Search Engine Optimisation Costs – The ROI Calculation

Recently, while working for a small business client, I received a cold call from an SEO agency. I am always interested in what services may be available in the marketplace so I allowed the agency to go through their pitch. I agreed to accept a monthly search engine optimisation quotation.

Based on the phone conversation I was not expecting much but when the quote came in it was a bit of a shock. To deliver a list of basic SEO services the cost was approximately £2,100 a month!

Obviously, the SEO agency had their targeting all wrong as £2,100 a month is way beyond the budget of my client but the offer got me thinking.

SEO Costs – The Numbers

Let’s assume you install kitchens and your average sale price is £1,000. Assume your profit margin is 40% then you need to make approximately five sales per month to cover (break even) the £2,100 charged by the SEO agency.

How many leads (enquiries) do you need to achieve five sales? The SEO agency is only concerned with driving visitors to your website so to obtain a fair assessment we should only include leads generated by that website.

let’s be optimistic and assume you can have a reasonable conversation with (perhaps even quote) 50% of the leads received. Assume 50% of those conversations/quotes convert to a sale then you need around twenty website generated leads per month to break even.

Again, let’s be optimistic and assume 1 in 75 of those landing on your website make an enquiry then you need 1,500 (75×20) website visits per month to hit the breakeven point. How many visits do you receive now, do you know?

What increase in website visitors is required on where you are now 2x? 5x? 10x? Is that realistic? Think of it in business terms. If someone told you they could double your sales in 12 months you may believe them, if they could present a strong argument but 5x? 10x? I think not.

Now, it is true, the above is oversimplified. If you have a strong website, or nurture campaign, then the 74 website visitors who do not make an immediate enquiry may come back at a later date. Those 74 website visitors are at least aware of your business so the effort involved in driving them there is not entirely wasted.

Branding and awareness are all very well but they are difficult to measure. Vanity numbers such as website visits, social shares, impressions clicks throughs are no more than indicators. All you can really judge on is leads generated, the quality of those leads and ultimately sales.

The SEO Agency Pitch – Smoke And Mirrors

Three other important points to note when assessing if search engine optimisation services will deliver a return for your business. They are, measurement and analytics, the time taken to generate first results and your level of involvement in the process.

The most common tool used to record website visitors is Google analytics. Not all website visits are valid and if you look at only the top level numbers a large proportion of the total may be complete junk. It is relatively easy for an unscrupulous SEO agency to deceive a business owner who does not have a basic understanding of organic, direct and referral traffic.

To generate SEO results takes time and you should not expect any significant results within three months. Remember you need to factor the monthly search engine optimisation costs during this ramp up time into your calculations.

Let’s say you keep spread the total cost of the SEO agency over 12 months. If 3 of those months are the ramp up time (25% of the total) then you need 25 leads per month and around 1,900 website visits per month during the remaining 9 months to break even.

Finally, there is the issue of content. At this point, the discussion can get a little complicated and is covered in greater detail in previous posts. In short, you need to assess what resources your business will need to allocate to the SEO process. Hiring an SEO agency is no longer a ‘hire and forget’ situation and whatever resources your business needs to allocate needs to be factored into the cost model.

Rounding Up

The above does not mean the right type (and size) of business, in the right market, with the right SEO agency in place cannot generate a return on investment on SEO services because they can. If your business can deliver the fuel for the process (content) if you can obtain good quality search engine optimisation services at a reasonable cost and most importantly if you can continue to fund the costs to the point you see a return then SEO can be worth the cost and resources.

There is no recognised qualification in SEO, there is no accepted approach that will work for every (or any!) business. There are some excellent SEO service providers out there but it can be difficult for those with no background in the subject to separate them from those who can simply talk a good game. It is important to remember good SEO takes time and effort and that costs. Often, that cost can be beyond the reach of small and micro businesses. It is, therefore, always best to work costs of what offered back to the number of sales required to break even.

What is a small business in need of more sales but unable to justify search engine optimisation costs to do? If that business only deals with customers in a relatively small geographic area then local SEO may be an alternative. This we will cover in future posts.

Author: admin

Phil Smith is a experienced marketer who writes about a number of subjects including local marketing, small business marketing, strategy and business growth Phil has owned and run Striga Consulting since 2008.Contact Phil at phil@striga.co.uk or call 01670 513378. Striga consulting operates in the North East of England including Tyne and Wear, Durham and Northumberland.