SEO ROI – The Return On Investment For A Small Business SEO Effort

What is Search Engine Optimization (SEO)?

In order to understand the value of SEO, we first need to have an understanding of what SEO is. Without going into the technical details of the SEO process, I offer the following definition:

SEO, Search Engine Optimization, is the process of getting a website to show up in the top results of a search engine such as Google, Bing, and Yahoo for a meaningful search phrase that will increase traffic to the website. If a website ranks well for a meaningful search phrase, it is considered to be optimized for that search term.

I stress “meaningful search phrase”, because if you optimize for a phrase that nobody will be using in their searches, there is nobody to find you and the SEO process will not deliver any real results. In other words, nothing in equals nothing out. A meaningful phrase is one that has a high potential for being used by the population of searchers when searching the web for a product or service.

Armed with a search phrase, known as a keyword in the business of SEO, which is meaningful, we can now explore the potential of a site optimized for this keyword.

SEO Works For Your Small Business

Your company website is an advertisement for your business. As such, it needs to be seen just like any other form of advertisement in order to be effective. Not only do we want quantity of viewership but also we want quality viewers, ones who are likely to respond to the advertisement once it has been seen.

Unlike many forms of advertising both on and off the web, a website that is optimized will be viewed often and by a highly targeted audience. Because a search user is actively looking for your product or service, they are already in the mindset to buy as long as they can find what they are looking for. The odds of making the sale to this type of ad viewer is already far increased over a viewer of more passive advertising media such as print ads, radio, and television. In passive advertising, the viewer is not looking for the product in the moment and success is only achieved in a small percentage of cases.

The user of a search tool is primed and ready to buy, but this potential buyer has to find your website in order to learn about your business offerings and then ultimately contact you to make a purchase.

Being found through internet searches will directly contribute to your bottom line. E-commerce sites and other online business hybrids with online as well as brick and mortar units understand this very well and invest heavily in SEO and other online marketing. It is vital for their business that they do so. To understand why, let’s look at some of the numbers.

From published academic studies measuring a search user’s behavior and even how their eye moves across the search results page and other industry data, we know that websites that show up on the first page of a search engine will get slightly less than 90% of the clicks. The listings on page 2 account for nearly 10% of the remaining total clicks, leaving less than 1% for pages 3 and beyond. In other words, most of the action is on page 1. Over 60% of the action is in the top 3 listings. 42% goes to the #1 spot alone.

While companies that earn all or a significant portion of their revenue from the web understand the benefits of SEO, most small businesses fail to utilize this tool to promote their business. You don’t have to be a big national company or be an e-commerce company to benefit from an SEO effort. For a modest cost, small businesses can conduct their own SEO campaigns which will reap a positive Return On their Investment. To understand how small business can benefit, let’s go through a real world example:

Doing The Math

Example: A small business selling pipe fittings optimized for the keyword “Steel Pipe Fittings”.

Google tells us that on average there are 22,200 searches per month for the keyword “Steel Pipe Fittings”. Using the 42% figure for the #1 spot, the top site would expect around 9,324 visits to their web site each month.

(22,220 x 0.42) = 9,324. for this search term

Out of these 9,324 visitors, some number of these visitors will make a purchase. The rate at which a visit to a web site converts to a purchase is called the conversion rate. Conversion rates vary by industry, but on the low end of most industry conversion rates a 1.5% rate is safe assumption.

9,324 visitors converting at 1.5% will yield 140 new purchases from customers who just found your company and your product mostly likely for the first time. Why first time customers? If the customer was already aware of your business and has done business with you, they most likely would not be searching for you again on the web using “Steel Pipe Fittings” term. They will already know you.

A small business SEO campaign in the year 2011 will cost about $300/month to conduct. Some firms may charge less and some firms will charge more. But for $300/month, your company can receive competent SEO services that will positively affect your rankings in search engines and your bottom line.

Profit levels vary quite a bit from product to product and company to company so I can’t come up with a one size fits all ROI number in this article. However we can calculate at what profit does the SEO result above break even. For this example, $300 per month / 140 new customers = $2.14 per customer break even. In other words, if your average profit per new customer is $2.14 or above, you have a positive ROI on this SEO effort. Most businesses are likely to have a higher profit than this example, thus the ROI will be extremely higher.

Most likely the ROI on this example will be higher than calculated. Consider that once this customer has found you, purchased from you and is satisfied with this result, they may come back to you. Your SEO effort will result in future sales from this new customer. Add in the possibility that this customer may also give you word of mouth referrals as well and the ROI pushes higher.

The ROI will be even higher if you rank high on multiple keywords. Most small business SEO programs at the $300 level offer optimization for multiple keywords. Let’s further assume in this example the website also reached #1 rank for “Brass Pipe Fittings” and “Iron Pipe Fittings”:

“Brass Pipe Fittings” with 4,400 monthly searches would yield 28 more customers each month. Similarly “Iron Pipe Fittings” with 9,900 searches will add, using the same formula as above, 62 more customers. In total we get 230 new customers with these three keywords. Break even is now at $1.30. Add more keywords in top ranks and the ROI goes even higher.

To be fair, you will have to invest in the optimization of your website for several months before you attain high rankings for your keywords. Thus in the short run you may have zero ROI at the start, but as the campaign runs over time, the results will improve and will move the ROI up. In short you have to “invest” for the future results.

In the above analysis I used conservative numbers. For example I could have used the key word “Pipe Fittings” with 246,000 searches per month which yields over 1,500 new customers per the formula above. It may be possible to rank at #1 for “Pipe Fittings”, but this would be a more difficult task taking a longer time period to achieve. The 42% rate of clicks for the #1 position may be low. Some other studies say it is as high as 59% which would yield even higher ROI. The point is that even if you use conservative assumptions, it is easy to demonstrate a positive ROI on your SEO efforts.

The Bottom Line

SEO works for small businesses by bringing more visitors to your web site. Your results will vary based on the nature of your business and your industry, but in almost all cases there is a positive return on investment when the right keywords are chosen and your website contains content that is attractive to your potential buyers. To get a more detailed analysis of your situation, you can contact a SEO professional.