

It's (relatively) easy to start a Facebook group, but maintaining an active presence can be pretty draining, especially if you have three or four groups that have been established for the long haul. I've noticed that group members stay a lot more active and engaged when they see that you place a high amount of value on interacting with them as well. -Nathalie Lussier, AmbitionAlly

4. Follow Back

In a small way, giving customers a follow on social media helps them feel more loyal to a brand. That's why major brands follow some of their customers on platforms like Twitter and Instagram–to let customers know that they are unique. -Brett Farmiloe, Markitors

5. Stage a Competition

Offer customers the chance to win a free consultation with you or a free demo of your product by winning a game or a competition. For example, the first person (or several persons) to correctly answer a question about your business wins the prize, which could be anything you determine to be of value to your customers. Throw in a free prize periodically that everyone wants to win, like a gift card. -Nicole Munoz, Start Ranking Now

6. Use Live Broadcasts

I really love the video features that allow me to record live broadcasts where I can share my thoughts and directly answer my audience's questions. I see the level of loyalty rise from this degree of interaction. Plus, it's lots of fun! -Murray Newlands, Due.com

7. Reward Customers for Their Loyalty

Today, online reviews can make or break a business, especially in the local small business space. The more positive reviews you receive on your business's Google+ (Google My Business) page, Facebook page, and Yelp, the more traffic, calls, leads, and SEO impact you'll receive. To encourage reviews, reward your customers for leaving a positive review online. -Wesley Mathews, High Level Marketing

8. Stop Talking About Your Product

Show your philanthropic side on social media, and engage in stories about your brand that aren't just about selling. Invite others to share what they do so they can participate in their community. Take advantage of tools that segment your follower list to find those that represent the best opportunity for your business. This way, you can ensure your message fits and communicates to the right audience. -Dan Golden, Be Found Online

9. Introduce or Highlight Your Employees

Publicly acknowledging the individuals behind your business is a meaningful way to bring your company recognition and trust. Consumers enjoy doing business with people they feel they know. Additionally, when you introduce or highlight employees in the public eye, your business will gain greater exposure among your employees' friends. -Anthony Pezzotti, Knowzo.com

10. Get Personal

Yes, your corporate social media accounts should be professional, but everyone loves a story, and the process of building a business is a real adventure. Letting people get a glimpse into your life and the passion you have for what you do can really pay off. Also, people like to know that they're following a brand that has authenticity behind it, and personal passion is great evidence of that. -Adam Steele, The Magistrate

11. Use Snapchat to Make Customers Feel Like Family

Snapchat can drive deep engagement and customer loyalty when used strategically to tell stories around your brand. It's basically the opposite of LinkedIn. While LinkedIn is about being buttoned up, Snapchat is about revealing the real. Snapchat is the perfect platform for making your customers feel like family; it gives your audience a unique and personal perspective. -Robby Berthume, Bull & Beard

12. Take Social Listening Seriously

When a customer tweets about your brand, respond and react. It's small, delightful acts that turn customers from casual users into super fans. Social and community managers should keep track of active members on all social channels, and reward them for their participation with personalized notes. These folks are the ones who will turn into major brand advocates. -Chris Savage, Wistia

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The Hidden Side Effects of Using Big Data to Better Understand Your Customers

When it comes to better understanding your customers, you likely leverage every possible resource from personas to mapping the customer experience journey.  For marketers, big data is a boon – it's a gold mine of information that, to be sure, requires a bit of digging through the dirt to get to the real treasure.

Big data has been used to tout everything from customer sentiment to fraud prediction. By letting computers do what they do best, it is believed that crunching all that information can lead to some pretty significant correlations – between click streams, geographic location, and even transactional data. Tying it all together helps bring the customer service lens into even greater focus.

With that being said, however, relying too much on big data has its drawbacks.  Beyond the fact that we're just starting to understand what's out there and how it's all relatable, big data should not be looked at as a marketing or customer service panacea.  In fact, there are a lot of areas where relying too much on big data to better understand your customers can have the opposite effect, like these:

Lack of Availability

Let's say you're shopping online for a new pair of shoes. You're scrolling through pair after pair on your cell phone until you find the perfect pair. Unfortunately, they're backordered.  You want to be notified when more are in stock, but you're not sure how to do that.  You tap for customer service. You're invited to type in your question and see a list of canned solutions.  That's a bit too cumbersome so you look for a way to contact a representative.

Instead, you're asked to submit your question to a helpdesk or online community. Trying to fill out a trouble ticket, you see that the service isn't compatible with mobile. You give up in frustration. Shortly thereafter, you get an email reminding you about the item you were interested in, and asking how the company can do better.

If you're visualizing a cartoonish response of steam coming out of your ears from anger and frustration, now you can imagine the limitations that big data has.  Perhaps the only retailer to truly get a handle on big data at this level is Amazon, and they've been able to integrate unimaginable reams of data seamlessly while being able to grow and scale their company with consistency.

Amazon had to grow and scale its operations – and quickly, yet they still deliver consistently high-rated customer service thanks to big data analytics.

When the service you need isn't available, you grit your teeth for long wait times ahead, and test your patience with the poor rep that has to look up the details of the backordered product in a sea of potential choices. The point is, Big Data shouldn't just be pored over by analytics experts, but made available to everyone at every tier in the organization.

Rush to Judgment and Unrealistic Expectations

Big data is the foundation of a perilously-positioned scale. On one end, you have the camp that's rigid and inflexible. Things have always been done a certain way, and the deluge of big data isn't going to change that. These companies risk getting outmaneuvered by their more proactive competitors. They make hasty decisions that may not always be backed by data science, and then backpedal when things go south.

At the opposite end, there are those who are positively drowning in analytics. They're so swallowed up by data that they hesitate to make any decision without consulting the numbers like some kind of oracle. They shrug off their “gut feelings” or intuition because the data doesn't account for that.

There's no doubt that big data is changing the way we market, but as many industry trends go, it can easily be blown out of proportion into something it's not. People are complex, self-serving, habitual, ever-changing creatures. Trying to make sense of that is not something that can be done overnight. It requires careful planning, an understanding of the different “pools” of information the data is drawing from, and one's own understanding of their target market to fully grasp.

Otherwise you end up with complex, complicated decisions that are impossible to predict and frustrating to implement.

Data Modeling Difficulties

In order to get the most out of big data, it has to be modeled in order to bring the value it's so often associated with to customer service, which in turn trickles down to the customer. At its core, Big Data is raw, unfiltered and largely noise. It's not structured, organized or clean.  The only system currently out there with the power to tackle such large scale information is Hadoop, which has been around since the early 2000s.

Hadoop is the closest thing available to enterprise-grade big data analytics. Image source

Currently there is no user friendly, on-demand and easily implementable enterprise data modeling system. There are many ways to tackle the big data noise, however, but many data models hit common obstacles including not being able to scale accordingly or organize the data in a sensible way, and still fewer work with existing analytics platforms and CRM information.

Just having the data is no longer enough. Making it accessible and understandable to everyone is the challenge today's modeling apps have to fix.

Pure Complexity

And finally, let's face it, we're only beginning to scratch the surface of what's out there. And yet it keeps growing and growing.  Costs go down, availability of information goes up.  Despite all its lucrative potential, big data can't replace people. When insights are gleaned from data scientists, they're passed on to managers and then employees.  If there's not a process in place to better understand and leverage the information you continue to gain, it's practically worthless.

The bottom line with using big data to better understand your customers is that there's a lot of expectations of what it can or cannot do. With such a wave looming overhead, it's easy to want to stand back and wait.  But just as the internet itself was once looked at as being “just a fad”, so too is big data poised to completely change what we know about our audience.

Being able to turn this information into insight is a challenge – but one worth tackling. We all know what happens when there's a rush to implement without a goal in mind.  Knowing the issues ahead of time can help you plan out a strategy that takes all of these points into consideration as you all work together toward a common goal – making sure every customer is exceedingly satisfied, again and again.

What are Your Thoughts on Using Big Data to Better Understand Customers?

Do you think big data is still in its infancy with regard to its use in customer analytics? Or do you think we simply lack the tools and understanding to make the most of it? What tools are you currently using to make sense of the data you collect? Share your thoughts and comments with us below.

About the Author: Sherice Jacob helps business owners improve website design and increase conversion rates through compelling copywriting, user-friendly design and smart analytics analysis. Learn more at iElectrify.com and download your free web copy tune-up and conversion checklist today!

Improve Your Sales With a Dose of Creativity

You'll hear many different answers when you ask people what is the one skill that salespeople need to be successful. Answers I've heard include talking, listening, and even golfing.

But I've never heard anyone tell me that successful salespeople need the skill of creativity–and they do. Here's why.

When Do You Need to Be Creative?

Creativity is the process of coming up with new ideas. How many different areas of the sales process require you to generate new ideas? Let's start with solving your customers' problems.

New problems come to light when you sell new products–that's when you need a creative solution. A customer's demand could be incompatible with management's policies–you will need a creative solution here too. You certainly don't want to lose a customer, but you had better have a creative solution when an important customer threatens to change suppliers. And when an important customer threatens to change suppliers, you had better have a creative solution–you certainly don't want to lose a customer.

Problems are only the beginning. You need to be creative to address the challenges selling against the competition. Also attracting new customers and prospecting often calls for having creative solutions.

How to Be Creative

Knowing that you need to be creative and actually being creative are two different things. It's easier to be creative once you understand the creative process, and it starts by understanding how the brain works.

Our senses are overloaded with information from people, places, and things. Only a small amount of the information you process is stored in your conscious memory; the remainder is stored in your unconscious memory.

Our brains then are like our attics. There's a lot of stuff in them, but most of us don't remember what's in there. Your attic material is only useful if you can retrieve it. Creativity allows you to retrieve and use your treasure of stored information.

Generating New Ideas

One way to generate new ideas is to tap into the brain's ability to associate. For example, the word “Thanksgiving” might trigger associations to other words like “food,” “family,” and “holiday.” The creative process starts with using those associations to generate ideas.

Start with a business problem. If your business problem is how to sell to more customers, the question to ask is “How can I associate “food” (the first association for Thanksgiving) with selling to more customers?”

One answer might be sending food gifts to attract new customers. Likewise, an association with “family” may lead to the idea of getting referrals for new business from one's family. “Holiday” may trigger the idea of celebration and how to acknowledge and celebrate new customers.

Creativity can lead to new ideas that would be difficult to develop without associations. There are lists of trigger words for technical and non-technical problems. Once you define your challenge, let the creative process and associations guide you to many possible solutions.

Are You Getting in the Way of Your Own Creativity?

There are many barriers to creativity. Believing there is only one right answer will diminish your ability to be creative. You will prematurely judge and generate fewer ideas. It's been said that nothing is more dangerous than an idea if it's the only one you have.

Challenge yourself to develop many answers, perhaps a second and a third right answer. Do this by rephrasing your problem and ask for many answers. These latter solutions will hopefully be even better than the first one you generated.

Another barrier to creativity is believing that you are not creative. Learning other creative techniques will reinforce your confidence in your abilities. If you believe you are creative, this will improve your ability to be creative.

Creativity Can Lead to Success

Think of how the workplace has changed over the years. There will always be a place for people who can take instructions from others; however, the people who will be the most valuable are the ones who can generate new ideas to get new customers, keep existing ones, and increase profitability. Their ideas will come from creativity. Don't you want to be one of the ones who is more valuable?

Salespeople who possess the skill of creativity, and are generating new ideas for their companies and their customers, will end up being the most successful in the future.

But why wait for the future? You can be creative today.

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Are You Handicapping Your Conversion Rate?

As humans, we tend to believe that if we like something, it must have value-how else do you explain our obsession with celebrities?

I mean, I've never met Tom Brady, but he's one of my favorite athletes…so he must be a good guy, right?

Unfortunately, this sort of thinking doesn't end with pro athletes or TV stars. As online marketers, we make a lot of assumptions about how certain website elements affect our conversion rates.

After all, if we like a certain page element or approach to site design, then everyone else must like it too, right?

If only that were true…

The fact of the matter is, you are not your target audience. So, even if you love your sidebar and hate your developer's favorite widget, you really have no idea how either of those site elements are affecting your conversion rate.

But, the good news is that with a few simple tests, you can easily discover how different elements on your site help or hinder your conversion rate.

Much Ado About Nothing?

Eliminating website elements allows you to get a good feel for how those elements are affecting the performance of your site.

In a lot of ways, it's like comparing Tom Brady's performance with deflated balls to his performance without deflated balls.

If Tom only wins Superbowls when he plays with deflated balls, that must be a big contributor to his performance. On the other hand, if he still wins without the deflated balls, air pressure probably doesn't affect his throwing ability much.

The same idea applies to your website.

If you remove an element and your conversion rate goes up, that element was probably hurting your conversion rate. If your conversion rate goes down, that element was probably helping your conversion rate.

Simple enough, right?

It may be a simple idea, but it's one that can make a big difference to your business.

For example, EA got rid of the promo banner on their SimCity microsite and improved their purchase rate by 43%. Impact deleted their sidebar and their conversion rate went up 71%.

It's easy to fall into the trap of believing that what we like, everyone likes. But, if you aren't testing your site elements, you may very well be doggedly hanging on to an element that is ruining your conversion rate.

How to Determine the Value of Your Site Elements

If you really want to know how specific site elements affect your conversion rate, there are two easy places to start: your pages and the elements on those pages.

Which Pages Do You Really Need?

One of the simplest things you can test on your site is how your homepage affects your conversion rate. Is your homepage an important part of your conversion process? Or does it distract and frustrate your site visitors?

To test this, all you have to do is send traffic to another page.

In fact, most companies do this without even realizing it when they send campaign traffic to landing pages…instead of their home page.

Essentially, when you send traffic to a landing page, you're running an A/B test. The homepage is your control and the landing page is your variant.

In general, a good landing page that matches the messaging of the marketing that brought someone to your page will convert better than your homepage. However, this isn't always the case.

For some companies, their homepage is actually an important part of their conversion funnel.

For example, we had a client who wanted to send traffic to two landing pages (each one was focused on a different product) to see which one performed the best. Out of curiosity, we also threw in the homepage for comparison's sake.

To our surprise, the homepage won.

As it turned out, this client's customers were actually interested in both products and a variety of our client's other products. Since the homepage featured all of those products, potential customers didn't want a product-specific landing page-they wanted the homepage.

For this client, the homepage was a key part of their conversion process.

Simply adding or eliminating pages from your customer journey can be a great way to determine how different pages are contributing to your conversion rate. It's simple, easy and it can teach you a lot about your audience.

Which Parts of Your Page/Site Matter?

Once you've identified how your pages are affecting your conversion rate, you can start looking at the specific elements on those pages.

For example, for one of our clients, we removed the sliding promotion header from their eCommerce site. As a result, their revenue-per-visitor increased by 25%. Similarly, when we nixed their navigation sidebar, their monthly revenue increased by 19%.

Together, eliminating these pet design elements increased their yearly profits by $2 million!

To set up a test like this, you'll want to build a second version of your page that is identical to your current page-with one exception. Your new page won't have the page element you are evaluating.

Typically, this is pretty easy. Just duplicate the page you want to test and then go in and delete the part of the page that you want to test. In some cases, though, this can mess up other parts of the page, so be sure to proofread your new page before you start your test.

As an added bonus, you can use what you learn from eliminating page elements to come up with further testing ideas.

For example, if you know that a page element on one page is hurting your conversion rate, you can try eliminating it from other pages too. Alternatively, you can try tweaking or replacing the element to see if you can get it to perform better.

On the other hand, if a specific part of your page is really boosting your conversion rate, you may want to replicate that element across your site. You can also try to milk even more from high-performing elements by tweaking things like copy, color, size, imagery or location.

Regardless of how you use your findings, eliminating page elements can teach you a lot about what your audience really wants from your site.

Conclusion

No matter how much you might like a particular page or page element, what really matters is how those aspects of your site affect your traffic.

Unfortunately, if you don't test your specific site elements, you'll never know whether or not they are helping or hurting your conversion rates.

However, by simply eliminating specific site elements, you can very easily discover what your target market values on your site and what they hate. And, once you know what your audience values, you can make sure your website delivers exactly what your potential customers want.

You've heard my two cents, now I want to hear yours.

How do you feel about this approach to website optimization? Are there additional factors that should be considered in this analysis? Is this something you've tried or would consider trying?

About the Author: Jacob Baadsgaard is the CEO and fearless leader of Disruptive Advertising, an online marketing agency dedicated to using PPC advertising and website optimization to drive sales. His face is as big as his heart and he loves to help businesses achieve their online potential. Connect with him on LinkedIn or Twitter.