In a world where SEO seems like black magic it’s no surprise that many companies don’t know what a reasonable SEO package might cost them. As a founder of a digital marketing agency I’ve had to build out my fair share of projects and workback schedules. Instead of trying to sell you on Delta Growth’s services or be too prescriptive of how this kind of pricing works I wanted to put my thoughts on the subject on paper and give you some tools to help you come to your own conclusions.
I’m going to try to speak to startups, small and medium businesses, agencies and consultants. I’m specifically not addressing enterprises here because there are just too many variables.
What is my SEO budget?
The first question you should be asking is, “What can I afford to spend on SEO?” This will depend on where you’re coming from, but in general 10-30% of your marketing budget will go towards SEO. A small business is going to skew towards 1-3 channels, so it may end up with 50% or more in SEO just because it can’t spread itself too thinly across channels. Also, some companies that have “SEO debt” like… never having invested in SEO, ever… may spend more in order to catch up.
Keep in mind that your marketing budget also pays your marketing team and any supporting resources like a project manager, designer, copywriter, developer, analyst, etc., and that SEO budget goes towards paying for the time those resources invest in that channel.
While Medium sized organizations generally have some kind of marketing budget defined and may even have Digital or maybe even SEO branched off already, small businesses sometimes haven’t considered their marketing budget at all. It’s a good idea for small business owners to read up on how much they should spend on marketing at all. The quick answer is 5-10% of your gross revenue, which I realize is shocking if you’ve never considered it. Growth and B2C companies will spend more. Mature companies with small growth targets and B2B companies spend less. Don’t take my word for it though, go do some research!
Startups have a worse time of this whole deal since they need to come up with accurate forecasts of their revenue to do any kind of planning like the above. You’re also likely looking to grow aggressively and your marketing budget is going to be 15-20% of your projected gross revenue.
Let’s consider some examples:
- Startup with projected gross revenue of $300,000 in year 1:
- Marketing budget of 20%: $60,000
- 30% of budget towards SEO: $18,000 (or $1,500 per month)
- Small business with 30% growth goals, $2M gross revenue:
- Marketing budget of 8%: $160,000
- 20% of budget towards SEO: $32,000 (or $2,700 per month)
- Medium-sized business with 10% growth goals, $60M gross revenue:
- Marketing budget of 4%: $2.4M
- 15% of budget towards SEO: $360,000 (or $30,000 per month)
Where do you fit into the above? What reasonable estimates can you come up with for your organization, and what do you think your results should be based on your investment or lack thereof in SEO?
What SEO tactics will my budget go towards?
Only a very small portion of SEO involves tweaking code–and that’s not the part that makes you money. So what kinds of tactics do we need to use to build success in SEO, and how do we think about budgeting for those tactics?
I like to use Shopify as an example of a business that’s kicking butt with SEO. There are a lot of companies that rank very well for one or two keywords, but there aren’t a lot of companies that aggressively try to be in front of their users no matter what part of the buyer’s journey they’re in.
Shopify thinks about users who are ready to make a purchase right now. These types of users might search for, “eCommerce Software,” and Shopify is there:
Shopify thinks about users considering their options. These types of users might search for, “eCommerce SEO” or “Best eCommerce Platform for SEO,” and Shopify is there:
Shopify thinks about users thinking about starting their eCommerce business–users who haven’t even thought about which eCommerce platform they’re going to use yet. These types of users might search for, “Business Name Generator,” and Shopify is there:
And this is just scratching the surface with examples from one tiny industry.
Why am I on about Shopify? Well, they’re a pretty solid example of the types of SEO tactics that you’re going to need to implement. Ask yourself for each of these tactics:
- How much time did it take to build or update the strategy?
- How much time was invested by an SEO strategist?
- How much time was invested to manage the project?
- How much time was invested to sell the project internally?
- How much time was invested by developers?
- How much time was invested by designers?
- How much time was invested by copywriters?
- How much time was invested in quality assurance?
- How much time or budget was spent on promoting / popularizing each?
- How much time was invested by an analyst?
- How much time was invested to maintain each strategy?
It’s sobering that even a startup needs to do all of the above correctly to get any reasonable chance of competing against their market. A higher budget doesn’t always mean higher quality, but no budget always means horrible quality.
How much will X project cost?
Let’s choose a nameless, faceless SEO project that takes 20 hours to accomplish. How much would this project cost?
Let’s quickly establish the value of an hour. You can calculate your hourly rate right now, it’s just your salary divided by 2080 (the number of workable hours in a year). Let’s say your salary is $75,000, then your hourly rate would be about $35.
- Agencies usually bill at 3x their employees’ hourly rate. An agency would bill your time at $105.
- Consultants can bill anywhere between 1.5 to 5x their hourly rate. This could be between $50 to $175.
- An employer considers your time as worth 1.4x your hourly rate ($50 in this example) due to the cost of your office space, benefits, vacation time, training, HR, etc., but this doesn’t account for efficiency (how much time you spend usefully working) which in an ideal world is 80% or more, bringing your effective hourly rate to at least $60 (assumes 80% efficiency) or as high as $75 (assumes 50% efficiency).
So a 20 hour project run by an employee getting paid $75,000 would cost:
- $2,100 from an agency
- $1,000 to $3,500 from a consultant
- Or $1,200 to $1,500 from an in-house employee.
Issues arise when you consider whether you can use just one agency, consultant or employee to complete a project.
NB: We put our employees ratecards on all proposals so I sometimes get asked, “Why do you charge so much?” And hopefully the above is a good answer to that. We don’t, really. Our profit margins aren’t huge. The difference between having an employee do the above project versus an agency is $600 to $900, and even numbers like those that assumes that the business can hire, maintain and manage the right specialists and reasonably use their time.
As for how much you might pay on average for the salary of someone you want directing a large potion of your marketing budget, I used an example salary of $75,000 on purpose. Below is a screenshot from Glassdoor (in Canada) with a quick search for “SEO.” This maps pretty accurately with what Delta Growth is seeing when hiring specialists, though we’re generally erring a bit higher for best in class talent as you may be as well.
An agency or a business can hire more junior SEO specialists and it’ll bring down the “blended rate” of a project. If you have one employee at $150 / hour and one employee at $100 / hour working equally (50/50) on a project, then the “blended rate” of the project is $125 / hour. That having been said, it would be negligent to trust a huge portion of your marketing budget to a junior specialist. The point is to add them to an SEO team, not let them direct your strategy.
How much will project X make me?
I get this question a lot. How much will my 20 hour project make me in revenue? This has always been hard to estimate, especially for our faceless, nameless project! Google has an extremely complex algorithm with upwards of 200 ranking factors that it applies to trillions of websites, all of whom are making some adjustments to themselves at the same time you are, and this algorithm changes on a day-to-day basis.
Generally we try to create ranges of projections. For example, “We think this project will increase your Organic leads by 10-30% year over year.”
However, this number is fairly hard to compare to the results of other marketing channels. Here’s a quick example of what a 15% increase in leads might actually look like:
This is a big, complex topic. If you’re interested in finding out more, we’ve created a video and calculator that explain the value of SEO here.
If you’ve read this far then you should have a solid idea of what you should be spending on SEO.
- Calculate your overall marketing budget. To guess, say 10% of your gross revenue if you’re under $10M in revenue and 5% if you’re over that.
- Calculate your SEO budget. To guess, say 20%.
- Subtract any resources you can use to enable SEO (% of time invested by copywriters, developers, designers, project managers, marketing managers, analysts, etc.)
- Divide the remainder by 12.
That’s what you should be spending on a monthly SEO package.
Hope that helps!