How to Calculate SEO ROI

How to Calculate SEO ROI

Small businesses seem to fall short too often on the ROI front. They conclude that SEO (and other marketing strategies) are succeeding or failing based on a gut feeling or what they see with their overall sales.

Neither approach makes much sense when you calculate or judge the impact of SEO in light of ROI. Sometimes business owners and managers make another guess about the value of SEO: they track rankings. It’s not an uncommon ROI metric. But again, what does it prove?

So how do they know which keywords mean the most? If a keyword phrase was #19 on Google and now it’s #9, that’s an improvement. Is it cause for celebration? Cue the dance music? The end game shouldn’t be the progress of a keyword ranking.

Yes, you can use SEO for brand building and to drive traffic that feeds into more email subscribers. But by and large, we’re really talking about leads and sales, right? So if sales are down, how do you know SEO is the reason? If sales are up, why should SEO get the credit and to what degree?

In early 2020, I met with a small business owner who appreciated the overall marketing program, including SEO. He had a huge reason to be thrilled. His company’s sales were flat in 2019. He knows traditional sales and marketing weren’t pulling their weight.

If it weren’t for digital marketing, his company would have seen notable losses. He was grateful for the work and happy he had made the investment. Metrics and reports were directly tied to the leads and sales that introduced many new customers.

What’s Your Multiplier?

Many numbers and variables should be in the mix if you want to establish a multiplier for your ROI. In other words, for every $1 you spend on digital marketing, how much did you get back? $3? $5? $7? Maybe $10?

What good is it if you spend $1,000 a month on an SEO consultant to generate $1,000 in product sales? I’d call that a significant loss. How much did you spend on materials to make the products? What were your labor costs?  What about shipping? You also need to account for rent, insurance, utilities, taxes and more. What if you sold $2,000? It’s probably still a loss. What are your margins? What products are the most popular? Which ones collect dust? Maybe you sold $5,000. I guess there could be a profit in there somewhere – maybe.

Some digital marketers don’t take their clients for a long walk through the financials. If it’s a new relationship, the owner may not want to be transparent about all of the numbers. Like I said, there could be many variables. Maybe a sales rep favors one product over another. Maybe some products have higher commissions. Even so, you can roll with some calculations and estimates and adjust over time as you review more data.

Lifetime Value

Just like a multiplier is overlooked, many small business owners I’ve spoken with don’t factor in the lifetime value of a customer.

I get that sales cycles can be long. We’re talking six months, maybe a year (or more) to close a deal. Based on your long business history, what do your numbers tell you about customers who buy again and again over the next two-three years? Do they make significant purchases? Do you convince them to use your engineering and consulting services? Do they buy high-margin replacement parts?

If you connected with them through SEO, shouldn’t their total purchases be a consideration? No, SEO didn’t lend a hand when your ace sales rep or customer service team sold something else. But maybe some of the revenue can be applied to SEO at least for the next two-three years. How much of that initial and additional revenue would you have if SEO wasn’t effective?

Next Steps

I would recommend that you check out this Inc. article: “Why Most Marketing Strategies Fail: Low ROI.”

Beyond that, make an effort to get a handle on your true costs and sales from online marketing. You may not trace every phone call to digital marketing. But if you start working with your team to ask prospects how they found your business, you will be able to start with some reasonable guesses. In time, they’ll be realistic calculations based on real data. How do you calculate SEO ROI for your company?