SEO ROI

13 Steps to calculate the ROI of SEO in 2020

Like any significant investment for your business, it’s important that you realise Return on Investment (ROI) for any marketing spend. This is especially true for marketing & advertising, as competition increases, the more effort (and spend) is required to compete and as a result, costs continue to grow.

Although it’s a relatively complex calculation, this guide will assist you to start the process to calculate the Return on Investment (ROI) in Search Engine Optimisation (SEO) for your business in 2020.

Everything here has been updated to be current for 2020.

So, let’s begin!

1. Target Keywords:

To start the ROI calculation, you’ll need to find one or more keywords for your business that have good search intent, aren’t too competitive and generate sufficient search volume. Guidance on selecting the most appropriate keywords can be found below:

https://www.link-assistant.com/news/keyword-research-2020.html

https://mangools.com/blog/keyword-research/

https://www.wordstream.com/blog/ws/2017/08/09/easy-keyword-research-guide

2. Search Volume of the keywords

After selecting some keywords in step 1, it’s important to verify the keywords have sufficient search volume. Those with only a few searches per month are unlikely to be useful for your business. The resources below provide advice on how to determine the search volume of your keywords. Please note, search volumes are estimated values only. No tool (not even Google itself) can provide 100% accuracy in the number of searches per month:

https://www.wordstream.com/blog/ws/2017/01/23/keyword-search-volume

https://www.rankranger.com/documentation/keyword-search-volume

https://www.brightedge.com/glossary/search-volume

3. Add up the search volumes from all the keywords

Now it’s time to simply total up the combined search volume from all the keywords your website is targetting. Here is a (simplified) calculation example:

4. Net Customer Lifetime Value (CLV)

To be able to ascertain if SEO is worthwhile for your business, you’ll need to know your customer lifetime value, in order to project your ROI. This is a crucial element to determine ROI. In this example, the CLV is $1000.

Here are some great resources to help to understand & calculating your Customer Lifetime Value:

https://blog.hubspot.com/service/how-to-calculate-customer-lifetime-value

https://www.shopify.com.au/encyclopedia/customer-lifetime-value-clv

https://www.stitchdata.com/customer-lifetime-value/

https://www.clv-calculator.com/customer-lifetime-value-formulas/simple-clv-formula/

https://blog.smile.io/easy-way-to-calculate-and-increase-customer-lifetime-value

5. Customer Lifetime Period (CLP)

The length of time (in months) that your business is able to retain customers. In our example, the CLP is 12 months.

6. Search Engine position

top 10 seo

Search Engine position (or ranking) is the position of the targetted keywords on the first page of Google (position 1-10). You’ll need to know the search engine position for all of the targetted keywords, to be able to estimate how many clicks you’ll receive. Here are some tools that can assist to perform automated rank checking for your website:

https://www.link-assistant.com/rank-tracker/

https://www.authoritylabs.com/free-tools/rank-checker/

https://seranking.com/google-ranking-checker.html

https://www.woorank.com/

https://www.webceo.com/online-rank-checker.htm

7. Click Through Rate (CTR)

The estimated percentage of search results that are clicked for each position on the first page of the search engine (positions 1-10). This data can be be easily extracted from Google Search console:

Here are some resources that can assist you to calculate your website’s Click Through Rate:

https://www.seerinteractive.com/blog/how-to-calculate-your-own-click-through-rate/

https://www.oncrawl.com/oncrawl-seo-thoughts/ctr-data-understanding/

8. Projected Clicks:

The projected number of clicks for each ranking position can be calculated as follows: Total Search Volume x Average CTR (from Google search console) = Estimated Clicks. For Example: 2,810 x .50 = 1,405.

9. Prospect to Lead (P2L) Conversions

This is the total number of clicks you have converted into qualified leads. Leads can be defined as contact form submissions, phone calls or subscribers. In our example, we have a 3.5% conversion rate. So, clicks x conversion rate = conversions. Example: 1,405 x .035 = 491 Conversions.

Here are some excellent resources that explain conversion rate & calculations in more detail:

https://www.monsterinsights.com/how-to-track-organic-keyword-conversions-in-google-analytics/

https://www.smartbugmedia.com/blog/what-percentage-of-organic-search-traffic-should-be-converting-into-leads

https://venturi-web-design.com/calculate-sales-conversion-rate/

https://www.disruptiveadvertising.com/conversion-rate-optimization/conversion-rate/

10. Lead to Customer (L2C) Conversions

The estimated number of organic qualified leads that have been converted into paying customers. That is, what percentage of qualified leads does your business generally convert? The estimated conversion rate in this example is 5.5%. Use the following formula to calculate your estimated conversions: Total P2L Conversions x L2C Conversion Rate = Conversions. Example: 491 x .055 = 270 conversions.

11. Estimated Monthly Revenue:

To calculate your estimated monthly revenue at each ranking position, multiply your L2C x Customer Lifetime Value (CLV) divided by Customer Lifetime Period (CLP). Example: 270 x $1000/12 = $22,500 estimated monthly revenue at position #1.

12. Estimated Profit

Take your estimated Monthly Revenue and subtract costs of providing the good or service to find your profit. In our example, the Profit margin is 35%

13. SEO Break-Even Point

Break-even point is the most important calculation for ROI. It’s essential to project how many months it will take to see ROI on your SEO investment.

To calculate the break-even point on your SEO campaign, divide the total SEO investment by the estimated profit from new conversions – Example: 36,000 (3k/mth SEO campaign x 12 months) / 94,500 = 2.6 months to break even at this position.

Here is an article that explains the break-even calculation in business in more detail:

https://blog.hubspot.com/marketing/break-even-point

Conclusion

This is a comprehensive guide that can assist in calculating your businesses SEO ROI investment for 2020. The calculation will vary, based on your business costs of serving the customer, but is intended to assist business owners to perform an estimate of the Return on Investment for an SEO campaign. There are many ROI calculators on the internet, but this guide is intended for business owners to understand how to go about an ROI calculation for SEO.

SEO is renowned for providing one of the best value marketing methods for business owners. This is especially true for businesses that have a high Customer Lifetime Value (CLV).

SEO is, however, a long term game. Be wary of promises of “quick results”, as it generally takes 6-12 months of sustained effort to see results.

Any questions or comments? Missing resources? Please leave a comment below.

Leave a Reply

Your email address will not be published. Required fields are marked *