When Google Ads came out, their offer revolutionised the world of advertising. We might take it for granted today as there are many pay per click advertising platforms, but before Google, advertisers had to fork out hefty sums to get the smallest print ad. All that without knowing if a single lead or sale would come in.
That magic of most digital advertising platforms is that you can pay is little or as high as you want. But of course, with great power comes great responsibility.
You can spend too little and never really scratch the surface of Google Ads true potential. Or you can go in and spend £1000’s with no guarantee of success.
Businesses that have approached me over the years have either had a set PPC budget in mind, or asked for my advice on what would be a good amount to start with.
In this article, I’m going to share my thought process and formulas for determining what your Google Ads budget should be.
The guide is aimed at two type of businesses.
If you’re already running Google Ads with profitable results then the question is how to scale campaigns while maintaining performance.
So for now, let’s assume that you’ve never run Google Ads properly or that you’re looking to run them very differently to how they’ve been so far.
Before we look at Google Ads and any formulas to project spend, let’s not forget the hard facts. What’s your cashflow like? What’s kind of turnover do you have and what capacity do you have to take on more work?
In simple terms, how much are you willing to risk on experimenting with a new channel. Before you know if can give a return.
Some businesses come with a set number, and that’s fine. They know that can play with £3000 per months for up to 3 months to try this out.
So take a good look in your accounts and find out what you can afford to experiment with.
In this method, we’ll use a formula to calculate what X spend will give you. The formula is:
Average cost per click x 10 click x 30.4 days per month.
10 clicks per day is the absolute minimum number of clicks you should get from a campaign. So you just need to find out what the CPCs are.
I use Google’s keyword planner tool to estimate what the average CPC is going to be.
By they way, CPC stands for cost per click, not sure if I’ve mentioned that (I’m sure you know anyway).
Keyword planner is a free keyword research tool from Google. You don’t need any paid tools for this and Google has the most accurate data about search volumes and costs per click. Because it’s Google.
You’ll find keyword planner in the left menu
Tools > planning > keyword planner
I recommend choosing “Discover new keywords”. I’ve recorded this short tutorial on how to use it.
This method is often more relevant to companies who are already running campaigns but are looking to expand. Expansion can be a little bit like starting from scratch because you might need to target new keywords and locations.
With this method, we reverse engineer starting from the desired outcome. For example:
You need to grow lead numbers to 300 per month. You’ve done the calculations and your cost per conversion threshold is £50 per lead.
Assuming that you can get those leads at £10 or below you should allocate £15,000 for those leads.
If your business is generating conversions from other channels, you can look at conversion rates in Google analytics. That’s the ratio between site visits and conversions. This ratio is a rough indicator to how many clicks you’ll need in order to get a conversion in Google Ads.
For example:
If the website conversion rate is 2.5% and the average cost per click in your industry is £3.50, you’ll need 40 clicks x £3.50 = to get one conversion at a cost of £140.
(that some B2B leads like commercial property can cost more than that).
You can then set a budget with the number of conversions in mind.
Like with any new activity, starting to advertise on Google requires a leap of faith. Unlike leaping from a cliff or paying thousands of pounds for traditional ad space, you can control the spend and accurately measure results.
I recommend starting with a simple cost per click formula and then going ahead and trying it out. Real life results are always a little bit different to how we planned them and you might discover that you’re getting higher or lower costs than you expected.
Having an experienced Google Ads professional can really help you save time and money in these scenarios ( I would say that obviously). But it’s also OK to try things out on your own and learn.
We’re a small but mighty PPC agency based in the UK. We help clients generate leads and sales on Google ads and we’re generally nice and approachable humans. If you need any help with your PPC campaigns give us a shout and we’ll be (ahem) happy to help.
Odi Caspi
Happy PPC
