We’ve helped a lot of companies determine if Google search engine marketing is a tool they can leverage to grow their business. Our clients are mature, profitable businesses, but when it comes to digital marketing, and specifically paid search, they simply don’t believe it has any place in their marketing plan because of some failed experiment years ago. Most commonly we find that somewhere in the past, someone tried to set up a campaign in house, put in their credit card information, and after a few days and a few hundred dollars, threw their hands up and said “this isn’t working, turn it off!”
If they’re being honest, they’ll tell you they know they should be doing more, but don’t know where to start, or even what questions to ask.
To help these companies explore whether or not paid search engine marketing (PPC or SEM) is a smart use of their marketing dollars, we start with a simple dollars and cents, ROI-focused math problem. If the math works, PPC could be a great option. If there’s no profit to be made, either find an alternative way to use search, or don’t waste your time.
Fair Enough? Let’s Get Started.
Let’s say you’re an accounting firm that has expertise in government contracting, and in helping companies that are fast-growth, have large capital needs in a highly regulated industry, and you would love a dozen more clients in that space.
Using Google’s tools to estimate search volume (search volume is how many people in the US search for a term in a 30-day period) we see that using the massive list of niche keywords and targeted phrases you’ve built, suppose there are 10,000 combined monthly searches for your terms/phrases. Let’s jump to using quarterly numbers to show this playing out at a larger scale:
90-Day Scenario: Estimated Search Volume: 30,000 Average CTR (Click-Through-Rate) in B2B: 2.41% Total Clicks/Traffic to Your Site: 723 Average Cost Per Click for B2B: $3.33 Estimated Cost: $2,407.59 Average Conversion Rate for B2B: 3.04% Net Number of New Leads Per: 22 (rounded up from 21.9792)
Let’s stop there: that means for $2,407.59 you now have 22 new business opportunities. And not only are they new prospects, but they are prospects that were ACTIVELY searching for a solution, or new provider/partner. They’re ready to buy – not just new connections you have to cultivate for years until they might need your help. For whatever reason, they’re searching now. Back to the math…
Because your hypothetical mid-market accounting firm is not out here looking for $300 tax returns, you tell us that each client is typically worth around $18,000/year in fees, and you’ll will keep them for an average of 5 years (maybe they’re acquired or have some type of exit).
Let’s be conservative and assume that half the leads are garbage. Wrong fit, they’re looking for something different, they can’t afford you, etc. So we’re down to 11 actual leads that are worth having a conversation with.
Of those 11, let’s be conservative again and assume your closing rate is 3/11. That means of the 11 leads that searched online, clicked on your ad, came to your site, read about you and inquired about your services by calling or emailing, 3 are now paying you.
3 new clients a quarter x $18,000 a year in fees = $54,000/year in revenue. Multiply that by your average 5 years retention, and you have $270,000 in Billings. Assuming a 15% profit margin, that’s $40,500 in profit.
In summary, you spent $2,407.59 in hard ad costs over 90 days to generate $270,000 in potential revenue in the next 5 years, and $40,500 in profit. If you’re cynical about the numbers – or the entire calculation – let’s pretend you’re not great at closing, and only close 2 clients a quarter from your 11 qualified leads. Over the course of the year, that’s 8 new clients, totaling 144,000 in annual revenue, and you paid Google Ads $9,630.36 to get that business. Yes, you still need an agency to do all the work, build the landing pages, write the ad copy, track conversions, adjust campaign metrics on a regular basis to ensure success, etc. But even if you add that in, there is money to be made, if you just follow the math.
Search volume, Cost Per Click, and Annual/Lifetime Customer Value will obviously differ based on your industry, region, and goals. But the numbers are all publicly available from Google, and using tools like SEM Rush, SearchEngineLand, Optmyzr, and more. Contact us to help run the numbers for your company, and we’ll let the results tell us all if there’s a clear opportunity to use paid search to grow your business.