The Value of SEO for Your Business
What is the value of SEO? A recent report indicates that only 49% of small businesses invest in SEO suggesting that 51% don’t think there is value or simply haven’t considered SEO as a way to increase business levels. It’s a bit surprising when you consider that the vast majority of consumers use search engines to find a product or service they need. There is a lot of reluctance and anxiety regarding SEO as discussed in this post. There are many reasons for the reluctance – there are some shady operators out there who may not provide good value or results. This article discusses the impact of a website search engine results page (SERP) rank in terms of investment dollars and ROI.
Value of Google Rankings
Common sense tells us that the higher we rank on page 1 of Google search listings, the more traffic we will get to our website. And that’s true! Here is the click through rate (CTR) as reported by Sistrix, an SEO tools provider:
This provides us some solid data to do some calculations. We’re going to create a formula that business owners can use to calculate the value of SEO for their business.
An SEO Example
Let’s assume we run a business that sells widgets (or a service) that is worth $500 every time we make a sale. Also, let’s assume that our conversion rate is 3%. Conversion rate is defined as the number of sales divided by the number of visitors who “click through” to our site. So if 100 people visit we can expect 3 sales. Conversion rates vary, but tend to be in the 2-5% range. We also have to factor in profit margins so lets say our widget has a 40% margin. So on a $500 sale, we make $200 profit.
Now comes the fun part – how many visitors do we get to our site, based on our ranking position. Let’s say there are 10000 searches per month for your widget or service. This information can be obtained from Google Search Console or other SEO tools for your specific case. Now if you are ranking in 10th place, you can expect 25 visitors per month. In position 3 you can expect 110 and the top ranked position gets you 285 visitors.
The following table shows how this translates into sales and monthly profit for 10000 impressions per month, a 3% conversion rate, $500 per conversion and 40% profit margin:
The table above suggests the difference in profit can be 2X for 1st versus 2nd place and even greater difference the further down the ranking we go. Page 2 SERPs and beyond see very little traffic.
A Page Ranking Profit Formula
Monthly Profit = CTR(%) x Impressions x Conversion Rate x Average Sale Value x Profit Margin(%)
- CTR is based on rank position
- Impressions can be obtained from Google Search Console
- Conversion rate can be obtained from Google Analytics or estimate 3%
- Average sale value and margin would be obtained from business data
So what does this value of SEO mean? Well, it’s a way to determine if paying an employee or SEO provider is worth it. In this example, going from position 10 to position 1 translates into an additional $14600/mo or $175200/yr. From this, you can determine what you might be willing to pay per month in SEO costs for a boost in sales and profit. It should be noted that this doesn’t factor in the value of building a client base and repeat business.
SEO costs vary widely among providers and are based on two major factors: the amount of time an SEO will put into optimizing your website per month and how much they charge per hour. Some SEOs have to account for overhead like office space, administration costs and so on.
The more time an SEO service provider works on your site, the faster you will see results. The experience of the SEO provider will also impact how quickly you see improvement. Keep in mind that while Google evaluates website content continually, the impact of SEO changes may not be seen for several weeks. This is why most SEO companies will ask or require clients to commit to a minimum of 3 months, allowing clients to get a fair impression of the work done.
Value of SEO for Your Business
So what does this mean for your business? Well, to start, you should at least consider SEO for some of your marketing dollars. You can use the formula described above to get a sense of what an improvement in SERP rankings might mean for your bottom line. A smaller business with smaller revenues might find it hard to justify the SEO expense. But you would want to consider what the increase might mean and decide if it makes sense. You should also know that your competitors may be doing SEO or plan to. This could potentially cause your rankings to slip and hurt your bottom line.
If you’re not sure, don’t be afraid to reach out to some SEO providers, or better still, reach out to us! Any decent SEO will be happy to discuss your situation and give you some feedback on what might make sense.