Why Conversion Rate Sounds More Important Than It Is

The way you calculate conversion rate on a website is pretty simple math: Number of Sales / Number of Visitors x 100 = Conversion Rate (that's sales divided by number of visitors). Seems simple right? So if I sell one item for $10 and 100 people go to my site and 10 people buy, I made $100 and my conversion rate is 10% because 10 out of 100 people bought something.
So say my boss says, Aaron, I'll give you a $500 bonus if you can double our conversion rate, so of course I say Heck Yeah! So I signup for an adwords account on the boss's card and before you know it, I've got 1000 people at my store and 200 people buy my $10 widget! Whoo Hoo! Pay up Boss!! I doubled our conversion rate...
So what's the rub? Did I forget to mention something? Of course!! What I didn't mention is that I paid $1.00 for that click, so YES I doubled the conversion rate, but I also just rang up $1,000 in advertising and only sold $2000 worth of merchandise (which we know you don't have anywhere near 100% profit on whatever your selling, e-books excluded). So I'm probably not going to get the bonus...
Take all the numbers into consideration when determining your advertising approach, always keep the goal in mind, SPEND LESS GET MORE. Optimize and test your site constantly and continually "test and learn" the more you do it the easier and better it gets! There are many analytical tools out there to see where bottlenecks are in your site, if you haven't already here are a few of the MUST HAVES as a webmaster.

1. Google Webmaster Tools
2. Google Analytics
3. Google Website Optimizer
4. jQuery

I'll be adding more as I think of them. Keep Learning and Testing, then Testing and Learning!