You don’t have to be a business owner or manager to need an understanding of return on investment. If you make a personal investment, you’ll want to know how much you’ll earn from your investment, too.
In many instances, calculating ROI is pretty straightforward. ROI is generally a percentage that reflects the gain you earn or loss you incur from an investment of money. The basic equation for calculating ROI is as follows:
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
While calculating ROI using the equation provided above is simple enough, factoring the ROI of a website isn’t nearly as easy. That’s because the ROI of a website isn’t always measured in dollars. If your goal is to drive traffic to your site, increase brand awareness or capture contact information, the standard equation may or may not accurately reflect the ROI of your website.
Calculating the ROI of a Website
While calculating the ROI of a website may be more challenging that determining how much you made off a cash investment in a stock or bond, it’s not impossible. It’s worth mentioning that the ROI of a great website will be more impressive than the ROI of a website that’s merely good. Similarly, the ROI of a good site will be higher than what you’d expect from a poor web design.
To increase the chances that your website will be in the category of great websites, it’s vital for you to work with a web developer or web development team that has a proven history of success. While your upfront costs may be higher, the ROI your website records as you move forward will prove that the higher initial fees were well worth it.
To calculate the ROI of your website in dollars, you’ll need the following pieces of information:
May I see some of the software you’ve already created for other clients?
A successful software development company will jump at the chance to show off its past work. By looking over an software developer’s portfolio, you’ll be able to gauge the quality of their work and predict whether they’ll be successful with your software.
If a company’s portfolio doesn’t include promising results or recognizable brands, it may be a red flag. If the company’s past achievements include award-winning software made for brands you’re familiar with, it’s a good sign.
- Search Volume (S)
- Rank (R)
- Visits (V)
- Leads (L)
- Price (P)
- Click Through Rate (CTR)
- Conversion Rate (CR)
- Closing Rate (CL)
- Cost of Goods Sold/Delivery Costs (DC)
As you’ve probably noticed, some of the information necessary to calculate your website’s ROI will have to be calculated, including your visits and leads. You can calculate your visits using the following equation:
(SR) CTR = V
Once you’ve performed that equation successfully, you can figure out your leads. Use this equation to calculate your leads: V x CR = L.
After you’ve figured out your leads, you can accurately calculate your website’s ROI. Here is the equation you can use to learn the return you’re getting on your site in dollars:
(L x CL)(P-DC) = ROI
While the steps just discussed are a good way to figure the ROI of your website in terms of dollars, they won’t help you calculate your ROI if your goal was something other than to make money. To factor your website’s ROI in these instances, you can modify the equation provided at the beginning of this post. If your goal was to increase the number of visitors to your website, you can calculate your ROI using the following equation:
ROI = (Gain in Website Visitors – Cost of Attracting More Visitors) / Cost of Attracting More Visitors
Contact Source Web Solutions, Inc.
If you want to work with a web developer that has a solid understanding of ROI and the skills necessary to come up with a web design that will produce the maximum ROI for your website, contact Source Web Solutions, Inc. We’ve helped small and mid-size businesses improve their website ROI for years and we can help you do the same. Contact us to learn more today.