A very important step to making a good decision whether SEO will be right for your business or is working for your business is calculating the Return On Investment (ROI) of your SEO campaign.
SEO ROI, or Search Engine Optimisation Return On Investment shows you whether your SEO is actually making you money. It compares what you spend on SEO to the revenue it brings in. This way you’re not guessing, you’re making smart, data-backed decisions about what to do next. It’s the clearest way to prove your SEO strategy is working (or where it needs fixing).
The Formula For Calculating ROI ON SEO
If you’ve been in business for a period of time, no doubt you would have come across the Lifetime Value of a Customer concept.
If not… here’s how it works (in a nutshell).
THE FORMULA: (Average Value of a Sale) x (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer)
Now you can work out at what rate you’re willing to buy customers with your marketing… you can scientifically and mathematically determine what you can spend in order to acquire new business.
Here’s the numbers you’ll have to gather:
1) Keyword Search Volume – this is the number of people that are looking for your products or services.
Example Figures For A Plumber In Brisbane: 2,020 searches across 11 keywords.
2) Traffic Capture - based on various studies completed in the SEO space and info provided by AOL, the industry standard for the amount of traffic captured by a website on the first page ranges anywhere from 2-37%.
For full report visit Chitika
In a new market, a safe figure to go with would be around the 17-20% mark. This won’t blow up your numbers and create unrealistic expectations.
Example Figures For Plumber In Brisbane: 17% traffic capture.
3) Lead Conversion – this is the percentage of traffic that actually turns into phone calls, email form enquiries or opt-ins. Be super conservative here.
Example Lead Conversion For Plumber In Brisbane: 10%
Once we have these real life figures for our business, we can accurately forecast what a ranking on the first page could be worth in terms of Lead Flow.
All you need to calculate is: (Total Traffic) X (Traffic Capture) X (Lead Conversion)
So in our example, there was a total of 2,020 searches/month multiplied by 17% traffic capture, which gives us 343 visits to the website.
Now multiply this figure by your lead conversion rate (10% in our example) – which reveals, in our example, this kind of SEO traffic will yield an average of 34 new enquiries every month.
4) Client Conversion – this is the number of clients/customers you convert from your enquiries. This figure is totally dependent on you, your sales skill level or closing procedures you may have in place.
A conservative figure is 50%, but for this example let’s work with 25% client conversion.
5) Average Sale Value – In our example, the average fee for a plumber starts at $50/hr and let’s say the average job would require 3 hours.
Example Average Sale Value For Plumber Brisbane: $150.00
6) Cost Of Paid Traffic – In our example, the average cost was anywhere from $16-$30 per click via Google Adwords.
How To Calculate The Precise ROI To Expect From SEO
First, let’s work out what your SEO traffic would be worth on a monthly basis.
Sale Value Of SEO Traffic Per Month: (Client Conversions) X (Sale Value)
In our example, we converted a total of 34 enquiries at an average sale value of $150. Which would make the search traffic worth $5,100/month.
A Brisbane campaign would require a fair bit of work, so in terms of SEO, you would be looking at a realistic cost of $1,500 per month for a campaign like this.
So in this example, you’d be looking at a profit (before any fulfilment expense etc.) of $3,600.
Cost Of Equal Adwords Traffic: (Traffic Capture) X (Cost Per Click)
In our example, we were working with 343 visits/clicks per month at an average click cost of $23.
So the cost of Adwords to achieve this kind of traffic would come to $7,889, which is dramatically lower than the potential sales made.
How to Determine the Value of an SEO Investment
SEO takes time and will SEO costs can take up considerable parts of your marketing budget, so of course you want to be reassured that it's working. Here are a few things you can look at to check the value and 'what's working':
Quality of Work Received
Look at the different modalities - are you getting high quality links from unique websites? Is your content helpful and well written? Is the coding of your site done well and strategies executed properly? A good SEO should be able to communicate the quality of these factors in ways you will understand.
Reporting of SEO Campaign
Is the campaign growing, or showing signs of growth? Do you understand the report and feel well communicated to?
Growth in website impressions
If you're on the first page, more people are going to see your site and potentially click on your site. You want to see those impressions grow in order for conversions to follow.
Growth in website traffic
Traffic is the driving force behind a successful campaign. The higher you are up in the search, the more traffic you will get, and the higher ROI you will experience as a result.
Growth in phone calls
Many businesses begin to see positive results within six months to a year after launching their SEO campaigns. Are the people who you want to call you, actually calling you?
Growth in enquiries/form submissions
Enquiries and form submissions are another conversion metric that SEO should help to improve, delivering high quality leads that actual convert.
Growth in sales
Sales aren't directly impacted by SEO, but you can influence your form submissions and sales process by understanding how your website is performing, your target market, and the widespread perception of your brand.
Growth in brand awareness
When your impressions grow, when you're featured across the SERPs, have links on popular websites and an active presence on social media, your brand will grow, which can only mean good things for your bottom line.
DIY V's Professional SEO
Should you give your mate who knows some stuff about websites a go? Or do you need to hire a pro?
SEO Complexity
This will determine whether you should hire a professional or can handle it DIY. If the site just needs basic optimisation, some content and local citations, and the industry isn't too competitive - you can probably handle this in house or as a DIY job, however there are a few more factors to consider below before doing so.
DIY SEO Time Investment
DIY SEO requires significant time for learning and implementation, which may distract from other business activities. You have to learn SEO, stay on top of updates, understand link building, coding ins and outs, content best practices, and how to handle the back end of your site. Where is your time best spent?
Focus on Core Business
Hiring SEO professionals allows businesses to focus on other vital projects related to growth. If your time is best spent in sales, dealing with customers and making your product better, hiring a professional will allow you to spend time on what matters.
Professional Preference
Many companies, especially small to mid-sized businesses, prefer professional SEO services over doing SEO themselves. A lot of smaller companies like working with local businesses, where corporate companies prefer a larger agency. If your time is worth more than the cost of getting an SEO, think of how much you're saving by outsourcing.
SEO Results Comparison
Professional SEO services often yield better results than DIY SEO in the long run. While there are no guarantees, you will be positioning your site for the best chance of success by going with a company who lives and breathes SEO.
Your Next Step
Now that you understand how to calculate SEO ROI and what factors actually impact your results, the next logical step is simple:
Run the numbers for your business.
- Start with your search volumes
- Estimate traffic capture and lead conversion
- Work out your average sale value and close rate
This exercise will give you clarity... not guesses, whether SEO is the right marketing channel for your business.
If the potential return makes sense, and you'd rather focus on your business than spend hours learning SEO, it might be time to talk to a professional.
Still not sure?
We offer a complimentary SEO quotes tailored to your business. No strings attached, just real numbers to help you decide if SEO should be part of your strategy. Get a free quote here or call our office on 1300 188 662.