We find it utterly astonishing that most SEO companies don’t perform ROI analysis when providing an estimate or quote. In fact, when we were recently talking to one of the biggest SEO firms out there, they mentioned that they don’t do any kind of ROI analysis because it is too risky for them! Too risky? In reading between the lines, it seems that the risk is that they might be held accountable for their performance.
So, the short of it is that most SEO providers aren’t going to “offer” you an ROI analysis so that you can see if using search engine optimization will benefit your company financially. We firmly believe in looking at the numbers to see if you should invest, as it will take a considerable amount of money to get solid rankings, so there better be a corresponding revenues that is greater than the cost.
One point of note that is important – it may still make sense for you to implement SEO even though the numbers don’t show a return over costs. Perhaps your overall strategy is to build up momentum over time as a part of a larger online marketing investment – including PPC, social media, and other online advertising channels. We’re not suggesting that you don’t invest in SEO unless it shows a shorter term positive ROI. But we are saying that you should consider these numbers before making the decision to dive in.
Now, on to an SEO ROI methodology that you can easily implement. First, take the keywords that they’re proposing you should optimize. Then, plug them into the Google Keyword Tool in order to gauge the Local Monthly searches per month. Be sure that you’re using “exact match” only. So, for example, the total local monthly exact searches for the term “toy trains” is 6,600. Now, the historical numbers show that most clicks on the first page go to the top ranking sites. There are a number of different thoughts here, but take a conservative number, say 6-8%. This will be your conservative click through rate scenario. So, by multiplying the total local monthly exact searches (in our case 6,600) by the conservative click through rate (in our case, say 6%), you’ll find the conservative potential clicks to your site. In our example, there are a potential of 396 visitors to our site. And, let’s say that our average conversion rate is 2% (total number of visitors to our site that “take an action”. So, of the 396 visitors, about 7 or 8 will be buying our toy trains.
There are a number of factors that come into play here – for example, if you’re optimizing for the wrong term, you may not get as many people to click through or to convert on your site. But in the very least, it’s important to understand if the investment is financially worth it. In our case, if we earn $30 per train and sell 8 trains per month, then our total revenue is $240. The cost of SEO services should be less than this if we’re ultimately going to sustain the investment.