Clients often ask us the same question when setting up PPC campaigns: “How much should I spend on Google Ads?”
The short answer is that it depends (sorry!). Your ideal Google Ads budget will come down to your business, your goals and what you want your campaigns to achieve.
At VerriBerri, we manage Google ads budgets of all sizes, from small businesses spending a few hundred pounds a month to global corporations investing five figures each month.
There are a few things to think about when setting a budget, including how much each click could cost, how many people are likely to enquire or buy, and what a new customer is worth to your business.
In this blog, we’ll take you through how to work out a sensible starting budget – and how to know when it might be time to increase your Google Ads costs.
What should you consider when setting your Google Ads budget?
There are a few things to think about when working out how much to spend on Google Ads. For example:
- Your advertising goals
- Your industry and level of competition
- Your cost per click (CPC)
- Your target audience and location
- Your expected conversion rate
- The value of a lead or sale
- Your available marketing budget
Start with your PPC objectives
Start by looking at what you actually want your PPC campaigns to achieve. You may also need to consider whether you’ll have separate budgets for different campaigns.
For example, are you trying to generate leads for a high-value B2B service, or sell products directly through your website? Are you launching something new, or putting extra budget behind a seasonal campaign?
This is why a £1,000 monthly budget could be a reasonable starting point for one business, but completely inadequate for another. Likewise, you may have a smaller budget to work with – in which case, careful management of your PPC budget is even more important to make every click count.
Understand your keywords and CPC
CPC simply means cost per click – how much you pay when someone clicks on your ad.
For example, if your average CPC is £2, a £1,000 monthly budget could generate around 500 clicks.
That said, your actual number of clicks will vary depending on your CPC, bidding strategy and competition.
What’s more, some keywords will cost more than others. This can depend on your industry, your targeting and how many other businesses are competing for the same searches.
The type of search matters too. Someone searching “buy [product]” is probably closer to making a purchase than someone searching “what is [product]”. What happens after they click is important, including how easy your website is to use and whether the page gives them what they were looking for.
Think about how many leads or sales you want to generate
It’s useful to think beyond clicks and consider what you actually want those clicks to achieve.
Let’s say, for example, that your £1,000 budget generates 500 clicks. If 5% of those clicks turn into enquiries, that would give you 25 leads – making your cost per lead £40.
For a brand-new campaign, you won’t necessarily know your conversion rate upfront. That’s why your initial budget is about gathering enough data to understand what’s working, rather than trying to predict your exact results from day one.
If you’re generating leads for a high-value B2B service, one £40 lead could potentially turn into a £20,000 contract. For a business selling a £100 product, however, the same £40 cost per lead would have a very different impact on profitability.
This is why it’s important to look at your Google Ads costs in the context of what you’re trying to achieve, rather than simply looking at how many clicks you’re getting.
If you have a smaller budget, careful management becomes even more important. You need to make every click count, which means focusing your spend on the searches most likely to turn into leads or sales.
How much should a business spend on Google Ads to start?
Starting with a set PPC budget gives you a clear testing period. You can see what your Google Ads costs are delivering, learn what needs improving and then decide whether increasing the budget makes sense.
For example, a family-run restaurant advertising within a small local radius might start with a £500 monthly budget, while a large national restaurant chain targeting customers across the country may need to invest considerably more.
The important thing is that your budget is large enough to generate traffic and collect meaningful data. This gives you a better idea of what’s working before you make decisions about your budget or other aspects of your campaigns.
The cost of managing PPC
Your Google Ads budget isn’t the only cost to consider. You also need to decide who will manage your campaigns.
You can manage PPC yourself, or bring in a marketing agency to handle it for you. If you choose an agency, make sure their management fee is included in your overall marketing budget.
Typically, their time could be spent on:
- Crafting ad copy
- Developing ad assets
- Designing creatives
- Tracking and analytics
- Testing and optimisation
They may also need to help set up an account if you don’t have one already, or you may want more support with developing landing page content to help your ads perform as well as possible.
Signs you may need to increase your PPC budget
So, how do you know when it might be time to increase your Google Ads costs?
Here are some things to look out for:
- Your campaign is consistently profitable
- You’re regularly hitting your budget limits
- Your cost per enquiry, lead or sale is within your target
- You’re generating a healthy number of conversions
- There are relevant searches you’re not currently capturing
Of course, you might see a “Limited by budget” warning in Google Ads. But before simply increasing your PPC budget, there are practical steps you can take to reduce wasted spend.
These could include reviewing the searches that triggered your ads, adding negative keywords to stop irrelevant clicks, checking your keyword match types and changing your ad schedule based on when conversions are most likely to happen.
Common PPC budgeting mistakes
So, what are some of the common PPC budgeting mistakes to avoid?
- Setting a budget based purely on what you can afford
- Spending too much too quickly without giving the campaign time to learn
- Spreading your budget too thinly across too many campaigns
- Ignoring conversion tracking, making it difficult to understand what’s working
- Focusing on clicks rather than what’s actually converting
- Increasing Google Ads costs in the hope that it will improve performance, rather than looking at what else might need be fixed, such as your ad copy or landing page
A 3-step approach to setting your Google Ads budget
There’s no magic formula when deciding exactly what to spend on Google Ads – particularly when you’re launching a new campaign. Instead, think of your budget as something you can refine as you learn more about what’s working.
Here’s our top three tips:
1. Understand what your clicks could cost
Research your keywords and expected CPC to get an idea of how much your clicks could cost.
2. Set a realistic starting budget
Set a budget that gives your campaign enough traffic to start gathering useful data, while keeping your spend appropriate for your business and objectives.
3. Use the data to refine your budget
Once you’ve collected enough data, look at your conversions and cost per lead or sale. You can then decide whether to increase your budget, reduce it or keep it where it is.
Ultimately, the right PPC budget is not always the biggest one. It is the budget that gives your campaigns enough room to work, while keeping your Google Ads costs focused on the searches and customers that matter most to your business.
If you’re looking for a marketing agency that can manage your PPC campaigns on your behalf, work out your Google Ads budget and keep an eye on your spend, then get in touch with us at amy@verriberri.co.uk or contact us today. We look forward to hearing from you.