Have you ever wanted to know how much return an investment would give to you before you make the investment?
If you find yourself awake at night wondering how your marketing investment is going to pay off in the long run then continue reading.
To solve your problem, we are giving you our very own ROI calculator to calculate your Return on Investment (ROI) for FREE!
Our ROI calculator
Our calculator is based off a simple ROI model and uses easy to understand mathematics to calculate your Possible and Desired ROI. Once you put in your Desired ROI, the calculator takes your figure and works out the amount of website traffic you need to achieve your Desired ROI.
The calculator is multifunctional, as it can be used to calculate your possible ROI for your business website and your eCommerce website. To get realistic results out of our ROI calculator you need to insert real figures, which you can get from your accounts, sales books or software. All this information and data should be easy to gather and placing it into the calculator is a breeze.
Here is a quick breakdown of the information required for the ROI calculator:
- Your Website Traffic
- Website Conversion Rate (%)
- Your Sales Conversion Rate (%)
- Your Average Life Time Value of your customers. If you do not know how to work that out check out this blog post.
We will dissect these concepts further and discuss the impact they have on your Desired and Possible ROI.
You can gather this information and put it into the calculator for yourself after you have downloaded our ROI calculator.
Website traffic, Website Conversion and Number of leads:
The first step of the ROI calculator is to understand Website Traffic and the Website Conversion Rate. The Website Traffic and the Website Conversion Rate are used to calculate the Number of Leads. These users who convert into leads can be nurtured until they are ready to buy.
What are leads?
A lead is a person or business that expresses interest in what your business is offering. They follow up their expressed interest by sending you their contact information. This can include an email address or their phone number. Leads are important for business growth because the higher the number of potential customers you have in your sales funnel the higher your earning potential is from those leads.
When working out your Possible ROI, you need to work out the Number of Leads needed to reach your million-rand goal.
If you refer to the image above, you can see that the number of leads is worked out by multiplying your Website Traffic by your Website Conversion Rate. This will provide you with the number of Leads for your Possible ROI.
Website Traffic
Your Website Traffic is defined as the number of users that land on your website. There are so many different paths that can lead users to your website. These include email, social media, paid advertising, search engine optimisation and many more. You should aim to take advantage of those different channels and increase your website traffic as much as possible!
Well designed websites determine conversion rates. Low-quality traffic will also give you low conversion rates. Your goal should be to get high quality targeted traffic and have a well-designed website with copy that converts. More traffic will mean more leads (provided its quality traffic) but conversion rates will be determined by the quality of the website and traffic.
Pro Tip
Business owners who start using online marketing to get more leads into their sales funnel start to worry about every user who visits their website. They become more concerned with the 95% of users who aren’t converting rather than concentrating on the 5% of users who convert. To maximise your sales, you must concentrate all your energy on the users who convert. These people are interested in your services and the value your business brings to their lives. With these users you want to focus on making them feel special, by adding as much value to them to increase the lifetime value of each sale. This has the potential to explode your bottom line!
The Website Conversion Rate
The Website Conversion Rate is the percentage of users that take a desired action on your website. Their actions may include downloading your lead magnet, subscribing to your webinar, calling your phone numbers or filling in your enquiry forms.
Looking at the table below we can say that if your Website Conversion Rate is 5% (which is an industry-standard based on research for a well-built website) and your website traffic is 10 000, we can assume that 500 of the 10 000 users that land on your website in a month will convert into leads. The more quality traffic you drive to your website will result in more leads, provided the website is doing its job to convert that traffic into leads.
Sales Conversion Rate
Converting a lead into a sale is difficult. Research shows that the average business will convert 20% of their leads into sales. For every 10 leads that are in your sales funnel, research shows that you will most likely only convert 2 of them into paying customers.
This is an average sales conversion rate. What you’ll need to do is work out the sales conversion rate of your business specifically ie. How many people convert into a ‘sale’ after becoming a lead. This could be higher or lower than 20% depending on your business and industry.
Pro Tip
A lead is someone that has reached out to your business directly. Either via a form, or they have called in. A lead is a person that has shown interest in doing business with you. Downloading a free resource like a lead magnet is designed to educate the user and provide them with value, so they can learn about your brand and business. However, your job is to nurture them into a LEAD later with emails and remarketing adverts that get them to call or fill in an enquiry form or to buy a product etc.
If you refer to the image below, you will see how we got to the sales conversion rate quantity of 100. Using the average Sales Conversion Rate of 20%, we can see the 500 leads that you obtained from your website could turn into 100 sales.
Average Lifetime Value
To know the Average Lifetime Value of a customer/client is imperative for a successful ROI. The average Lifetime Value is the monetary profit amount that the average customer will spend with your business during the course of their lifetime with you.
READ: How to work out the Lifetime Value of your client here.
You have different types of customers; some will provide you with constant business and others will be once off purchases. The key is to identify the average profit value between all your customers spending and use that figure.
Once you have identified your Average Customer Lifetime Value, you can appreciate the benefits of the ROI calculator. Take your Average Customer Lifetime Value amount and insert the figure into the box next to ‘avg Life time Value.’ The ROI calculator takes this amount and multiplies it by the number of sales you have and gives you your Possible ROI.
Let us look at an example:
If you owned an online golf shop, you would have an extensive range of products to offer. Your products could include golf clubs, golf bags, golf t-shirts, golf balls, golf shoes and much more.
Customers who are first-time buyers would be interested in buying golf clubs (R15 000.00). The next time they buy from your store, they may buy golf shoes (R1500), golf gloves (R300), golf balls (R600) and maybe some plastic golf Tees (R100).
This customer buys multiple products throughout his lifetime with your business, which could span over a few years. That’s just one customer.
Let us assume that the profit on all these purchases for your business is R5000. Now imagine if you had 100 customers all spending R5 000 in profit on average at your business throughout their life with you. If you worked that out you would earn R500 000 in profit over the duration they support your business.
When you look at those figures you will see the earning potential that can occur for your business by acquiring new customers and clients.
“How much Traffic do you need to make 1 million rand?”
Congratulations on getting this far! Now let’s answer the big question you have been waiting for, by using our free ROI calculator and what we have learned.
Determining the Desired ROI Requirements
We can calculate the required traffic using the Desired ROI requirements. Remember, to be effective in your results you must use your own figures. For this example, we will use the figures from our previous example to show you how to use the ROI calculator. We will keep the Average client profit at R5000, the Sales Conversion Rate at 20% and the Website Conversion Rate at 5%.
In the block next to the Desired ROI you must use the figure R1 000 000 (or any desired figure). Now we need to insert our average client Lifetime Value, in our example, we will put R5000 into the block on the right of the Average Lifetime Value. Using these figures will give you the number of sales required to make your desired profit. This equates to 200 sales or new clients. The number of sales is worked out by dividing the Desired ROI (R 1 000 000) by the average Life Time Value (R5000) giving us 200 new sales/clients.
What you’ll get out of the calculator
The calculator will provide you with the number of sales you will require, the number of leads and the amount of website traffic you will need to achieve your desired ROI.
You can use these figures to help give you a better understanding of what is required and how to go about achieving your goals.
Remember, the traffic required would need to be high-quality traffic that are actively in the market for your products or services. There is no point in running an online marketing campaign to people that are not interested in your products and or services.
That’s why it is important to do some research to find out who these people are, where they hang out and what problems you can solve for them.
High-quality targeted traffic converts into sales. Low-quality untargeted traffic is just traffic that will land on your website and have no desire and/or interest in your products or services.
Don’t waste your money on traffic sources that don’t convert into leads and sales.
PLEASE NOTE: The numbers you use in this ROI calculator are to be used as a guide only. Nobody can guarantee you the results you desire, there are too many factors involved. For example, your sales conversion rates could be lower than the industry standard, your website could convert less than 5% of the traffic into leads and a whole range of other factors need to be considered.
The proof is in the pudding
The below graph is from a campaign that we manage for one of our clients.
This customer is getting 2000 highly targeted website visits each month on average.
This business has a website conversion rate of 5%. This means they are getting 200 enquiries on average per month.
They have a good sales team that manages to convert 20% of these leads into sales. From the 200 enquiries/ leads, they are receiving an average of 40 new clients per month.
The lifetime value of each client to their business is R50 000.
We can work out that R50 000 multiplied by 40 would equal R2 million rand in sales over the average lifetime value of their client.
Want to grow your business through proven online marketing strategies? Then book a Free 30-Minute strategy consultation worth over R3000 today! Let’s talk about how we can help you grow your business through online marketing this year.
