Setting and Managing Your PPC Budget

One of the first and most important questions when starting with Pay-Per-Click (PPC) advertising, like Google Ads, is: "How much should I spend?"

Setting and managing your PPC budget is a critical part of running a successful and profitable advertising campaign. A well-managed budget ensures that you are spending your money efficiently and are getting a positive return on your investment.

Here's a guide to setting and managing your PPC budget.

How PPC Budgets Work

In most PPC platforms, you set a daily budget. This is the average amount you are willing to spend per day on a specific campaign.

• The platform will aim to spend your daily budget over the course of a month. It's important to know that on any given day, the platform might spend slightly more or slightly less than your daily budget, but it will not exceed your average daily budget multiplied by the number of days in the month.
• You are in control. You can change your daily budget at any time.

How to Determine Your Initial Budget

There is no magic number for a starting budget. It depends on your industry, your goals, and your financial situation. However, here is a logical process for determining a starting point.

1. Use a Keyword Research Tool to Estimate Costs

• How it works: Tools like Google's Keyword Planner can give you an estimate of the cost-per-click (CPC) for your target keywords. The CPC is the amount you will pay every time someone clicks on your ad.
• The Calculation: Find the average CPC for your main keywords. If the average CPC is $2.00, and you want to get at least 5 clicks per day, you will need a minimum daily budget of $10.00.

2. Consider Your Industry

The CPC can vary dramatically by industry. Highly competitive industries (like law or insurance) can have CPCs of $50 or more. Less competitive, niche industries might have CPCs of under $1.00. You need to be realistic about the costs in your specific market.

3. Work Backwards from Your Goals (The Best Method)

A more strategic way to set your budget is to work backwards from your desired return on investment.

1. What is a new customer worth to you? (Your Customer Lifetime Value - LTV).
2. What is a lead worth to you? (Your LTV multiplied by your lead-to-customer conversion rate).
3. How many leads do you want to generate per month from your PPC campaign?

Example:

• A new customer is worth $1,000 to your business.
• You know that 1 in 10 of your leads becomes a customer (a 10% conversion rate).
• Therefore, a single lead is worth $100 to you ($1,000 * 10%). This is your maximum cost-per-acquisition (CPA). You are willing to pay up to $100 to get a new lead.
• If you want to generate 20 new leads per month, your total monthly ad budget should be $2,000 (20 leads * $100/lead).

How to Manage and Optimize Your Budget

Setting your budget is just the first step. You need to actively manage it to ensure you are spending it effectively.

• Start Small and Test: It's always a good idea to start with a smaller, experimental budget for the first few weeks of a new campaign. This allows you to gather data on which keywords and ads are performing best without risking a large amount of money.
• Focus on Your Best Performers: Once you have some data, you should allocate more of your budget to the campaigns, ad groups, and keywords that are driving the most conversions at the lowest cost per conversion.
• Pause the Underperformers: Don't be afraid to pause the keywords or the ads that are spending money but are not generating any results.
• Use Ad Scheduling: If you know that your customers are more likely to search for you during business hours, you can use ad scheduling to only show your ads during those specific times, which makes your budget go further.
• Refine Your Geographic Targeting: Make sure you are only showing your ads in the specific geographic locations that you serve.

Conclusion

Setting and managing your PPC budget is a dynamic process that requires a blend of research, strategic planning, and continuous optimization. By starting with a realistic budget based on your goals and your industry's costs, and by diligently monitoring your performance and allocating your spend to what's working best, you can build a profitable PPC campaign that provides a clear and measurable return on your investment.