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When I have optimised a site I have been to Wordtracker.com
picked out some relevant keywords: 160 UK pounds
written the content text with some html tags and metatags based on keywords for those pages (someone-else designed the look and feel of the html). Submitted to Yahoo, Open Directory, Splut, JoeAnt, GoGuides, Gimpsy, Qango, Somuch, Mavicanet. Free submit Fast, Inktomi, Altavista, Google. 400 UK pounds for the work (200 UK pounds on top for paying for Yahoo).
Got 20 PR 5 links into the site: 250 UK pounds.
Thanks.
But frankly it depends on how good you are at it. Reputations are easily ruined in this business.
In my opinion this is cheap, however if PPC is cheaper I would of not done SEO.
If adwords is £100,000 per year - i'd charge anything in relation to that! ;) - looking forward to a money rich 2004 year!
As a rule I would use the industry of the client to work out the costs, for instance I quoted £199 a month for some SEO work I was doing only to find out that adwords was costing them £11,500 a year - so I stopped work and let Google get the money. After another month i'll tell them that our Industry is not as easy as it was when I first quoted for the work, and will then price the job in accordance with google.
Price in relation to them, do not undercut them as they are our friends :)