It’s probably best to consult with a professional when trying to determine how to calculate ROI from SEO efforts. There are many factors (many of which may be unique to YOU, and not to others) that would go into the calculation. Bottom line? You need to determine all the costs that might go into an effort (agency/content/IT support, etc.) and then figure out how much business (leads/sales) it will take in order for the investment to make sense. Let’s say that you have an agency that costs $10,000 per month and you’ll have another 10 hours of IT support needed and a copywriter is going to need to be involved at a rate of $500 per month. What does your IT cost? (is it in-house or FT?). Once you get these costs, you’ll then know what you need, in return. For the sake of argument, let’s say that your total costs are going to be $13,000 per month. So, you need to net $13,000 per month from the investment in order to “break even”.
Are you B2B or B2C? Ecommerce? Each of these have different calculations (B2B may involve determining the value of a lead and then value of a “qualified lead” and then conversion rate of qualified lead to sale and then the average value of a sale; Ecommerce – pretty clear…”sales”). Since B2B is the most complicated, we’ll tackle a sample scenario here. Let’s say that out of 1,000 visitors, you have 10% convert into a lead (100 leads). From there, 10% of those convert into a “qualified lead” (10 qualified leads). You now have 10 qualified lead for every 1,000 visitors to your website. If your conversion rate is 20% of those qualified leads, that would mean that 1,000 visitors would/should equate to 2 sales. If each sale is worth $5,000 (total $10,000) that would mean that you would need more than 1,000 visitors in order to be ROI positive for the SEO investment ($13,000 invested; $10,000 gross).
But, then again, you must consider your “net” on this (the idea is not to break even on “gross”, but for the investment to actually put money into your bank account). But, armed with that information (what “net” revenue looks like), you can now calculate how many visitors you’re gonna need in order for the investment to pay off. Once you know your target for the number of visitors needed, you can look at the keyword universe (for the keywords you are thinking that you might target), and see how often those keywords are searched, each month. Understanding that there are no guarantees for SEO, you can get a sense for how much opportunity exists and see how close (or not) you are to ranking “well enough” (top 10 on Google) to generate traffic/clicks from these keywords.
If you find that you have a keyword universe of 1,000,000 searches per month in which there is a chance for a top 10 ranking, and you use a low estimated click-through-rate (something like 1%), you can then see what the opportunity “might be” (i.e.: 1,000,000 searches x 1% = 10,000 clicks/visits per month). In this scenario, since we would be “happy” (no one is ever completely content with “exceeding break even” with their investment) with 2,000 visitors per month, there’s a good chance that ROI is possible from the investment.
To help you to determine how much traffic SEO needs to deliver, in order to be ROI positive, we have developed Digital Marketing ROI Calculators, to be used for SEO and/or PPC efforts. Please check them out and share your feedback on how we can make them better.