Google Ads Budgeting: How to Get it Right on Day 1

In today's digital landscape, Google Ads stands as a formidable advertising powerhouse, especially for small businesses. The potential to reach your target audience and drive business growth is immense, but one crucial question often perplexes advertisers: "How much should I allocate for my Google Ads budget?" This question holds the key to your advertising success, and our blog is here to provide not just one, but two clear answers.

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Google Ads Budgeting: How to Get it Right on Day 1

Google Ads is a highly effective advertising platform, particularly for small businesses.
In our conversations with potential clients and during our webinars dedicated to Google Ads, a common question frequently arises:
“How much should I allocate for my Google Ads budget?”
This remains a dilemma, and it results in not one but two clear answers…

First, Start with a Test Budget.

In the beginning, it’s crucial to control costs because you’re venturing into unknown territory. Your first test campaign might turn out to be profitable, but it could also result in breaking even or experiencing minor losses.
Through your initial testing endeavors, you’ll amass valuable insights into which ad messages deeply resonate with your target audience. Additionally, you’ll uncover the keywords that effectively transform into qualified leads and loyal customers. Moreover, you’ll have the opportunity to assess the performance of various landing page messages, discerning which ones excel in converting clicks into valuable leads and customers.

What should your test budget be?

A rough estimation can be made by multiplying the number of keywords you wish to test by the cost per click, and then by a minimum of 100 clicks. As a standard guideline, it’s advisable to secure a minimum of 100-200 clicks on a specific keyword to gauge its google conversion potential effectively.
For instance, suppose you intend to test 10 keywords, each with a cost per click of $1. In this scenario, it would be prudent to allocate a test budget ranging from $1,000 to $2,000.
Expect to come across a combination of successful and underperforming keywords, ads, and landing pages in the early testing stage. As you progressively receive results, you’ll fine-tune your campaign by retaining the successful elements and eliminating the less effective ones, thus steering your campaign towards profitability.

…Then, Ditch the Budget.

When your campaign starts making a profit, it’s time to ease up on those strict budget limitations.
The most successful advertisers understand the value of smart advertising as a highly profitable investment for their businesses.
Consider this scenario: For every $1 you invest in Google Ads, you’re reaping returns of $2, $3, $4, or even $5. Why, then, would you want to keep your money on the table?

If your goal is to grow your business, you should make this investment as often as you can.

Focus on ROI, Not Cost

If your objective is to establish yourself as the foremost advertiser within your market, your primary emphasis should not solely revolve around cost management; instead, channel your efforts into optimizing your return on investment (ROI) from your advertising endeavors.

Focus on EPC, Not CPC

Putting all your attention on the cost per click (CPC) is a narrow approach. Many advertisers obsess over lowering their CPC, trying to create better ads to improve their Google Ads quality scores and get cheaper clicks. But remember, this strategy is just one part of the equation.

Certainly, it’s good to aim for more efficient advertising. However, the real power in Google Ads doesn’t come from reducing CPC but from increasing your Earnings Per Click (EPC).

When your Earnings Per Click (EPC) is the highest in your niche, you have the power to outbid your competitors, grabbing a larger portion of clicks, leads, and customers. This is the true secret to success in the Google Ads arenas.

How To Calculate Your EPC

It’s a straightforward process.
Just multiply your conversion rate (the percentage of clicks that turn into paying customers) by your customer value (the revenue generated from a single customer, minus fulfillment costs).
Here’s the formula: EPC = Customer Value * Conversion Rate
For instance, if the average customer brings in $100, and your conversion rate stands at 1%, your EPC amounts to $1.00.
With this EPC, you can effectively advertise on keywords with a CPC (Cost Per Click) lower than $1.00.
Now, imagine you boost your EPC to $1.50 or $2.00. You’d gain the capacity to increase your bids profitably, expanding your market share.

To truly dominate your competitors when it comes to Google Ads, your primary focus should revolve around optimizing and maximizing your EPC.

Need Help With Google Ads?

Need help with your Google Ads campaigns?
Whether you’re new to Google Ads and require campaign setup or an existing advertiser in need of campaign management, we’re here to offer you a personalized quote.

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Picture of Justin Rondeau
Justin Rondeau
Justin has been doing this whole “Marketing” thing since 2010, when he was mildly […okay maybe more than mildly] obsessed with all things, data, email, optimization, and split testing. He’s trained thousands of marketers, spoken on hundreds of stages, runs a delightful team of marketers, has dozens of shirts louder than his voice, and loves one hockey team: the Boston Bruins.