How to Determine Your Optimal Google Ads Budget

Google Ads formerly known as Google AdWords is a great option for digital advertising. In fact, it’s one of our favorite ways to get the word out about your business.

But we often get asked about how much our clients should be spending on Google Ads.

The important thing to know is that every business is going to spend a different amount on Google Ads and digital advertising in general, which is why we like to create custom-tailored digital marketing plans for our clients.

Your business isn’t like any other so your Google Ads strategy shouldn’t be either.

Are you spending too much on Google Ads?

Below are a few factors to consider when putting together your Google Ads budget so you don’t overspend:

- Test your Google budget

- EPC (earnings per click)

- Focus on ROI instead of cost

- Google Ads benchmark by industry

What’s a test budget and how to use it to get the best ROI

A test budget is a budget that’s created based on an analysis of your goals.

The truth is you can guesstimate the right budget, but you’re likely going to use this as a starting point. Then you can analyze the data and keep revising it until you’re getting the results you’re looking for.

The secret to digital advertising is to start with a lower budget (so you don’t lose too much money) and then see how it performs.

If it works, awesome, up your budget.

But in case it doesn't, analyze the data and optimize your AdWords.

You can check out Google Ads’ keyword planner to help you determine the right keywords for your specific goals.

But how do I come up with a test budget?

An easy way to put together a good test budget is to multiply the keywords you want to use by the cost per click. You’ll want to look at ads that have at least 100 clicks as ads with less probably won’t have enough data for you to properly determine how your ad converts.

So let’s say you want to target 10 keywords at a cost per click of $2, you would want to plan on your test budget being around $2,000.

10 keywords X $2.00 X 100 click = $2,000

You will likely have some winners and losers.

So dump what’s not working and keep what is. Then add in more keywords in your Google Ads account while slowly upping your budget.

This will give you a great way to determine a good budget for your ads.

But here’s the fun part, once you find the right money-making campaign, you can just let it run without a budget.

Think about it, if you knew that you would get a return of $5 for every $1 spent, would you really want to cap your budget…

Probably not.

Look at your earnings per click (EPC)

Some people look at Cost Per Click (CPC) and while that can be helpful, earnings per click (EPC) is a much better marker to consider.

Why?

Because cheap clicks don’t always turn into conversions or sales. Cheap clicks can actually attract low-quality leads and therefore, less than optimal conversion rates.

While CPC should be considered, analyzing your earnings per click is going to make your campaign more successful.

How do you calculate earnings per click, you ask?

Determining your EPC is pretty straightforward. Just multiply your conversion rate, (the percentage of people who click and convert) by your customer value (the profit you earn per customer after all your costs).

For example, If you’re selling a product that brings in $20 in profit and your conversion rate is 1%, then you’re earnings per click is $.20.

Make sure to optimize your EPC so your earnings per click is growing. And by looking at your earnings per click and profit, you’ll be able to tell if you need to increase or reduce your budget.

Consider ROI instead of cost

Everyone wants to know the cost of advertising with Google, but a better factor to consider is your return on investment (ROI).

After all, most people don't mind the cost as long as they are making a good ROI.

If you were making $5 for every $1 you spend, would you care as much about cost?

Not likely.

And this is the reason that looking at your ROI compared to your costs is a great way to determine if a Google campaign is working for you.

What Google Ads costs per industry

Did you know that the average conversion rate of Google Ads across industries is 3.75%?

Want to know the average conversion rate or other Google stats for your industry, check out WordStream’s Google Ads benchmark info. It will give you the “norm” for Google Ads costs across all industries.

And while this info is incredibly helpful, some businesses will vary. So give it a whirl and see what they suggest as it’s a great starting point.

How Rocket Park can help you with your Google Ads

We are a Google Ads agency that helps businesses all over the US rock their digital advertising goals, and we’d love to help you too.

All the info we’ve provided in this blog is a great starting point to determine your ad spend, but if you have any questions or feel like you could benefit from Google Ads support, let’s chat.

A more effective marketing strategy, increased conversions and a better return on investment with Rocket Park.