SEO won’t be profitable for every business. In the past 8 years, I’ve turned down clients where my analysis showed that SEO won’t be a good investment for their business. I’ve also worked with companies where SEO became one of their most profitable customer acquisition channel.
Whether SEO will be a profitable channel or not for a company depends on a few key things:
- Brand awareness
- Product demand
- Niche trends
- Competitor landscape
From my experience, this analysis provides a pretty accurate view of whether SEO will be profitable, with one caveat: the company must meet a few prerequisites.
Proven product and sales funnel for 12 months or more. While SEO can help accelerate the conversions of a good product, it can’t fix a bad product. Your product should already be selling using other acquisition channels like social, and SEM.
At least 5-figures in monthly sales. Since SEO typically requires a 4-figure or more monthly investment, it would be impossible to show a return on businesses that not making at least 5-figures in sales already.
These prerequisites are just a technical way of saying: this evaluation won’t be accurate for companies that are only a few months old, or have tried and failed in getting customers using every other channel.
If you’d like an evaluation of your company for its potential to profit from SEO, you can contact me here. (The typical price for an evaluation is RM799, but send me the code JAN23 to get it for just RM500!)
How to Estimate ROI from SEO
ROI from SEO can be evaluated using:
Return on Investment (ROI) = Revenue Potential from SEO / Investment in SEO x Investment Impact
Revenue Potential from SEO
Revenue Potential = Total Addressable Market (TAM) x SERPs Click-through Rate (CTR) x On-site Conversion Rate x Product Cost
Total Addressable Market (TAM): In SEO, TAM is the total available search demand for your products and services, including branded and non-branded search terms. This can be estimated using keyword tools like ahrefs and SEMrush and are evaluated on a per country basis.
SERPs Click-through Rate (CTR): SERPs CTR = Number of Clicks / SERP Impressions. In general, the higher your website ranks for a keyword, the more clicks you’ll get. According to FirstPage‘s insights, the #1 ranking gets 39.8% of all clicks. It goes down to 18.7% at position #2, 10.2% at position #3 and way down to 2.2% at position #10. You can use figures from either end of this scale to adjust your estimate.
On-site Conversion Rate: Conversion Rate = Number of goal completions / Total number of visitors. Goal completion could be a purchase, or a sign up. You can use your current conversion rate as a baseline.
Product cost: The price of your products before shipping and tax, where applicable. If your goal completion doesn’t involve the purchase of a product, you can assign the dollar value of each sign up instead.
If you have more than one product, you need to do this per product and then add them all up to get the Total Potential SEO Revenue for your business.
Investment in SEO
The average monthly investment ranges anywhere from US$500 – US$5,000 a month. Pick a figure you can realistically put aside for SEO. Based on my experience, a business that does 5-figures a month should invest at least US$1,500 in SEO.
Investment Impact
The next thing you need to consider is the impact of your investment. This is slightly tricky. You need to consider what your top competitors are doing and try to get an estimate of how much they are investing or have invested in SEO.
It’s very likely that if you want to rank higher than your competitors, you need to match or even beat their SEO investment amount.
You can estimate their SEO investment amount by considering their:
- Number of articles published and their length
- Number of guest posts
- Number of high-quality backlinks
Although it’s impossible for us to know exactly how much they invested, an SEO professional would be able to estimate the costs of each item and come up with a value. With this value in hand, you can calculate your Investment Impact.
Investment Impact = Your SEO Budget/Top Competitor Investment Estimate
You should adjust the budgets on a monthly or yearly basis.
How Accurate is This Figure?
I would place the accuracy at 55 – 65%, slightly higher than flipping a coin. While there are still many unknowns in calculating this estimate, it can still provide a much more accurate and quantitative view of the potential of a return from investing in SEO.
A company with all the information in their hands can make an informed decision on whether to invest in SEO or not.
Get an SEO ROI Evaluation for Your Business
If you are unsure if your company could benefit from investing in SEO, contact me to have an evaluation done. Use code JAN23 to get it for RM500 instead of the usual RM799!
