How to Choose a Google Ad Budget

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Budgeting is a crucial part of every business plan, and advertising strategies are no exception. You should base your budget on various elements, like the current marketing budget, desired budget, keywords, CPC & other KPIs to track progress. Learn all about how to plan your Google Ads budget in this blog.
Imagine you’re all set to begin marketing your product or service. You’ve selected your target market and designed your ads. Your next step should be to decide on the right budget for your campaign.
But we all know that budgeting can be a nightmare, thinking all about the how’s and why’s of advertising costs, but we’re here to help.
Effective budgeting, planning, and forecasting are vital aspects of any business plan, and online ads are no exception. And this is particularly true for Google Ads, where each click equals either business growth or a waste of your hard-earned money.
Unfortunately, resources that cover all of the aspects of PPC budgeting are scarce. On most days, you have to figure it all out on your own.
But, we at have created the following guide to assist you in understanding the correct Google Ads budgeting strategies from scratch.
Before we start with our steps, it is crucial to understand the difference between Daily Budgets & Total Campaign Budgets. So, let’s get going!

Setting Daily Budgets on Google Ads

You can set a daily budget or a campaign budget in Google Ads. When using the daily budget setting, it’s common to have an idea of how much money you’ll have to spend on that campaign for the month.
Suppose you have a $100 monthly budget for this campaign. Divide the monthly budget by 30 days, and you’ll have a total daily budget of $33.33 for your campaign. This is a simple method of calculating your daily budget.
You should keep a daily budget in mind because Google Ads does not place a rigid limit on the allotted daily budget. So, you can try to go over by up to 20% of the monthly budget to account for daily changes in search traffic just to keep a safer margin.
For example, if your campaign generated higher search volume on day 2 than it did on day 3, you might go over your daily budget.
There’s no need to be bothered about this daily spend fluctuation because Google Ads will keep your campaign from exceeding your monthly budget. If your monthly budget is exceeded, Google Ads will give you credit. So, you can sit back and relax.

Total Campaign Budgets for Google Ads

Another kind of budget is the total campaign budget. You can use this option if you already know how much you want to spend on a specific campaign with a time-sensitive budget.
Let’s say you’re planning a webinar and want to spend $2000 to promote it for only three weeks. You can choose a start date, an end date, and a total budget. Google Ads will take care of delivering your ad to the right people for that amount of time.

Determining your Google Ads Budget

We all want to get the most out of our Google Ads budget, whether we’re new to Google Ads or a seasoned digital ad expert. Even for Google Ads pros, it’s critical to understand the process as Google makes changes to it so that you don’t fall into financial traps.  

Choosing your Initial Google Ads Budget

To determine an initial Google Ads budget, you must first identify your objectives. With goals in place, you’ll be able to figure out what budget to start with.
Let’s imagine your goal is to acquire 100 new clients. If your conversion rate is 4% and your industry’s average CPC (cost-per-click) is $2, you’ll need to spend $50 to acquire 1 customer and $5,000 to gain 100 new customers.
When deciding on your initial Google Ads budget, you should ask yourself four key questions:  
  • What role do Google Ads play in your marketing strategy?
  • What do my competitors spend (and where do they spend it)?
  • What is the cost-per-click (CPC) for the terms I’m bidding on?
  • Which KPIs (key performance indicators) are most important to me?

Make use of Google’s Keyword Planner

When you create campaigns on Google Ads, you start by deciding which keywords you want to target and how much you’re ready to pay for each click to your site.
You probably already understand the keywords you want, but you shouldn’t base your campaigns on broad concepts. Instead, utilize Google’s Keyword Planner to research the phrases you’re thinking about and come up with new ones to target.
Assume we wanted to run a Google Ads campaign to reach consumers interested in buying spices like clove and turmeric. Then you have to think about targeting the keywords “clove” and “turmeric” or “ayurveda.”
When we typed that into Keyword Planner, we got the following results:
Google has pretty much everything figured out for you.
You can read more about it here.  

Conduct Test Campaigns

If you’ve never done Google Ads campaigns, you won’t know what works and what doesn’t for your business unless you run a few tests.
It’s critical to understand that these test campaigns may not be profitable. In fact, if you’ve never worked with PPC before and don’t intend to hire a PPC campaign manager, you’ll most likely lose money on them. (which is why you definitely should hire one 😉 )
That being said, any money you lose during this process can be viewed as an investment in your entire PPC strategy, and you can expect to recover it after you launch optimized and tested PPC Advertising.
But if you’re still skeptical about it, let us do this job for you! (psst, we will tell you a secret! We have managed more than $165M+ Ad-Spend & have done 140,000+ Ads & running)

What is the CPC for your Targeted Keywords?

You’ll want to base your budget on the success of your chosen keywords as well.
For example, if you use high-competition keywords, you may not see as much return on your ad expenditure as you would with less competitive terms.
For calculating the average CPC for any given keyword, you can use this formula:
CPC = Total Costs / Total Clicks.
While you have control over the maximum CPC you pay for each term, highly competitive keywords will always cost you more. When it comes to CPC budgeting, there are a few objectives that you should keep in mind:  
  • First, do some keyword research to see what your competitors are bidding on and how much it will cost to compete.
  • Set a budget limit and restrict the number of keywords you bid on or the number of ads you run.
  • Determine which keywords you want to target and base your budget on their cost-per-click (CPC).
If you know how much money you want to spend, creating a CPC limit and target words within that range seems like a better option.
However, if you have a flexible budget, dedicate extra effort to keyword research. Then you can select those with the highest potential ROI and allocate your budget accordingly.

The Ads Budget and Key Performance Indicators

All the above information should give you a starting point for the budgeting on your Google ads campaign.
While CPC is one of the most crucial metrics, it is not the only one. You should also keep track of the following essential KPIs which influence your ad budget. Other KPIs include:
  1. Quality Score – This influences how much you spend on your ads; the greater your quality score, the more relevant your ads are.
  2. Impressions – The number of times your ad will be displayed.
  3. CTR (Click Through Rate) – The number of times users click on your adverts.
  4. CPC (Cost Per Conversion) – The amount of money spent per conversion.
  5. Average position – The position of your ad determines how much traffic you receive. Higher the placement expensive the ad. But, they generally have higher CTRs.
  6. Conversion rates – Measures the activity rate that visitors take after visiting your websites, such as signing up for an email or purchasing services/items.

Ending Note

Unfortunately, there is no set formula for calculating your paid search budget.
You should base your budget on various factors, including your current marketing budget, desired spending budget, ultimate campaign goals, keywords, CPC rates, & other KPIs to track progress.
Make sure you’re paying close attention to your campaigns. This will allow you to discover which campaigns produce the highest ROI and which are wasting your money.
Now, it’s time to make the magic happen!

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Avi Kumar
Avi took the Engineering Route to Marketing. He loves proving that all marketing is Scientific and not black magic. He is obsessed with finding efficient ways of doing things. He started at 17 from improving how to “Holystone” ship’s wooden decks efficiently as an apprentice on ships!