As a small business you know you have to get out there and get seen, be that face to face, or using advertising and/or marketing.  Most of the time with starting prices in the region of £500 per month for SEO services it can feel like this area of marketing is out of reach.  So is it worth the investment?

To find out we need to dive into some figures and look at how much an improvement in search result positions (rankings) are worth to your business, and the alternatives and their costs.

What is SEO worth to you?

Here are the figures you will need to work out if SEO is worth undertaking:

• Keyword search volume
• Search engine click-through rate CTR (see graph below)
• Your average conversion rate (leads turning into sales)
• Your average order value

The Formula:

(Keyword search volume X CTR X Average conversion rate X Average order value)

Say I want to rank for 'digital marketing company'.  I'd need to find out how often this keyword is searched for per month.  Ahrefs.com is a great website to find this information.  Their data shows 'digital marketing company' is searched 900 times per month.

Here are the expected click through rates for first to fifth page search positions on Google:

(use the CTR% listed above in your calculations)

Let's consider we have an average conversion rate of 2%, with an average order value of £2,000 per month for digital marketing services.

We want to rank for position number 1 for the term 'digital marketing company'.  And we know from above that it gets searched 900 times a month.

900 x 36.5% x 2% x £2,000 = £13,140

Here is how you break that formula down:

900 x 36.5% = 328.5
£2,000 x 2% = £40
328.5 x £40 = £13,140

We would be looking at £13,140 per month in revenue.

Let's say that is our best case scenario, now we need to look at the other end of the scale.

Say our current position in the search results for 'digital marketing company' is position number 23.

This time we have a CTR of 0.3%, the conversion rate of 2% stays the same, as does the £2,000 per month revenue.

900 x 0.3% x 2% x £2,000 = £108

We would be looking at £108 per month in revenue.

Ranking in position 23 is worth £108 a month, whereas ranking in position 1 is worth £13,140 per month.

The only factors we can't know is how long it is likely to take to move from position 23 to position 1 and how hard it is to rank for that keyword.  This all comes down to the skill set of the SEO manager, strategy and successful execution of the strategy.  This is so much harder to put a figure to.

We could look at the ranking curve by working out the monthly value of each position as we showed in the examples above, then add all 12 months together to get a grand total.  This will then show us how much each position is worth as we move up a position in the search results, as well as revenue over a period of time.  To work out this next section you will have to have done this calculation.

The first 12 months value per year would be £15,876.

If we are paying £2,000 per month over a year for SEO services that comes to £24,000 giving us a loss of -£8,124.

£15,876 - (£2,000 x 12) = -£8,124

However, by the end of year two with SEO fees staying the same, the gain would be £32,640.

You can use the above to work out what SEO is worth to your business for your main keyword and what you can expect to pay for SEO services and ROI over the short and long term.

What is the cost of an SEO alternative?

The best alternative is PPC (pay-per-click) advertising.  It's a better option as you don't have to wait to rank number 1 in the search results.  You can pay to be there the moment your website launches.  But the moment you stop paying your website will no longer rank at the top in the advertising section.  Whereas any improvements the SEO has caused will continue to work for the longer term.

Use Google Adwords free keyword tool to find out suggested bid prices for your chosen keywords.  Sponsored Google ads typically have a lower CTR than organic search results, so let's assume around 5% CTR for our calculations.

Our chosen keyword bidding price is £25.00

900 x 5% x £25 = £1,125 per month ad spend

900 x 5% x 2% X £2,000 = £1,800 in revenue per month

£1,800 - £1,125 x 12 = £675 revenue in the first year. 

So if you are managing the ads yourself, you get a positive return on investment (ROI) of £675.

If you are using an ad management company for say £500 per month you can see you will only have £175 revenue left a month, over twenty four months that is going to be £4,200.

Compare this to the figures for SEO services of £32,640 gain by the end of year two.

You'll start making revenue faster with PPC but you will also have more expenses with PPC.

If you want to know if SEO is worth it for your business, identify your search term, run through the equations above and let the numbers help guide your decision.

David at DR Adept (DRA) is an award winning website designer/developer.  DRA create service and eCommerce websites that won't break your budget.  DRA also offer product inputting and updating as well as search engine optimisation (SEO), content creation and blogging.

DRA Digital help businesses of all sizes attract new customers, with strategically designed and managed websites.

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