Various measures need to be taken early on by a company looking to establish a baseline SEO budget, such as selecting and expanding on a list of search terms and calculating the revenues additional SEO traffic might bring in.  When you have determined your budget using this information, you need to then treat SEO as an ongoing budget expense since the process itself is continual. 

If you are a company looking to outsource your SEO services, you definitely need to educate yourself about site optimization first.  Another immediate task is to determine your own baseline SEO budget, give or take a few dollars.  If you have never done SEO before and do not have any test results to work with, then you probably need to do some research and talk to some industry folk before developing your own budget.  It's an inexact science, but here are some guidelines:

Step #1: Pick a list of search terms

Brainstorm a list of terms prospective visitors and potential customers might use to search for your site. (Big hint: If you’re already investing in paid search, don’t ignore the knowledge you gained there.)  While you can include your brand name and company name on the list, it’s important to focus on words and phrases someone might use to describe you when they don’t use the brand name.  A relatively small percentage of searchers use brand names when searching.

Don’t expect to find every term or every best term - that’s something you’ll pay your SEO firm to help you with. Your immediate goal is to make a quick list of obvious terms. Some marketers ask their customer service or sales department to help with this, by asking incoming callers what words they would use to describe the products or services. The results, invariably, surprise everyone.

Step #2: Use Wordtracker to supplement your initial list of terms

Wordtracker (www.wordtracker.com) is an independent service that has been around since 1999. You can take part in the free trial or for a nominal price sign up for short-term subscription (a day or even week).

After you input your search term list, Wordtracker will offer suggestions for more related search terms, together with an estimation of the amount of traffic each term gets over the course of an average day across the major search engines. It also will tell you roughly how competitive each term is (i.e. how many other sites are listed under it).

Make a rough estimation for yourself. If you were in the top 10 rankings for each of your search terms and achieved a moderate 1% clickthrough rate, how many visitors would you get?  With that number in mind, it’s onto the third step.

Step 3: Do the math

Remember how we said you need to have a metrics system in place before investing in search marketing? Not only will it ultimately help you determine how effective your SEO efforts are, it will help you calculate how much to budget for.

Multiply the additional potential traffic you could receive by the average value of traffic you now get from search engines.

If you’d don’t know that value, consider that, in general, search engine traffic tends to convert fairly well into sales, compared to other online advertising such as banner ads.  Higher conversions are related to the fact that searcher are generally further along the sales cycle thanthose who impulsively click a banner ad or other non-search promotional campaign.

Step #4: Create a budget

Treat the dollar value you arrive at for additional SEO traffic as a baseline for your projected budget.  A good SEO firm should be able to return a much higher dollar value than this budget because:

• The firm will be able to find many more appropriate search terms for you to optimize for.
• An SEO specialist will be able to significantly improve on your current rankings, which leads greater increased traffic per search term than you may have expected.
• By rewriting your page’s title tags, your site description will be so much more compelling to search users that you’ll get more and better qualified traffic than you currently do - even for terms for which you rank well already.
• The SEO firm may be able to offer you advice or services to improve your site’s conversion rate.
• High-presence organic rankings can help you raise brand awareness, as well as the click rates of your other ads on the same page. These are benefits you can’t always count through direct links or immediate site traffic, but many SEO firms can present data proving these benefits exist.

Once you’ve created a baseline budget, you can make sure it covers the costs of critical element of an SEO campaign. For details on this, please read an article I wrote, to be found in our Information Centre:

Main Optimization Tactics and how they affect pricing

All great budgets are built from both the top down (what we can make) and from the bottom up (what are the detailed cost elements) to arrive at a final number.

If an SEO firm pitches far above or below your adjusted budget, be sure to ask why.  They should be able to justify additional costs with estimated additional Return on Investment (ROI) or be able to explain why your site isn’t complex enough to require very many hours of SEO work.

Step #5: Consider the ongoing investment

If you’re budgeting for SEO investment, assume you’ll need at least an initial month’s outlay as the SEO team does intensive research, initial optimization work, training and submissions. Plus, you’ll probably also want to budget for monthly reporting on your rankings. You can use this for review to determine when it’s time to renew your optimization campaign.

Sites that feature just a few static pages and operate in a very targeted, small niche marketplace probably do not need as much SEO work and, as such, have limited budges.

More complex sites in larger marketplaces will require more ongoing SEO attention throughout the year in order to ramp up links campaigns, optimize changed pages, measure, tweak and add search terms, among other tasks.  This is generally referred to as maintenance, which is misleading because there’s much more than that involved.

Just like PR and sales, optimization must be an ongoing budgeted item to be truly effective. Even if your Web site doesn’t change that much, other factors may require you to re-optimize including:

• Search engines change their ranking algorithms, which can cause rankings to rise and fall.
• Search engine partnerships change, so if one feeds results to another they may not always do so.
• The words people use to search by evolve. It wasn’t long ago that we all used laptop computers. Now they’re notebook computers. We used to have cell phones. Now they’re wireless devices. New products, names and category descriptions emerge and enter the vernacular all the time.
• New site sections and sites emerge in your category that might be perfect for you to target for a links campaign.