If you are providing Search Engine Optimization / Search Engine Marketing for a business there nothing more embarrassing when you are asked you how profitable their investment SEO is and all you can do is make an "educated" guess.
You should know exactly how much additional money your clients are making for every dollar they spend on SEM (their ROI).
First, you should first add the monthly amount you charge your client, the monthly cost of each of your PPC campaigns (ie adwords, overture and adcenter), and the monthly advertising cost from each of the other websites you advertise with.
Second, you should use Google analytics to see the referral sales from other sites that you advertise on. Multiply the monthly unique visitors from each PPC search engine and for each website you advertise with. Multiply the number of monthly unique visitors x the conversion rate x The average sale for each transaction which equals the gross revenue from each referral website. I would export the information for each referral website onto an excel spreadsheet and sort the cells in descending order.
Third, subtract the PPC costs and advertising costs for each relevant search engine and website. Calculate the net difference between the gross revenue and costs to come up with net sales. You should also create a percentage column to see what percentage of your sales are spent on advertising. If the percentage is more than 10% or if it exceeds your ad budget, you may have to rethink your advertising plan. Determine which sites offer the best return on investment. If those are not good enough keep looking for new ones until you find advertising partners that deliver a profit.
Be careful that you understand the quality of the traffic coming to your site. There is a big difference between impressions, click-thrus and conversion rates. You can artificially drive a lot of traffic to your site with broad keywords using PPC, but will those visitors convert into sales? You ad and your relative landing pages have to be relevant to one another. I have seen companies spend thousands of dollars a day on broad keyword terms using PPC to get traffic, but their landing pages were not specific to the needs of the visitors, so their conversion rates were too low to justify the PPC expense.
I noticed that one of our competitors recently went out of business because they did not monitor their PPC costs close enough even though they went from zero sales to $ 8 million within 3 years. I was able to use a web scraping service called spyfu to monitor the exact details their AdWords campaign to see the exact content of all of their ads, the amount they spent on keywords, which keywords they were using and who their competitors were.
Make sure you have goals set up in Google analytics. You should have a well-defined sales funnel for each step of your shopping cart. Try to imagine your sales funnel as a real plastic oil funnel with 4-10 big holes punched into it. Imagine your frustration trying to pour expensive oil into the funnel only to watch more than half of it leak through the holes. If you do not plug the holes in your sales funnel, you will be wasting money but on a much larger scale. You need to spend a lot of time to understand why there are holes in your funnel in the first place.
The final step in your sales funnel (google analytics sales goal) should be a thank you page indicating a confirmed order. You should carefully monitor the drop rates between each step within your sales funnel and find ways to keep your customers in the sales funnel until they place an order.
There are literally hundreds of ways of improving conversion rates such as offering a low price guarantee, putting certain trust icons on your checkout out page, offering effective features and benefits of your products and services, etc.
Use the goals tab in Google analytics as often as you can. Check the 'Total Conversions' and 'Conversion Rate' reports on a daily basis to track the sales (multiple the number of sales x the average transaction) and to track your conversion rate. Raising your conversion rate by just 1% could actually increase your sales by million of dollars. If you can come up with 100 ideas that will increase your conversion rate by .01%, those 100 ideas will add up to 1%!
Your website and your shopping cart must project the impression that you are trusted, that you are an authority on the subject, you have or can answer any questions the customer may have, and that you will fulfill or exceed the customers expectations.
Remember to keep careful track of your monthly sales and costs and keeping finding ways to improve your client's ROI.
I was very surprised to see a very expensive and lengthy Search Engine Marketing proposal offered to one of my clients. The slick 50 page proposal had no reference to my client's ROI. How would that client be accountable for all of their "services"? If a SEM company wants to increase your sales, they must show you how they will do it in ROI terms.