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About the Author

Ansh Malhotra

Ansh, the visionary founder behind Nexist, Up & Gro, and Socialite, has garnered multiple awards for transforming business landscapes globally. His expertise in app and website development, alongside innovative software and video content creation, has led businesses from adversity to market prominence. Known for his problem-solving prowess and commitment to excellence, Ansh has significantly impacted Australian businesses and beyond, establishing himself as a leading figure in entrepreneurship. His revolutionary approach has not only driven companies to achieve beyond their goals but also redefined industry standards.

May 10, 2024

The Ultimate Guide for Small Business Owners To Calculate Your Website’s Real Return on Investment

In today’s digital age, a website is not just a luxury for businesses; it’s a necessity. Yet, a lot of small business owners remain on the fence about investing in a functional, user-friendly website.

This guide aims to demystify the process of calculating the real Return on Investment (ROI) of a website, helping you make an informed decision about this critical aspect of your business.

The True Cost of Not Having a Website

Imagine walking into an empty store, with no signage, no products on display, and no one to greet you.

That’s essentially what happens when your business has no online presence. In contrast, an outdated or non-functional website is like that store filled with products but in complete disarray, leaving potential customers frustrated and walking out.

The cost?

Lost opportunities, credibility, and revenue.

Excuses, Excuses…

Many business owners still believe that having a social media presence is enough, or that word-of-mouth and traditional marketing methods are sufficient. While these can be helpful in driving some traffic to your business, they cannot match the reach and impact of a well-designed website.

Moreover, not having a website may also signal to potential customers that your business is not keeping up with the times.

Here’s a list of the most common excuses our sales team has compiled after speaking to thousands of businesses around the world.

  1. “We generate sales via referrals” – That’s great! But what about expanding your referral base exponentially through online visibility?
  2. “We are busy enough” – Until you’re not. Markets fluctuate, and having a robust online presence can provide a buffer during slower periods.
  3. “A website doesn’t fit our business model” – It’s 2024 and almost every business model can benefit from an online presence. Yes, even if you sell artisanal marshmallows.
  4. “We don’t need one” – This statement is as outdated as floppy disks. Everyone needs one.
  5. “We have one (even though it doesn’t do anything)” – A non-functional website is like having a car without an engine. Looks good, doesn’t go anywhere.

The Case for Investing in a Functional and User-Friendly Website

Investing in a website isn’t just about having a digital ‘open’ sign; it’s about creating a platform for sustained growth. A well-designed website can:

  • Increase inbound sales
  • Reduce reliance on less reliable sales channels
  • Serve as a long-term strategy for growth
  • Build trust and credibility with your audience
  • Enhance your brand identity
  • Improve customer service and satisfaction

Calculating the ROI of Your Website

To calculate the ROI of your website, consider the following formula:

ROI = [(Gains from Investment – Cost of Investment) / (Cost of Investment)] x 100

Where:
Gains from Investment include increased sales, time saved in customer service enquiries, and other long-term benefits.
Cost of Investment encompasses the initial setup, design, development costs, and ongoing maintenance.

Step-by-Step Process:

If that formula looks daunting to you, use the below step-by-step process to calculate the ROI of your website:

  1. Identify the Average Sale Value: How much is an average sale worth to your business?
  2. Estimate the Increase in Sales: Based on industry benchmarks, estimate the potential increase in sales from having a functional website.
  3. Calculate Time/Cost Saved on Customer Service: With a website for answering FAQs and providing information, estimate the time saved for you and your team. Consider how this saved time can be redirected towards more productive tasks.
  4. Consider Trust Building and Other Long-Term Benefits: While harder to quantify, the trust built through a professional online presence carries immense value. Some ways to quantify your business’s goodwill could be by measuring customer retention rates, length of your sales cycle etc.
  5. Account for Initial and Ongoing Investment: Include all costs associated with building and maintaining your website.
  6. Finally, put it all together in the ROI formula to get a percentage value.

What Does a Positive ROI Mean?

A positive ROI means that your website is earning more than what it costs to build and maintain. This is great news and shows that your website is effective in driving business results.

However, keep in mind that a positive ROI does not necessarily mean you should stop investing in your website.

Example Calculation:

Suppose your average sale value is $500, and you estimate an increase of 20 sales per month from your new website. That’s an additional $10,000 per month. If your website saves you 10 hours of customer service time, valued at say, $25/hour, that’s another $250 saved per month.

If your initial website investment was $4,000, with ongoing monthly costs of $200, your first-month ROI calculation would look something like this:

ROI = [ { (10,000 + 250) – 4000 } / 4000 ] * 100

Your ROI = 156.25% in the first month. Calculate this for the whole year, you get a whopping 2975% return on your investment and so on.

I hope that this simplified example demonstrates a significant return on investment, highlighting the potential financial impact of a well-thought-out website.

Final Thoughts

While the thought of investing in a new website might initially seem daunting, the potential returns in terms of increased sales, efficiency, and brand credibility are too significant to ignore.

Remember, in today’s digital marketplace, your website is often the first point of contact between your business and potential customers. Make it count.

Calculating the ROI of your website is more than just crunching numbers; it’s about understanding the value of establishing a strong online presence and laying down the foundation for future growth.

And who knows, with the right approach, your website could become the best employee you’ve NEVER hired – always on duty, never takes a break, and relentlessly working to promote your business.

WANT TO KNOW WHAT THE NEXT STEPS LOOK LIKE?

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