For many people who are not familiar with the world of digital marketing, spending too much (or too little) on advertising can sound daunting. A question that is regularly asked by those interested in using Google Ads for their business is, “How much should I spend?” In simple terms, there is no true one-size-fits-all answer to this question, but we will try to break it down for you. 

When you are considering Google Ads for your business, the cost is almost always at the top of the list of concerns. Knowing how much you should spend on your Google Ads is important for any successful digital marketing campaign, but for beginners, it is not always easy to reach this number. 

In this piece, we will discuss how much you should spend on your Google Ads budget and how to reach calculate this. 


Clarify Campaign Goals

The very first step you will need to take when attempting to calculate your Google Ads budget is to clarify and set campaign goals. Now, you might think that the goal of bringing in more phone calls or generating more leads are ideal goals, but these are too vague to allow you to make any decisions. 

  • Think about your most profitable service or product: This is a great place to start when setting your campaign goals. If you are running ads for every service or product, you may end up spreading your budget too thinly, spending more than you are making. 
  • What is your success rate: If one of your goals is to have more phone calls to your business, you will need to think about how many of those phone calls end in a sale or a lead. This will help to clarify your goals and your budget.
  • How many customers can you realistically handle: You are probably thinking that you could handle an unlimited number of customers, but in order to make your Google Ads spend worthwhile, you will need to keep this number realistic. You will need to dedicate time and effort to fulfilling product orders and services to customers each month.
  • What are your customers worth: This is an important consideration for your Google Ads budget. Consider how much you could spend to acquire one customer and break even. An average customer’s worth should be enough to allow you to break even or make a profit. 

Once you have all of this information, you are able to create a clearer goal for your Ads budget. 


Test That Budget

After thinking carefully about important aspects of your business, you should move on to a test budget. When you are starting out with a Google Ads campaign, it is best to start with a test budget, as this will allow you to see how successful the campaign could be. Your initial test campaign my be profitable, but it could also break even or even cause losses. 

The idea behind this is to perform market research into which ads are performing better than others. You will be able to see which messages are resonating with your consumers, as well as which keywords are converting people into qualified leads. If you are using landing pages, this test budget will help you to see which landing pages are converting clicks into leads and conversions. 


Take A Mathematical Approach

After you have tested your budget, you can take a more solid, mathematical approach. You could calculate your ad budget by looking at your conversion goals. Starting backwards by thinking of the number of leads you would like to generate, you can calculate how much it will cost to acquire those leads. 

An example of a formula you can use is: (Number of Leads x Avg CPC)/Conversion Rate = Est. Monthly Ad Spend. 

These numbers will likely fluctuate for each campaign but this is a solid method of calculating your ad budget. When using this mathematical approach, you can expand it and use it to calculate what your potential revenue could be. 

A simple formula that you can use includes the following: (Leads x Close Rate) x Average Purchase Price = Revenue. 

You will be able to see if your Google Ads spend is bringing in profits or if you will need to adjust your budget in order to improve this. 


Consider ROI Over Cost

If you would like to make the most of your Google Ads and be the forerunner in your business, you will need to think about maximising your ROI (return on investment) from this advertising. This means that as well as focusing on CPC (cost per click) you should be looking at your earnings-per-click for your Google Ads campaigns. 

Calculating your EPC is simple, all you need to do is multiply your conversion rate (the percentage of people who become paying customers) by your customer value. For example, if one customer is worth or generates R100 and your conversion rate is 1%, then your earnings per click will be R1.00. This means that you are able to advertise successfully on keywords with a CPC under R1.00. 

If you were to increase your EPC to R1.50 or R2.00 you would be able to successfully increase your bids and gain more market share. When you are able and willing to increase your bids by 50% or more, you can gain more traffic, which is the ideal result. 


Opt For Optimisation

Optimising your Google Ads campaign using data is a surefire way to increase what your budget can garner for you. These optimisation techniques include performing keyword research, which can help immensely improving your Google Ads campaigns. 

  • Improve your keyword sets: When you initially create your campaign, you will include a mix of different keywords with different intent levels which your CPC can use and level out. Once you start doing keyword research, you can cut out keywords that are not performing or have low conversion rates. 
  • Add negative keywords: Negative keywords are an important part of any Google Ads campaign. These keywords are specifically excluded from being bid on. They are irrelevant to your business and could have a negative effect on your campaign success. 
  • Soup up split-testing: Split-testing ads allow you to test the different headlines and descriptions in your ads to see which ones are performing better. You will be better able to decide on which keywords and target audiences ot keep and which to cut, improving your ad spend. 
  • Don’t forget demographics: Once you start seeing leads coming in from your ads, you will be able to see what demographics to keep and what demographics to eliminate. This includes age ranges, genders, income ranges, and so forth. Keeping only the most important data will allow you to have more streamlined campaigns. 

Search engine optimisation is a vital component of any successful Google Ads campaign. 


You Are In Control

The answer to the question of how much you should spend on Google Ads is dependant on what you are willing and able to spend. Because you have so much control over the ad spend, you are able to set it to suit your budget. However, you should also be willing to spend a little more for each new campaign in order to see more ROI. 

In order to calculate your budget, you should start by clarifying your campaign goals and testing out a campaign budget to see how it performs. Taking a mathematical approach can also help you to build a clearer picture of your budget and possible return on investment. Including optimisation in your strategy will help to improve its success. 

If you would like to learn more about Google Ads and how they can help your business, feel free to speak to NetMechanic today to find out what we can offer you.