Return on Investment
Let’s talk about ROI
ROI or Return on Investment is: Net Profit/Cost of Investment x 100
A Net Profit of $100 on a $50 Investment would have an ROI of 200%, calculated as follows:
ROI = (100 / 50) x 100 = 200%
Website Development, SEO, etc. are all intended to increase Website traffic. To determine the effect on Return on Investment we can estimate the number of New Visitors and potential Conversion Rates (on the site itself … and by actual customer contact). We then take those new Customers (Sales) and simply multiply by the Net Value (Net Income) to your business. If that is more than your monthly Services cost then you have an increase in Return on Investment.
For example, if your Website traffic increases by 1,000 Visitors per month and 5% of those Visitors convert or contact you, that will give you 50 New Leads per month. If you can convert 30% of those New Leads into Customers that will give you 15 New Customers per month. If each New Customer has a Net Value of $100 to your business, that equals $1,500 in New Customer Net Value every month. Let’s assume that the cost of Services (or Investment) is $1,000 per month; that would leave you with a 150% ROI, calculated as follows:
ROI = (1,500 / 1,000) x 100 = 150%
And don’t forget, just as some Services are intended to increase traffic, other Services such as Customer Relationship Management are intended to increase conversion rates which will also increase ROI.