How to Calculate Your Website's ROI
What is ROI (Return On Investment)
How to measure ROI and what is a Return On Investment, sometimes known as ROI, is a simple way to gauge profitability. After deducting its expenses, how much money did an investment make (or lose)?
Many business and investment choices are based on return on investment. It can be used to estimate the potential return on a new investment, compare the potential returns of various investment options, or determine the actual returns on investment.
The ROI formula, for instance, can be used to calculate the expenses and prospective returns of a business owner’s decision to expand into a new product line. A Return Of Investment assessment can assist a business owner in deciding whether a new approach is likely to be profitable. The ROI formula is a simple indicator of actual or anticipated website performance and past or future results.
Justifying the Investment Amount for a New Website
Unquestionably, the purchase of a new business website is an investment. Particularly if you create everything from scratch, including the images, text, product descriptions, and more. This means that you must ensure that the expense will be justified by the potential growth of your company. The Return On Your Investment is thus one of the first things you should learn.
In light of this, let’s go through a brief formula that enables you to assess the Return Of Investment of your website more accurately.
How to Measure ROI
So how to measure ROI for your website – Let’s say that developing your website costs you $6,000, for instance. Your annual expense for web development will be $2,000 if it takes three years before a redesign is necessary.
For this investment to be worthwhile, it must provide an annual profit of at least $2,000 (preferably more). If each customer generates $1,000 in sales, your website should be directly responsible for bringing in two new clients each year.
The remainder of your website’s calculation is straightforward once you know the average value of your clients. Just multiply it by the aforementioned 36; if the typical customer is worth $500, your website makes $18,000 annually. If you compare that to the $2,000 annual cost, your website’s return on investment is 90%.
Your website’s influence on bringing in new clients should now be estimated. We project that the website receives 500 visitors per month, or 6,000 visits per year, based on the goods, industries, or services it offers, along with our design advice and suggestions. Your website will produce 180 new leads annually if, on average, 3% of these visitors convert to inquiries. And once more, if 20% of these leads turn into paying customers, it translates to 36 new clients per year.
(average customer value x annual customers generated) / annual website cost = website ROI.
Of course, to achieve that objective, you need a website designed expressly to draw visitors, solicit inquiries, and turn them into clients. Contact us if you need assistance creating that online presence.
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Latest Update on January 15, 2023
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