Website ROI: Calculating the Return on Investment for a new website
June 02, 2020
Whether you’re launching a new business, re-designing a website for an existing business, or have an established business that has been operating without a website – it’s important to calculate the expected return on investment for the new website.
With these three steps and easy-to-use formula, you can estimate the return on investment for your business’ new website. This information can help you make informed decisions about how much to invest and what kind of increase in revenue you’d need to see to come out on top.
1. Calculate the increase in revenue from the new website
First, you should already know how much revenue your business is receiving per year before the new website is launched. You can use these figures as a benchmark and set up metrics in Google Analytics to track leads or eCommerce purchases on the new website. For leads, assign a value based on the average lifetime value of a client and your sales close rate.
By setting up Goals for leads and eCommerce tracking to collect data on purchases, you can easily see how much business the new website is bringing in. For example, a small service-based business was receiving an average of 50 leads per year with a value of $1000 each ($50,000 per year in leads). Then with a new website, they were able to increase the leads to 80 per year ($80,000 per year in leads).
2. Calculate the costs of the new website
Next, calculate how much it will cost to build and maintain the new website. Even if you plan to DIY, include the labor costs at your standard hourly rate. Another thing to keep in mind is that hosting plans are usually heavily discounted for the first year and will increase over time.
Here are examples of approximate costs for a simple website for a small service-based business:
- Domain name ($10 USD per year)
- Hosting ($100 the first year and $150 USD subsequent years)
- Premium website themes ($150 USD one-time)
- Paid plug-ins or software ($10 USD per year)
- Labor e.g. staff and sub-contractors ($2500 upfront and $50 per month).
Then calculate the yearly costs over the expected lifetime of the website. Most websites last around three years before being re-designed, so we’ll use that for the example.
$4910 / 3 years = $1636 per year for the cost of a new website with an expected lifetime of 3 years.
3. Calculate the ROI for the new website
Finally, the formula for calculating the Return on Investment for a new website is:
((Increase in Revenue – Cost) / Cost) x 100% = Return on Investment
So, using the example above, the ROI would be:
(($30,000 increase in leads per year – $1636 website cost per year) / $1636) x 100 = 1733% ROI
For these calculations, we’ve included standard costs based on a small service-based business with a simple website (2-5 pages) and minimum maintenance requirements. However, these figures can vary wildly based on your budget and needs.
Website costs can easily range from $1000-$20,000+ depending on whether you do it yourself or outsource to professionals such as a Web Designer, Web Developer, Copywriter, and Search Engine Optimization Specialist. Furthermore, it doesn’t include any digital marketing expenses to drive traffic to the website.
The formula can be used before making investment decisions before website creation, as well as post-launch to track the ROI over time.