You may have heard that SEO is one of the best investments a business can make in their long term growth. Well is it true?

When done right, your SEO optimized website will regularly receive brand awareness and new customers to your business for free....sort of. SEO takes a careful strategy, consistent execution and time. How do you know that investment is worth it?

Fortunately, there is a formula for predicting return on investment from your SEO marketing efforts. We also created an SEO ROI Calculator below that you can use to discover if SEO is worth it for your business.

The Basic Formula for SEO ROI

You can find SEO return on investment with the following formula:

• Organic Traffic * Conversion Rate = Leads
• Leads * Close Rate = Customers
• Customers * Average Revenue / Sale = Revenue
• Revenue * Profit Margin = Profit
• Profit – SEO Investment = SEO ROI

Key Assumptions

It's important to note that this formula, along with our calculator you can find below, relies on a few assumptions.

• First, your website must rank on the first page of Google.
• Second, that your website ranks in the top 3 for all of your chosen keywords.
• Third, it's likely going to take roughly 4 - 6 months for your SEO to kick in.

With this in mind, let’s get into the details of calculating the ROI.

What Industries are Most Successful with SEO ROI?

The answer to this question depends on how large your average sale is, the demand for your industry, profit margins and monthly investment.

Home services businesses have a lot of demand and a high ticket price making them excellent contenders of an SEO campaign. A restaurant, however, has a low ticket item and thin profit margins.

Their ROI will be much harder to achieve than the former.

How To Measure SEO ROI

Now that your numbers ready to go, let’s get into how it all comes together.

1. Estimate Traffic from Keywords

Start by taking the volume from each keyword in your list and add them all up to get your total keyword volume. From here it’s time to find the percentage of that traffic you’ll be receiving to your website from your keyword list.

Let’s say the total monthly volume of your keyword list was 3,000, which we’ll be using throughout our example.

According to stats from Smart Insights, here is a chart showing the share of clicks that each of the results in Google’s first page receive based on where they rank.

So if you rank #1 for a given keyword, you should be receiving approximately 34.2% of the keyword’s volume each month. Make sense?

Our SEO calculator uses 21% , which is the average percentage you would get from the top three search results based on the list above. We believe ranking in the top three is a great goal to achieve for any keyword and will be using the 21% average for our example.

With our earlier number of 3,000, the estimated visits we would receive to our website each month would be 630 people, assuming you rank in the top 3 for our chosen keywords sticking to the 21% average.

Feel free to use the chart above to estimate your own averages, or put together calculations based your website ranking in a specific search position.

2. Estimate Conversions from Traffic

By now, we should have estimated the total number of monthly visits to our site based on our chosen keywords. Next, we need to estimate just how many customers or leads we will receive from this total.

According to a study by  Smart Bug Media , roughly 15% of your organic traffic should be converting into leads. This number varies widely and there are a few factors you should take into account when it comes to your own conversion rate:

• You website design impacts your conversion rate
• Your content impacts your conversion rate
• Your online reputation impacts your conversion rate
• Conversion rate varies largely by industry

If we take the average of 15%, we end up with 95 leads per month from ranking in the top three for all of our chosen keywords. It’s all starting to come together now.

3. Estimate Revenue from Conversions

Now that we know we’ll receive approximately 95 leads each month, it’s time to figure in the estimated revenue. This part is pretty easy.

Take your total leads and narrow these down based on your average lead close rate. What percentage of leads do you turn into customers on average? If that number is 60%, then you’ll be left with 60 closed sales in a given month.

Next, take this number and multiply it by your average revenue per sale / customer. If you’re a plumber, that number could be around $450.

When your SEO and rankings kick in, this means you’ll be looking at $25,650 per month in revenue coming from your website. Lastly, if your profit margin is 35%, SEO will be generating $8,978 in sales profit for you each month.

Let’s not forget to factor in is your SEO investment. Local SEO services can be anywhere from $500 – $5,000 per month . For our example, let’s just say $1,500 is your monthly spend. Your SEO ROI is $7,478.

4. The Full Calculation Visualized

Here’s that calculation broken down:

Total Keyword Volume * Traffic Share from Top 3 Google Ranking = Estimated Monthly Traffic
3000 * 0.21 = 630 traffic

Estimated Monthly Traffic * Average Organic Conversion Rate = Estimated Monthly Leads
630 * 0.15 = 95 leads (rounded)

Estimated Monthly Leads * Your Lead Close Rate = Estimated Customers
100 * 0.60 = 57 customers

Estimated Customers * Your Average Revenue per Sale = Estimated Monthly Revenue
60 * $450 = $25,650 / month

Estimated Monthly Revenue * Your Profit Margin = Estimated Monthly Profit
$25,650 * 0.35 = $8,978

Estimated Monthly Profit – Monthly SEO Budget = Estimated Monthly ROI
$8,978 – $1,000 = $7,978 profit / mo

SEO Takes Time, You Need to Factor This In

You know how to calculate SEO ROI, but the question remains…how long does it take to see results from SEO?

While no person or agency can say for sure, it’s widely accepted in the industry that the average amount of time it takes to start seeing results is 4 – 6 months of executing a solid SEO strategy consistently.

However, if your ROI will ultimately be $7,978 per month after 6 months, you will make your return on investment by month 8 , assuming you were spending $1,500 per month on your SEO investment.

Be sure to factor in the delay in ROI when accounting for SEO.