How to Budget for SEO: Our Thoughts on Budget Allocation for B2B SaaS Companies

How to Budget for SEO: Our Thoughts on Budget Allocation for B2B SaaS Companies
How to budget for search engine optimization (SEO) is a topic that’s been coming up a lot lately in our conversations with SaaS founders and marketing managers. And when we looked at the existing articles on this topic, we realized essentially all of them omit the thing these SaaS companies are trying to understand: how do we get to an actual dollar amount for SEO that makes sense?

It turns out this is a really difficult question to answer which is why so many SaaS businesses struggle with it — and why other articles on this topic provide context, but don’t actually answer the question.

The thing is, unlike paid advertising, SEO often takes six months to a year of investment to begin producing ROI. But when you’re doing it well, the overall money you spend to get page one rankings can continue to produce ROI for as long as you’re able to stay there. In contrast, as soon as you switch off investment in paid ads, ROI stops.

So how do you factor this in when you’re trying to figure out how much to budget for SEO?

In this article, we describe a few different ways you can think about answering this, including:

  • Using the cost of traffic from paid search as a reference point (including an example of how you could do this math)
  • Two ways to factor in the time it takes to get rankings and ROI
  • Specific examples of situations where you might increase, reallocate, or shift SEO spend to another area of digital marketing

If you’d like additional support for figuring out your SEO budget, you can schedule a Free SaaS Scale Session to learn more from our team. If you’d like to learn more about our approach to SEO, check out our article on SEO Strategy for B2B SaaS.

Budgeting for SEO Using Paid Search Traffic as a Reference Point

One way you can think about getting to an actual dollar amount for your SEO budget is to choose a target of how many new signups per month you want through organic traffic, and then based on metrics you have access to, figure out how much that traffic would cost with paid ads.

To do this calculation (similar to what we covered in our article on SaaS marketing budgets), you need to know your average rates for the following:

  • Conversion rate from visit to demos (% of site visitors that convert to leads)
  • Demo closure rate (% of leads that convert to customers)
  • Cost per click (CPC) through paid search

With these metrics, you can figure out the number of site visitors you’d need to hit your goal for new monthly sign-ups via organic. And then you can multiply that by your average CPC to figure out how much that traffic would cost through paid channels.

For example, let’s say you want 10 new customers per month from SEO. If, on average, 5% of site visitors convert to leads, and 10% of leads convert to customers, the math would be:

10 (new signups) / 10% (leads that convert to customers) = 100 (demos per month)

100 (demos per month) / 1% (site visitors that convert to leads) = 10,000 (visitors per month)

So you’d need 10,000 visitors per month to get your desired 10 new customers per month (We’re just using nice round numbers in this hypothetical to make it easy to follow. Of course, substitute your actual numbers here).

Now, calculate how much these 10,000 monthly visitors would cost you from paid channels. If your average CPC in Google Ads is $2, then you’d pay $20,000 per month for those clicks through paid.

So this number — $20,000 — gives you a benchmark for SEO to meet, then beat. In other words, if you can invest that same $20,000 in SEO and also get 100 demos and 10 customers a month, you’ve met the results that paid channels can get.

But here’s the advantage of SEO over paid channels: If you can get and keep the rankings that get those 10,000 visitors a month, you can use your budget to get more rankings, and thus more visitors and, for the same SEO budget, cross the 100 demos and 10 customers numbers above and beat the paid CAC we benchmarked to. If you can get there, the ROI from SEO will continue to be a better and better investment over time.

And now, let’s discuss the elephant in the room: how long would it take to get the rankings needed to start seeing those SEO visitors…

2 Ways to Factor in the Time It Takes to Get Rankings and ROI

Another big difference between paid and SEO is that unlike flipping a paid budget on and off, it takes time to get SEO rankings. If you’re budgeting for SEO, there are two ways you can think about factoring in the time it takes to begin working.

The first is you can remove this factor from the equation all together. SEO is known to be a valuable investment because after you achieve rankings, they can last for a long time given that you protect them (which we wrote about recently in our piece on how to protect #1 SEO rankings). We find that for many of our clients, the month to month value of the organic traffic they ultimately get is so high (even after accounting for their investment in us) that their initial investment is easily overshadowed.

Alternatively, if you did want to carefully account for it, you could think of it in terms of the payback period. As an oversimplified example to understand this, let’s say you hire an agency that charges $10k per month for SEO, and eventually they achieve rankings for you that bring in $20k per month in revenue. At that point you’re making roughly $10k of “profit” on your spend with them. If for the first six months you get — too keep it simple — zero traffic, and then you start ranking and for every month after that you begin “making” the $10k per month profit, then your payback period would be six months. After that you’d be ROI positive (analogous to how SaaS companies already think about CAC vs. LTV). So in this case what you should think about is: how long of a payback period can we handle? 6 months? 12 months?

Have this discussion with your prospective SEO agency, whether that be us or anyone else. Ask them what kind of traffic you can expect with SEO. Ask them how long you can expect to get to that. Walk them through this math of benchmarking to PPC costs.

These questions do not have definitive, clear cut answers. The examples and math above were just to show you the overall strategy of thinking about SEO budgets and directional trends of how it works. But having an open and honest discussion with your prospective SEO agency about this is important.

Specific Cases Where You Might Shift, Increase, or Re-Allocate Spend on SEO

In our experience, it is very rare that decreasing your investment in SEO activities makes sense. Competitive markets and the importance of maintaining a strong online presence through organic search make maintaining or increasing your budget the most common path forward.

With that said, there are a few flags for low growth potential where you might consider shifting your budget to other areas of digital marketing.

When You Might Shift Budget to Another Area of Digital Marketing

Case 1: Spotless Technical Health, High-Performance Content, and Earning Backlinks Naturally

If your technical health is near perfect, you earn backlinks naturally to a wide set of landing pages, and you have high quality content that’s been consistently ranking on the first page of Google for your primary keywords, it’s possible that you could be in a position to shift some of your SEO investment into what is getting you the most impactful result. For example, if PPC is generating more signups for you at a low CAC, then you might consider shifting some of your SEO budget over there.

Case 2: You’re the Dominant Player in Your Space

If you’re like Salesforce or HubSpot, where you’re ranking in position one for your primary topics, and you’re essentially top of mind for anyone searching for related topics in your space, you might also be in a position where you could divest in certain areas of SEO while maintaining high performance. Focus on doubling-down on what is delivering results, or shifting budget to improve a lagging area in your digital marketing investments.

But for the vast majority of SaaS companies, increasing your budget or reallocating it to bolster your weak points and seize opportunities will make the most sense.

When You Might Increase Your Budget for SEO

Case 1: You’ve Reached the 3:1 LTV-to-CAC Ratio for SEO

In our article on SaaS marketing budgets, we described Trello founder Joel Spolsky’s “Golden Ratio” of LTV to CAC. The idea is that if you can achieve a three to one ratio of LTV to CAC in a given channel, the money you spend there will continue to produce a positive ROI such that the more you spend, the more profit you’ll make.

So if you’ve achieved this ratio through your SEO campaign, increasing your investment in SEO is likely to be a safe and effective bet.

Case 2: You Have Mature PPC Campaign Data to Inform SEO

If you’re in a position where you’ve had PPC campaigns running for a while, and you have data showing exactly which keywords convert well, it’s possible that you would benefit from increasing your investment in SEO to target improving your organic rankings for those keywords.

As a long-term strategy, getting pages to rank for those terms through SEO could allow you to decrease your spend on PPC (costs that would otherwise never go away) while getting the same benefits.

Case 3: SEO Potential is Largely Untapped

If you happen to be in a niche where your competitors have been slow to ramp up their own SEO efforts, and they don’t yet have pages ranking organically for the high-intent keywords in your space, it could be the perfect time to increase the amount of money you’re spending.

Very often the companies who get to this first can continue to reap the benefits of positive ROI for years to come.

Lastly let’s look at when changing the amount of your budget isn’t necessary, but reallocating spend between the three “pillars” (covered in our article on SEO strategy for SaaS) would improve your results.

When You Might Re-Allocate Spend within the 3 SEO Pillars

Case 1: Compelling Content and Quality Backlinks with Technical Health Issues

Let’s say you’ve been producing high-quality content and successfully building links to it, but you find you have technical problems (like sub-optimal site speed or indexation issues). You should consider shifting some of your budgets from content creation to optimizing technical health.

Related Resource: check out our technical SEO services for guidance in this pillar.

Case 2: Great Content and Technically Healthy with Minimal Backlinks

It may be the case that you’ve focused on producing great content and done so in a technically sound fashion, but you haven’t built the relationships necessary to foster (or naturally attract) sufficient backlinks. If this is you, you would likely benefit from shifting spend to focus on outreach rather than creating more content. In doing so, you could increase the authority of your key pages and overall site which positively impacts rankings.

Related Resource: check out our article on backlink strategy for tactical advice on how to approach link building.

Case 3: Must-Have SaaS Pages Are Built, But Secondary Content Isn’t Being Leveraged

If you’ve thus far spent your SEO budget on building your core website pages (home page, product pages, customer avatar pages, etc.), but you’ve yet to develop a content marketing program, you might choose to shift SEO spend into developing and producing strategic secondary content, such as blog posts and resources. Then, as you produce compelling content, you can begin doing link building in a way that adds value for your network and works to build your authority at the same time.

There are more than just these cases that can lead you to increase, decrease, or reallocate funds in your SEO budget, but these examples should give you direction in parsing out what makes the most sense for your business.

Conclusion

When you’re thinking about budgeting for SEO, it’s useful to keep the “buy vs. rent” metaphor in mind. Do you want to “rent” traffic via paid search ads indefinitely? Or do you want to “buy” real estate on page one that will continue to produce ROI over the long term?

If you can tackle your highest converting paid keywords through SEO:

  1. You will get a higher number of clicks than you would on your paid ads (a higher CTR)
  2. You will, therefore, get more traffic, demos, and signups from those keywords
  3. Unlike paid ads, you will keep the ranking if you pause your spend

If you’d like additional support for figuring out your SEO budget, you can schedule a Free SaaS Scale Session to learn more from our team. If you’d like to learn more about our approach to SEO, check out our article on SEO Strategy for B2B SaaS.