How Much Should A Small Business Spend On Google Ads?

Admit it deep down, you know it is an excellent investment to run advertisements on the world’s biggest search engine, but the unknown technicalities of Google Ads serve as excuse and none bigger than the thought that it is extremely expensive.

Time to put that assumption to bed.

The first question all business owners start off with is what it will cost?

However, there is a much better question to focus on, but let’s look at the most common questions we receive and if you relate.

Does this sound familiar?

  • How do I choose a budget for Google ads?
  • What is the minimum budget for Google ads?
  • Is paying for Google ads worth it?

The first answer you would get from any marketer would probably be “It Depends”. We are with you on this one, we hate that as well. It is normally followed by a long explanation, and it never circles back to your original question. “How much do Google Ads cost”

BUT let us put you out of your misery…

Let’s look at 2 quick ways you can determine your Google Ads budget:

  1. The thumb suck method, one we use on a daily basis.
  2. The scientific Algebra method for when you know your numbers.

Google Ads Monthly Budget

Some housekeeping before we start:

The goal with Google ads is getting to the sale. For that to happen, we need enough data to sculpt the campaign and turn it into a lead generation machine. More clicks = more data = more optimisation = profit turning Google ad campaigns.

Google ads is based on an auction platform where multiple businesses bid on winning a placement of their ad for a specific term in the search results.

So to circle back to the intro. A better question to ask instead of what should our google ads budget be, is, what is the amount of clicks I need to achieve a certain return on investment from using Google Ads as a tactic in my marketing strategy? [more on this later]

Lastly, everything inside the ads platform works from an average daily budget.

“64% of brands are planning to increase their PPC budget in the next 12 months.” (State of PPC 2019/2020)

What Should My Google Ads Budget Be?

The thumb suck method:

To answer the most common question we get, “What’s the Minimum Amount We Should Spend on Google Ads? We look at a simple formula and one assumption.

Daily budget = Average CPC x 5. You can then take that and multiply it by the amount of days in a month you are running ads lets say 20 days on average for weekdays only.

The minimum goal we strive to achieve with this method,  is getting at least one lead per day.

Most owners we speak with always want to know what the minimum spend should be. Understandably it is a great place to start if you are new to advertising on Google or if you want to test it out.

BUT you might run into a problem…

If your average click cost vs daily budget is extremely tight, where there are not enough clicks available, let’s say at least 4-5 clicks. Google will restrict your campaign because you are a lower cash flow asset to them and they cannot risk overspending on your budget and will then rather give it to a competitor with a higher budget.

Limited by budget is explained in the help section,1, but comes down to your cost per click exceeds your daily budget (1).

Rather look at how many clicks you need to make a sale and get a return on our ad spend and work backwards to a daily and monthly budget.

Ads Funnel Traffic To Customer

Other than determining your initial Google ads budget, here are other recommended questions you need to answer:

  • How does Google Ads fit into my current marketing strategy?
  • What (and where) are my competitors spending money on advertisements?
  • How high are the CPCs for the keywords I’m bidding on?
  • What is our goal with advertising on this platform?

How to determine our average CPC?

  1. Step1 – Download and install this chrome extension,
  2. Step 2 – By a few credits
  3. Step 3 – Google your most searched for keywords to your product or service and add your location at the end.
  4. Step 4 – Look at what the CPC is for your top buyer intent keywords.
  5. Step 5 – Multiply CPC by 5.

You can also use the Google Keywords Planner for free.

Let’s calculate an example:

Roof Repairs Pretoria Cpc 02 2021

If we look at “roof repairs” and you service the Pretoria area, you are looking at a CPC of R55.56 using the keywords everywhere extension.

That roughly translates to a daily budget of R278 (55.56 x 5) and monthly R5560 if you are only running ads on weekdays.

The Algebra method using a Google Ads calculator.

If you are looking for something a bit more scientific and you know your conversion metrics, you can use a Google ads calculator.

All you will need is a bit of info:

  • Average Cost per Click (CPC), we already saw how to determine that above.
  • Website/Offer conversion rate, if a 100 people see your offer how many give their information or further inquire about it.
  • Sales closing rate, how much of the leads that converted are you able to sell.
  • Revenue Per Sale, the value of a new customer to your business. Amount of transactions of the customers lifetime with you x price.

Google Ads Calculator N

If you would like a copy please send us an email, just click here.

Don’t always look at minimums but at how much you can handle.

Most of the service businesses we work with run into another problem related to ad budget. Instead of minimums, they run into a deliverability / fulfilment issues where too many sales come in for them to handle. This is obviously a great financial position to be in but can cause all kinds of problems for your business.

So look past minimum ad spend and figure out how many clicks, sales you need to match your fulfilment capacity.

A question you can ask yourself; if you spend R1 on marketing to make R5 in sales, how many R1’s will you spend?

Results: A Solar customer of ours is returning on average R24.08 on each 1 Rand spent on advertising in the first part of this year. 

4 Quick tips to maximise your ad budget

  • Select high intent buyer keywords and set them as exact and phrase match.
  • Write compelling ad copy while using the full power of ad extensions.
  • Send them to a high converting landing page.
  • Measure everything down to recording the phone calls.
  • Use ad scheduling to match business hours.

“40% of brands and agencies say that their PPC budget is lower than where they actually want it to be.” (Social Media Today, 2018)

5 major pitfalls to avoid wasting your budget.

  • Pay close attention to your keyword match types keep them specific [avoid broad match] tightly focused per ad group.
  • Don’t leave your account to run unmanaged, things can change overnight, CPC can skyrocket, competitors can enter etc.
  • Don’t forget to set up conversion tracking!
  • Double check that you are sending visitors to the correct landing pages
  • Restrict your Geo targeting Options

In Closing: Will Google Ads Be A Good Investment?

If you are selling a service or product with a decent profit margin, Google ads are for sure one of the best places to promote your offer.
It’s the biggest search engine on earth where you can pay for quality and strategic clicks. You can compete with big companies and insert your offer with perfect timing when they search for a solution.

You can start small and easily scale, and it offers a great return on investment that is easily calculated to make it part of your marketing strategy.

If you don’t want to do it on your own or would like advise on how to improve your own campaigns, its a good idea to speak to an Google ads specialist.  It’s as easy as emailing us or filling out the contact form, we welcome any questions and will do our best to help where we can.

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Chief experimental scientist at RhinoBerry — where we help business owners kick ass.
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