How to Set Your Monthly Google Ads Minimum Budget

A common question we get asked by prospective clients is, “how much should I spend on Google Ads”?

Our answer is always, “it really depends”.

It depends on what your overall marketing budget is, which in turn depends on how much revenue you generate, the stability of that revenue and your profit margin.

It depends on how fast you want to grow and how much you may be willing to spend ahead of the curve (are you a startup in a growth phase or a mature business with lots of referrals?).

It also depends on the competitive nature of your industry and service area as well as the quality of your website, competency of your Google Ads manager and CPC (discussed more below) of the service you intend to advertise.

Finally, it depends on how much a lead, converted lead and client is worth to your business. This can be defined not only in terms of initial acquisition value but also LTV (life-time-value) which is how much revenue you’ll earn on average over your lifetime relationship with a client, for a certain service, and how profitable that business is.

At North Shore Digital, we have a comprehensive initial strategy session and regular performance consultations to ensure all these inputs are well fleshed out, and we can offer a meaningful Ad Spend recommendation.

However….

If you’re just getting started with Google Ads as a DIY project and just want a general sense of where to begin setting your budget, below are a couple quick steps you can take. Consider this a “rule of thumb” that will put you in the right ballpark for a minimum monthly Ad Spend.

1. Start with 1 Service or Product

A common mistake made by Google Ads DIYers is doing too much, too fast. Too many campaigns, keywords, ad groups, as well as advertising every service they offer in every location they operate.

If you’re running your own ads campaigns, get ready to invest a lot of time optimizing them – Google Ads is a beast, and you should be prepared to commit a good chunk of your week running campaigns to avoid wasting money.

When starting out, especially if you’re planning to run ads in-house, we highly recommend prioritizing and starting out with 1 service (and preferably 1 focus location as well). This will allow you more time and focus to make all the important optimization steps needed, not muddle your data and also potentially save time when adding additional services through copying and pasting ads, ad groups, extensions, campaigns and more.

2. Figure out the Average CPC for that Service or Product

CPC is your cost-per-click. This is how much you’re spending each time someone clicks on one of your Google Ads and lands on your website. CPC varies widely. For standard search ads, CPC can be as low as $1 to as high as $100. CPC not only depends on the type of service you’re advertising and specific keywords you’re using, but also your location, the quality of your ads, the relevancy of your ads, the quality of your website landing pages, your competition, seasonality and more!

There are a lot of tools that can help you find CPC, but the easiest (and most accurate) is Google Ads own internal “keyword planner”. To find your average CPC, select your target location and then enter iterations of your focus keyword. So if you’re a financial advisor in Winnipeg who wants to advertise life insurance, you might research “life insurance winnipeg”, “life insurance”, “life insurance near me”, “best life insurance rates” and so on. Google Ads keyword research tool will also offer suggestions for close iterations that you can add to your list.

You’ll begin to get an idea of the CPC $ range you fall into and can average this out (think, taking the median of all the keywords you researched, so if you saw $4.50, $5, $6, $6, $6, $6,50, $6,50, $11 a good bet would be around ~ $6).

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3. Multiply your Average CPC by $100

Next, to estimate your minimum monthly budget, multiply your average CPC by 100.

Why 100? Let’s say your CPC is ~ $8 across all keywords. Multiplying by 100 gives you $800 for a minimum monthly budget. Let’s assume you want to advertise only on Weekdays. Depending on the month, this is roughly 20 days of advertising. $800/20 = $40 per day budget. This means that you’ll receive 5 clicks on average each day that you advertise.

That’s not a lot of clicks! In fact, that’s around the bare minimum we would recommend starting out with.

The reason is that the success of your Google Ads campaigns depends on your (and their algorithms) ability to analyze a reasonable enough number of data points over a short enough timeframe to make accurate data-driven changes to your campaign to continue to improve results month over month.

And that’s it folks! A quick and dirty way to get a (general) idea of the smallest amount of Google Ads spend you can “get away with”. Obviously this rule of thumb misses a fair bit of nuance and variables, but if you’re just starting out it can be a good way to take the first step towards Google Ads – ascertaining whether you can allocate enough budget in the first place to effectively try out this channel.

If you don’t want to spend a bunch of your time managing your own ad campaigns, have any questions about google ads or just want to chat digital marketing with a team of pros, you can reach out to us anytime !

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