Return on Investment Calculation for Online Businesses - Other Factors Influencing ROI
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As you could see from the math on the previous page, the cost of your domain name is not the only factor influencing your ROI. There are at least three other things you need to consider.
- Web Hosting Fees- Web hosting will cost you some money. But in our earlier example, say you are really savvy and get into a free and quality blog hosting platform like Google Blogger.com. You can save some money on web hosting fees. Note that free hosting is not a good idea for every kind of site.
- Web Developer Fees - If you do not have any knowledge of web development, it could be costly to you, since you need to hire someone knowledgeable to implement your projects. But if you have some background, it is very easy to set up and start a blog online, as there are many free sites that let you do it. You do not need to hire a web developer. In this case, you can save some money again.
- SEO Company Fees - This is where many online business owners make a mistake. The reality is, hiring an SEO calls for extremely careful planning, especially if you are using ROI to measure the success of your business. There are pluses and minuses to hiring an SEO. Note that the SEO can only be responsible for bringing up your rankings, NOT YOUR CONVERSIONS in most cases. So it is possible that, even though you are at the top of search engine results, you do not have sales. This is because many SEOs do not care that much about conversions. They care about your ranking.
In the example above, the $5000 spent on hiring an SEO could be better spent in other things, such as hiring a high quality and viral writer to improve the web site's conversion rate. This is just an example.
If you are using www.blogger.com as a means to publish your blog, there are a lot of great and easy to implement tips for onsite SEO.
You do not really need to spend that much money to have a very good, SEO- friendly site.
How about link building? In reality, links from SEO companies do not provide value if they are not editorial in origin and coming from sites of proven, trusted value in the search engines. I suggest, instead, that you concentrate your efforts on developing a network of contacts that share the same interests as you in your selected niche. They have a higher chance of linking to you (because of your useful content) and offer you detailed insights into your blog, which leads to better search engine trust.
You can gain a lot of contacts from blog communities such as www.blogcatalog.com , Technorati and even Digg. I'm not saying this to underestimate social networking sites like www.friendster.com and Facebook.
So what is your new or adjusted % ROI if you want to cut down your cost?
- Planned hosting cost: $0 (because you might be using a free blog publishing site).
- Domain registration fees: $750 (still the same).
- Web development cost: $0 (because you will be the one implementing the onsite jobs for your blog using easy and free tips).
- SEO Cost: $ 0 (because you will be relying on the quality of your content as link bait for your network of contacts that share the same interest or niche).
- Total investment needed: $750.
With pure hard work, a daily commitment to your marketing plans and dedication to your blog, you can even reach Google's first page in the first six months, provided you add a lot of value for your readers and network heavily in the blog communities.
Thus, your expected net profit = 18000 x 3 % x $0.2 = $108 x 12 = $1296. And the time it takes to break even will be $750/$1296 = ~ six months after reaching Google's first page. Therefore, your % ROI = ($108* 12)/($750) x 100% =173% !
Believe it or not, this is possible in a real online business scenario. If you are not the type of person that is willing to do the work yourself, then consider hiring experts to do the job and be ready to invest more.
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