What is the ROI of SEO: A financial statement example
Bonjour, les amis! It's Bogdan here, welcoming you to our new series aimed at addressing SEO questions from business owners.
Last updated
Bonjour, les amis! It's Bogdan here, welcoming you to our new series aimed at addressing SEO questions from business owners.
Last updated
Today, we're diving into a topic that's been on the minds of many—what is the ROI (Return on Investment) of SEO? If you've searched online for answers, you know they're hard to come by. I believe I have a clear perspective on this that I'd like to share with you.
For small businesses, customer acquisition cost through SEO is typically 20% less compared to pay-per-click (PPC) campaigns like Google AdWords. To illustrate, if you spend 100 euros or dollars to acquire a customer via PPC, opting for SEO can save you at least 20% on these costs. This translates into substantial savings for small businesses.
Consider a solar panel distributor earning 500 euros per sale. With fixed annual operations costs of 275,000 euros, you'd sell or install around 1,000 panels yearly to reach a revenue of 500,000 euros. The acquisition cost under PPC would be 100 euros per customer, resulting in a gross profit margin of 25% or 125 euros per unit.
When SEO traffic is introduced to this business model:
1. Reduction in Customer Acquisition Cost: By integrating SEO, acquisition costs drop to 80 euros per customer.
2. Impact on Fixed and Variable Costs: With stable fixed costs, acquiring more customers spreads these costs out over a larger base, effectively reducing the per-customer fixed cost burden.
3. Increase in Gross Profit Margin: For every 10% shift to SEO traffic, there's an estimated 3% rise in gross profit margin; translating to an additional 1% or closer financial gain.
For example, moving from 100% PPC to incorporating 10% SEO traffic shifts your gross profit margin from 25% to approximately 26%. While a full transition to SEO alone is improbable, it exemplifies how SEO contributes to profitability.
Adding up 10 percent of SEO traffic to your current traffic portfolio that is made of PPC or paid advertising would increase your gross profit margin by nearly 1 percent in absolute numbers and almost 4 percent in effectiveness to your business.
To conclude, incorporating 10% SEO traffic into a predominantly PPC strategy can increase your gross profit margin by almost 1% in absolute terms, and approximately 4% in relative effectiveness. This makes SEO a viable complement to PPC in enhancing your business's financial performance.
Feel encouraged to reach out with any questions or comments. You can find my contact details below. Thank you for tuning in—until next time!
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