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4 Ways to Forecast Your ROI from SEO

By Snap Agency July 30, 2014

In the past couple years, I’ve talked with a lot of hesitant marketing executives and business owners on the subject of online search. And understandably so. Online search can be an intimidating marketing endeavor. You’re committing a budget to a channel that’s tough to predict and the time frames for results aren’t exactly lickity-split.

I’ve also seen a lot of these same people happily spend money on billboards, mailers and radio spots that are even more difficult to track return on. Humans are weird.

Like all marketing activities, there’s no guaranteed return for investing in online search. However, with the preponderance of search data available, you can do some reasonable forecasting to determine the potential value of SEO for your company.

I’ll walk you through 4 methods that forecast the value of SEO and make the online search landscape a bit more tangible.

1. Estimate Web Traffic from SEO

Before you generate revenue from online search, you need to generate traffic. Let’s first understand the size of the market and how many of those searchers you can reasonably attract to your website.

Start with One Product or Service

Ideally, your most popular or highest grossing. Develop a list of 10 to 15 of the most obvious keywords to you that a potential customer might be searching to purchase your product or service.

Let’s say you own a landscaping company based in Tucson, AZ. Your flagship service is landscape design. Your list may look something like this:

landscape design, landscape designer, landscape design services, landscape design company, landscape architect, landscape consultation, backyard landscape design, landscape design tucson, landscape design company tucson

Head Over to the Keyword Planner

Using Google’s Keyword Planner, enter the list of keywords you came up with and filter by geographic location. Even if you do business nationally, enter the areas of the country where you most commonly do business. This will paint a more accurate picture of the search market. Hit ‘Get Ideas’.

google keyword planner

Estimate the Size of the Search Market

Take a look at the bar graph of average monthly volume.

Looking at the landscape design search market in Tucson, monthly volume fluctuate between 3,800 and 7,400 searches. We’ll go somewhere in the middle and estimate this market at 6,000 monthly searches.

Repeat the Above Steps for your Other Products & Services

Then, combine the resulting estimates of monthly search volume.

Now you have an idea of the size of the online search market. This is definitely a conservative estimate. Search volume provided by Google is notoriously under reported and your SEO strategy will draw searchers from a much wider range of search terms. You may drive traffic for hundreds or thousands of searches, we’re just looking at a handful here.

Of course, you can’t expect the entire market to land on your site. By using click curves, we can estimate how many of these searchers will.

A Google search engine results page (SERP) displays web pages in a few different formats. You can read more about the anatomy of a SERP in a previous post. Organic search results earn roughly half of the total clicks for a given search term. The higher you appear in the order of organic search results, the more clicks you are likely to attract.

Here’s a breakdown of the click-through-rate (CTR) for each spot on a first page search result from a study by Catalyst.

google ctr by position rank

Being the first result means that 17% of searchers will click through to your web page.

Taking the size of the search market you found, we can build a simple table that gives us an estimate of web traffic from online search for each ranking position.

The formula for calculating monthly web traffic from organic search is Monthly Volume x CTR (%).

estimate web traffic table

Taking our example of the landscaping company in Tucson, a top ranking for all of the landscape design keywords that were included in our calculation of monthly volume would deliver just over 1,000 visitors to the site each month.

Of course, a top ranking for all of those keywords all the time is probably unreasonable.

So, how do you know where you will rank? You don’t. But you can take a look at the search results, find where close competitors are ranking and reasonably expect that with an SEO strategy of your own, you will achieve a similar or better ranking.

Enter some of 10 to 15 keywords from your list into Google search. Where are your highest-ranking competitors appearing? Are there industry-leading companies or online resources such as Wikipedia dominating the results? If so, you can assume that it’s unlikely to outrank these titans.

After looking at the competition, our Tucson landscaping company figures that an average ranking in position 6 across all landscape design keywords is achievable. Therefore, they can expect 97.8 monthly visits for this service from organic search.

We’ll take this information and use it to forecast revenue from an SEO strategy.

2. Estimate Revenue from SEO

Predicting potential revenue from SEO is the next step after you’ve estimated web traffic. Let’s find out how valuable that search market is.

Determine your Website’s Conversion Rate

If you track goal completions using a web tracking software like Google Analytics, that data will be the most accurate. If you do not, assume one of the following conversion rates:

  • For an ecommerce website, use a 2% conversion rate
  • For a lead generation website, use a 5% conversion rate

Find Some Sales Metrics

Average Sale

Across the products and services your company offers, what is the dollar value of an average sale?

Close Rate

Of the total leads your company receives, what percentage turns into closed business?

Calculate Revenue from Organic Search Traffic

Set up a simple table that takes your estimate of monthly web traffic, conversion rate, close rate, and average sale value and spits out a revenue estimate.

Let’s say that the landscaping company in Tucson has an average project value of $7,000. They close inbound leads at a rate of 30%.

estimate revenue from seo

For their landscape design service, this company is projecting $10,269 in monthly revenue from organic search.

3. Estimate Profit from SEO

Predicting potential revenue from SEO is the next step after you’ve estimated web traffic. Let’s find out how valuable that search market is.

So now we’ve estimated web traffic and revenue. Next logical step is to forecast the return on investment (ROI) or profit from an SEO strategy.

How much does one spend on SEO? It varies greatly by company size, products or services offered, and target audience. Josh Steimle, a digital marketer and contributor to Forbes online, grouped budgets by common business characteristics.

  • Tier 1: $250-$500 per month. Small business with limited geography. However, you’ll find a lot of swindlers and black-hat SEOs and this price point.
  • Tier 2: $700-$1,500 per month. Small to medium size business with a limited geography in a decently populated market.
  • Tier 3: $2,000-$6,000 per month. A regional, national, or international company with a niche product or service and limited competition.
    • A small to medium size company that does business locally in a high competition market.
    • A small to medium size company that does business locally in a metropolitan area.
  • Tier 4: $10,000+ per month. A national or international company that markets to a wide audience. At this tier, the cost of producing content is quite high.

A survey conducted by Moz in 2012 sought to find out what companies were spending on SEO.

While the average hourly cost of SEO services varied from $76 to $200, the most common hourly rate fell into the range of $101 to $150. Companies most often hired their SEO services vendor for 17 to 50 hours per month for a total monthly retainer of $2500 to $5000.

Where does your company fall within these budget ranges? Does the investment produce an ROI given the revenue forecast that you previously calculated?

Our landscaping company in Tucson probably fits on the high end of Tier 2 and the low end of Tier 3. They should anticipate spending $1,500 to $2,500 per month on organic search marketing.

Given their forecast of $10,269 in monthly revenue, their ROI would be in the range of 310% to 585%.

However, they can’t expect their investment to pay off right away. SEO takes time. At the beginning of their SEO strategy, the landscaping company will likely see negative to no ROI.

4. Forecast the Timeline for Results from SEO

The biggest unknown in forecasting SEO is the timeline for results. It can make or break justifying the investment in online search.

SEO takes time. There I said it again. Search engines reward websites that consistently produce valuable content for its users for an extended period of time. You can’t jump into SEO thinking that returns are right around the corner. The winners in this game are those companies that see the bigger picture.

Reasonable expectations need to be set and agreed upon between the SEO services provider and the client for a campaign to be successful. A misalignment can great a huge rift between expectations and reality and turn a good relationship sour really fast.

In my experience, a successful SEO strategy looks like this:

successful search seo strategy trendline chart

  • Months 1 – 3: Technical SEO, site performance enhancements and general best practices have produced a small, yet measurable increase in the website’s search engine optimization.
  • Months 4 – 6: Minor victories, such as a blog post that gets some attention on social, produce temporary spikes in traffic. However, visibility in organic search results change very little during this time. Websites with extremely low competition might be an exception.
  • Months 7 – 9: Pieces of content produced early on in the SEO strategy now have some longevity. Impressions from organic search have risen considerably and more searchers are clicking through to the website. Activity is increasing, however conversions are lagging.
  • Months 10 – 12: The website is generating significantly more leads, depending on the seasonality of the business. Clear content winners in organic search are consistently funneling traffic to the website. Going forward, the SEO strategy will produce results more frequently due to the incoming data from the last year.

Applying this timeline to our landscaping company, they might not see a conversion from organic search for the first six months of their SEO strategy. That may mean an investment of $15,000 with nothing to show for it. But by sticking with it, they could easily turn a positive ROI by the end of the year and begin the next busy season with a website that consistently generates leads.

Organic search marketing is a long road with huge payoffs. By doing some initial forecasting, you can get an idea of the potential return that can come of an SEO strategy.

If your company is wrestling with the decision to pursue organic search marketing, contact Snap or another reputable digital marketing company to help you assess the search landscape and define the opportunity.

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