Google Ads can be a powerful tool for driving traffic and conversions to your website. However, running an effective Google Ads campaign requires an adequate budget. So how much should you spend to get results?
This comprehensive guide examines realistic budgets for Google Ads based on your business type, campaign goals, and other factors.
Determining the right budget for Google Ads depends on your business, campaign objectives, and target return on investment (ROI). Here are some average costs to keep in mind:
Keep reading for factors to consider when setting your Google Ads budget.
One of the most important metrics to factor into your Google Ads budget is your target cost-per-conversion.
First, determine your desired conversion goal. This might be:
Next, set your target cost-per-conversion (CPC). If your average conversion value is $100, you ideally want to spend less than $100 to acquire each conversion through Google Ads.
Common cost-per-conversion benchmarks by industry:
Calculate your conversion rate to determine a starting daily budget for Google Ads:
For example, if you expect a 2% conversion rate and want 5 conversions per day at a $30 CPC, you would need a $7,500 daily budget.
Your target audience size and competitor Google Ads activity should also inform budget decisions.
Advertising to a small, niche audience will be more expensive per click than advertising to a broad market.
Plus, competing against other companies advertising on the same keywords will drive up costs. Expect to spend more to rank well and get clicks when competing for high-value keywords.
Research keyword costs in your niche before setting a Google Ads budget. Average CPC will give you a realistic idea of the competition and targeting costs.
Another best practice is setting tiered budgets based on your sales funnel.
Here is an example budget breakdown for a B2B SaaS company across the funnel:
Allocating more budget to bottom-funnel keywords that convert accounts makes sense financially, as those terms directly generate sales.
Your minimum Google Ads spend also depends on sales, lead, or customer acquisition goals.
To determine the budget needed to achieve volume goals:
In this example, a $6,000 monthly Google Ads budget would be needed to have a good chance of hitting the 100 sales target at a $50 CPC.
What return on investment (ROI) do you want from Google Ads?
A good starting point is aiming for an advertising spend ROI of 3:1. That means for every $1 spent, you gain $3 in revenue. This requires tracking conversions from ads.
To hit a 3:1 ROI target with $100 average order value (AOV), you would spend up to $33 per conversion:
In this example, you could invest up to $33 per conversion and expect $100 back to maintain the desired 3:1 ROI.
When launching a new Google Ads account, it’s wise to start small and scale up.
An initial budget between $250 and $500 per month will allow you to:
Once the account is stabilized after 2-3 months, you can increase the budget if performance is strong.
Ramping up spending too fast before understanding your ideal CPCs and conversion rates can lead to subpar ROI.
Ongoing monitoring of ad cost and conversion data is crucial for optimizing budgets.
Check metrics weekly or monthly, including:
Analyze this data frequently to identify opportunities to adjust budgets up or down.
For example, consistently high impression share suggests you could drive more clicks with an additional budget. Poor conversion rates may signal that certain keywords are overpriced and budgets should be reduced or reallocated.
Here are some additional Google Ads budget tips to keep in mind:
Watch out for budget cannibalization: If you run multiple ad campaigns, look out for Google over-delivering on one campaign, leaving the others underspent.
A: A monthly budget between $250-$1,000 is recommended for smaller businesses. Enterprise brands often spend over $10,000 per month. The ideal budget depends on factors like conversion value, funnel stage, and target ROI.
A: Look at your target cost-per-conversion and expected conversion rate to calculate a daily budget. Also, factor in goals for sales volume or leads. Ultimately your budget should align with your target ROI.
A: If you hit your daily budget, your ads will stop running for the remainder of the day. Focus on hitting monthly budgets, not on overspending daily limits.
A: No, setting budgets too high without monitoring can waste money. Start with a conservative budget and increase it gradually as you optimize conversion rates.
A: While higher ad budgets can help improve rank, there is no perfect correlation. Relevant, high-quality ads targeted to metrics like conversion rate tend to achieve better ranking over time.
A: Budget is a factor Google considers, but your actual bids and Quality Score have a bigger influence on ad position. Set appropriate bids and don’t solely rely on big budgets.
Determining the ideal Google Ads budget requires looking at your business goals, conversion values, funnel stages, and target ROI. While there are benchmarks like $1,000 per month for local businesses, the best budget ultimately depends on your specific objectives and metrics.
By starting with a small budget and scaling up carefully based on data, you can find the sweet spot for Google Ads investment that maximizes your returns. Monitor your account daily initially and then weekly, adjusting budgets based on performance.
With an optimized Google Ads budget, you can drive more high-quality traffic to hit your lead and revenue growth targets.
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