Sometimes we see business owners that are postponing adding Google Ads to their strategy and the main reason for that is usually ‘we’ve heard Google Ads is very expensive’. At the same time, Google reassures that advertisers are in charge of the budget and can never ‘overspend’. So, where is the truth?
How to figure out the right budget for your business and really make a decision on whether you can or cannot afford Google Ads?
Today we want to share some thoughts on this matter with you.
Let’s start with a simple maths exercise, and to make it easier we will assume that you only have one Google Ads campaign. The average number of days in a month is 30.4. In Google Ads, you will be required to set a daily budget for each campaign, so you need to make sure that your budget is enough to cover the minimum needs of your account. Imagine you only have € 50 per month to spend. This means that you only have € 1.64 per day to feed your campaign (€ 50 / 30.4 days). Does it feel like it will be enough for a campaign that you want to bring you considerable traffic for your website? Well, it really doesn’t. Unless you work in a very specific and low competition niche, where the search volume is low and the prices per click are low as well, as there are no other companies competing!
Now imagine you decide to spend € 5 per day on advertising. Not much, but still feels affordable to you. This means that you need to allocate at least € 152 per month for your Google Ads campaign (€ 5 x 30.4 days). At this time, you may ask – “OK, I have € 152 per month available, but is € 5 per day enough for my company’s promotion?” It is a very valid question and the answer is: it depends. Let us carry on with our analysis to better understand it.
After you’ve done that quick and simple calculation, you will need to understand what the average costs per click for the keywords you are going to use are, and which is the average search volume per month. To analyse this information, you can create a Google Ads account (or enter the one you already have) and open the Keyword Planner. Don’t worry, unless you activate your campaign, you will not be charged for using any of the Google Ads tools. In the Keyword Planner, you will be able to specify your target (location and language) and to search for keyword ideas. You can just insert two or three of the most basic variants of keywords that are relevant to your business and Google Ads will return hundreds of other variants with the available stats on them. You will see the historic bids in Euros for each one of the keywords and how often people are searching using that keyword.
Just by browsing through the keywords and narrowing down your choice, you will better understand the potential costs of your future advertising. If all your desired keywords are rather cheap – for example, around € 0.10 each – then your € 5 of the daily budget will bring you about 50 clicks per day, which is not bad at all. Of course, we are not calculating any exact numbers, we are trying to access the potential costs based on historic averages, so keep in mind that your real-life results will be different. But if in your niche keywords are more expensive – for instance € 2.50 each on average – with the same € 5 you will be potentially getting only two clicks a day, which doesn’t look great, right?
This way you can figure out the minimum investment for your business, but what if you are interested not in the minimum, but in the budget to maximise the effect of Google Ads? Well, in that case to the analysis that we’ve done so far, we would need to add one more question: how much does a potential lead should cost your business? If you are selling € 5 lipsticks, for example, it would make no sense that a lead would cost you € 15. But if, for instance, you are selling tourist tour packages for € 300–€ 500, a cost of € 15 per lead would not be a bad result. And what if you are selling luxury real estate? Well, your ‘comfortable’ cost per lead in this case might grow significantly, as will your monthly investment in Google Ads.
At this point you may want to calculate a desirable/ possible ROAS (Return On Ad Spend) for your campaign using the estimated values and later on your real-life campaign data. The ROAS will show you how much you gain per each Euro invested in the campaign. To calculate the ROAS you need to divide the revenue that you got from the leads in a campaign by that campaign´s cost. For example, if you’ve spent € 20 on a campaign and got one lead that resulted in a sale of a product worth € 100, then your ROAS is 5 or, in other words, each Euro invested brings you back € 5 in revenue. Calculating your ROAS will give you an even better feel on whether a certain investment in a campaign is worth it, or if it makes more sense to increase the budget.
To sum it all up, our suggestion is start small, figure out your minimum budget, create your first campaign, test it, optimise it as much as you can, get real-life data for your account, see if you are getting leads and, if so, what’s their average cost. Keep an eye on your ROAS and then, if it makes sense for your business, you can grow your account (by creating more campaigns) and adjust your investment accordingly.
There is no one-size-fits-all when it comes to Google Ads. Certain businesses can ‘get away’ with a rather low investment, while others need to allocate more budget.
The most important thing is to make an analysis beforehand, so that you manage your own expectations. And if, by any chance during the analysis, you realise that you cannot yet afford to make the necessary investment for your niche, you will be ‘saving’ yourself some of the hours of the work need to set up a campaign.
