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I'm working on developing a new website for a party rental company, and I'm wondering whether it's a good idea to clean up their URL structure.

They have established URLs like sitename.com/Pagedunktankrental.html as a page that is for renting out dunk tanks for example.

My development version of the site has cleaned up these URLs so they are now something like sitename.com/dunk-tank-rental.

I'm worried that when I push the development site to production for this new site launch, all the SEO value of established links will be lost. The company relies heavily on SERP rankings to drive traffic and sales.

Is it worth cleaning up these URLs? Should I just setup 301 redirects to the new URLs? Or should I just keep the old messy URLs to preserve SEO?

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You can clean these URLs, but if you want to preserve SEO, you'll need to write 301 (Moved Permanently) redirects. I have done it and didn't penalised my SEO. Once you don't get any traffic to the old page, you can safely remove the redirects.

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