SEO Pricing Models: How Much Should You Charge?

For six years now, I’ve been the founder, CEO, and president of a search engine optimization company, and I’ve maintained one additional role, that I soon hope to relinquish.

Salesperson.

My reluctance in hiring a salesperson is that finding the right person for the job can be quite a challenge. “Selling” search engine optimization (SEO) is a very consultative venture and one that I’m loath to turn over to someone mostly motivated by a commission check.

Selling SEO requires that you know the space well, and that you’re able to balance the need to bring revenue into the company while ensuring that you’re bringing in business which won’t lead to future headaches, because:

Expectations weren’t set appropriately.
The prospect lacks an understanding of the process.
There aren’t enough resources on the client’s side (or not enough money to outsource) for generating content, addressing issues, and implementing recommendations.
The work isn’t properly scoped out so that we can gain a solid estimation as to the work that will be involved (so that the work doesn’t end up being unprofitable).

It’s that last piece that I’m going to address, today.

Scoping Out and Pricing an SEO Effort

In order to survive as a well-run business, we must make sure that we operate profitably. Just as I might look at the probability of generating a positive ROI for prospects that come seeking SEO services, so too must I focus on ensuring that my company also runs profitably.

To that end, I made a decision, years ago, to hire a head of operations who also happened to have a background in process improvement. It also doesn’t hurt that she’s a CPA. Her name is Kim Patterson, and she also happens to be my wife’s cousin (so you headhunters can just keep on looking).

Kim came to the company with no background in SEO. Over the years, she has learned the process and has put in place measurements of effectiveness, efficiency, and accountability that I believe had been sorely lacking in our industry.

Another major component of bringing Kim on was to make sure that we were charging a fair rate (one which was within Industry standards, one which helped us to reach our profitability goals and one which would be reasonable, based upon what value we bring to our clients).

I asked Kim what formula she uses to price our SEO initiatives. Her response:

First, you need to determine your profit goals (15 percent; 20 percent; 30 percent; more?). You calculate your fixed overhead costs (costs that you pay no matter what your sales are), variable costs (what costs go up as sales go up – and what the relationship is to the sale dollar; not all relationships are the same for each sector of your biz) and direct costs (what actual direct labor, direct services, etc) for the actual job and make sure when it all is put together you end up with your targeted profit.

The real tricky part here is determining the direct costs. SEO projects can’t be precisely scoped out for everything that you might do for the next 12 months. Part of SEO is analysis and recommendations, based upon what we see in the SERPs, analytics, competitive analysis, and industry changes/opportunities, among other things.

Pricing SEO is one of the great challenges, because most prospects still have a basic understanding of search engine optimization and the time/work involved in the efforts. The best that anyone can do is get a sense for how much time may be required to spend adequate time to address specific goals.

Rand Fishkin provided a tremendous value when, in 2007, he wrote a quality post on pricing SEO. Granted, this was written over four years ago.

Can you think of much that is cheaper today than it was four years ago? If supply and demand are the drivers for pricing, I would suggest that demand far exceeds (good) supply. There are many people who lay claim to being good at SEO, and a scarce few who truly do it well.

Today, I hope to peel back the onion just a bit, to help you to understand how search engine optimization is priced and how you, too, might want to consider your pricing models for SEO.

SEO Pricing Structure

Many firms still offer package rates for SEO. In fact, there’s one firm that is driving me absolutely crazy because they’re spamming a client of mine with emails. Here’s an example of one such email:

I just got the details from XXX management on our July SEO Special, and here they are…… “Summer Gold Rush” Special

Our National Gold Plan – Regularly Priced at $2750 per month will be greatly discounted for ONLY 30 new clients starting July 11

The 2011 Summer SPECIAL:

Only $1999/mo for the life of the account
That’s a $751 monthly savings
That’s approx 27% off each month for 30 lucky clients
Equal to saving over $9,000 per year
Clients can purchase multiple specials

*Starts as a 3-month agreement, then runs month-to-month

To me, an SEO effort isn’t a package of tactical deliverables. Unless you’re simply hiring a company to merely provide tactical work (keyword research, site structure analysis, competitive analysis, SEO audit, analytics review, usability consulting), SEO is something that is unique to every website, competitive environment, client goal(s), and assets (news, blog, product search, local, video, image, etc.) and is ongoing with review and “optimization” (there is a reason that “O” exists in “SEO”).

Just as you’d expect to scope out a website design and development project, so too must you scope out a search engine optimization effort.

Who’s going to write the content?
Who is responsible for PR efforts?
Who is handling social marketing?
Who’s doing link building?
Who’s restructuring the website, as necessary?

Today’s SEO is about bringing together many facets of your marketing, web design/development and PR/social efforts so that they work well together.

All of these things go to “scope” and each requires time (either the agency’s time or the company’s time). And, yes – time is money.

Setting Pricing Structure

When we go through the process of determining how much a search engine optimization effort might be, it goes directly to how much time we have to spend on the initiative.

Yes, we have some basic templates to follow, in terms of what is generally included in most SEO efforts, but then we need to dig deeper into the time that might be needed to address items which the prospect has mentioned are “goals” of the effort, and address any human resource allocation that we may need to provide because the prospect isn’t adequately staffed.

Cost of Talent

We’ve all seen the ads: “$400/Month for SEO.” How can one firm be charging $400 per month while another is proposing a monthly cost of $20,000 per month? What’s the difference?

In most cases, it comes down to people. In my past, I was the president of an SEO firm that had over 30 “employees” (contractors) offshore. We paid those folks $300-$400 per month for full-time employment.

I won’t speak for all offshore firms/contractors, but our experience with these contractors wasn’t very positive. A couple guys were good, but more often than not, the work would need to be redone by our staff in the U.S., or otherwise we sold the services so cheaply that the client’s expectations were low and so “it worked.”

It depends on your expectations.

If you think that the $400 a month guys are doing “the same thing” as the $20,000 a month guys, you’re probably going to be wrong. Chances are the $20,000 a month guys are hiring people that cost more than $400 a month. While the deliverables may seem the same (anyone can get their hands on the $20,000 a month company’s proposal, and find/replace with their company name and say “we do the same thing”), at the end of the day, you’re paying for the people/process/software/experience of the firm(s).

Cost of Software

There are plenty of great free SEO tools. Due to the length of this post, I can’t get into them all.

Then, there are plenty of great tools that cost significant amounts of money. The firms charging $20,000 per month may very well be using software for management of the efforts that cost $10,000 a month. It’s something to consider. Some of these pieces of software are slick, and I can see that larger companies would want this type of information/dashboard/reporting, because they need to work with a firm that is very polished and professional.

Amount of Talent Needed

Small effort? Perhaps we only need one person.

Small-ish effort, but the client has no webmaster, copywriter, PR folks, link builder, etc.? We may need to put a lot of resources into a project that would cost quite a bit of money and the ROI may simply not be there, for this small business.

If a project is properly scoped, you should be able to get a general sense as to how much time/work/effort may need to come from the client, and how much will need to come from the agency. Some efforts can become quite complex, with web designers, developers, copywriters, PR staff, social marketing, video optimization, SEO analysts, link builders, analytics specialists, usability consultants, etc.

If you need more resources, you’ll be paying more (whether it’s to your in-house team or to your agency).

ROI Estimation

As I mentioned above, many times, the effort needed for an SEO effort, and the time needed to realize results, can prevent many companies from affordably investing in search engine optimization. And, there are many times when companies are infatuated with “free” search engine traffic that they don’t realize that there are simply not that many searches for keywords that are relevant to their business.

If there are no fish in the pond, no amount of bait in the world is going to catch you a fish. Comprendé?

This is why one of my favorite tools is SEMRush. You can check out the estimated value of the organic traffic for your competitors, and compare that with where your website is currently, and get a sense as to whether there will be value available to you in your efforts.

If you see that all of your identified competitors are getting $200 a month “worth” of organic search traffic each month, it’s going to be hard to justify spending any amount of money on organic search. You might be best off to invest in a pay-per-click effort. At least with paid search, you’re guaranteed to pay only when you actually get a click.

Amortization of Efforts

The real value of SEO efforts are, generally, not realized in the first month(s) of the effort. Folks ask me all the time, “how soon until we see results?” The honest answer is “hard to say, but our guess is ____.”

We don’t own the search engines, so we can’t make guarantees. But, if a search engine optimization firm has dug into the competitive landscape and done a fair amount of research, they should be able to determine whether an opportunity to have a profitable SEO effort is possible, even if it may take some time. This is where you should be considering the lifetime value of the effort.

You didn’t get into business thinking that you’d start and be profitable, right away (at least, not most of you). In fact, when I started my company, I didn’t take a salary for over a year and I expected that there was a price to pay to be in business.

With search engine optimization, it’s kind of the same way. There will be a period of time (perhaps as small as a couple of months, and perhaps as long as many years) when money and time is going out, and there’s not an equal amount of value coming in. But, if you’ve done your homework, and know that the opportunity for great value is there, and you “plan your work and work your plan,” you can realize gains that can far exceed the value in “pay per click” models.

One such company in an extremely competitive industry for SEO was being charged $6,000 per month for SEO and was getting OK value for a couple of years, and now – five years later – realizes an approximate value of $319,000 “worth” of organic search traffic each month. Even if they were getting “no” value whatsoever for the first two years (invested $144,000 total) to one day realize a monthly value of $319,000 (each and every month), you’d say that this is a pretty good investment, right?

It doesn’t always come to these types of valuations. Just like the TV ads say, “results will vary.” For this particular client, they happen to be in a space which people search for these keywords veryoften.

For the local business owner, that’s one of the critical pieces in determining whether SEO is for you. What is the “search universe”? How many times are people searching for your keywords?

So, How Do You Price Your SEO Efforts?

Do you know if the efforts are profitable? How do you measure profitability?

I’d love to hear your thoughts, in the comments section below.