Google Ads is a great way for small business owners to kickstart lead generation. With the right keyword strategy and budget allocation, you can propel your business to the top of Google’s Search results page. However, it’s crucial to bear in mind that Google ad spending can get out of hand very quickly.
Determining Your Google Ads Budget
The question that small business owner’s face when venturing into Google ads is: What should my Google Ads budget be? There is no short answer to this question. To answer it, we need to dive deeper into the key factors that influence the cost of Google Ads.
Factors Influencing Google Ads Pricing
1. Industry
The industry you operate in shapes your Google Ads expenditure. In general, industries that have a higher value-per-conversion, or a higher customer lifetime value, will have a higher cost per click. This occurs because businesses are willing to invest more for each click.
Consider a scenario where one business can potentially earn thousands of dollars from a single conversion; they’re comfortable with a higher cost per conversion. Consequently, this willingness to spend more on clicks drives up the cost per click within that industry, making Google Ads more expensive in that industry.
2. Keywords
The choice of keywords play a pivotal role in determining your Google Ads spend. The price of the keywords you choose to bid on is affected by keyword intent and the competition.
Informational keywords characterized by low intent, come with a lower price tag. For example, in the Self Storage industry if someone was to Google “how much does storage cost per month”, this is informational. There is no indication that they are ready to rent a storage unit, so the intent is low. Businesses are likely to bid conservatively on such keywords due to the lower likelihood of a conversion, resulting in lower costs. In contrast, if someone searched “available storage units near me”, that is high intent so the bidding price will be higher. This is because competitors are likely to bid aggressively for these keywords.
3. Budget
The cost of your Google Ads will ultimately depend on the budget that you set. Your budget is the amount you are willing to spend over the course of the month (approximately 30.33 days). Google will only let you set a daily budget, so if you want to spend $1,000/month, you will divide 1,000 by 30.33, which is $32.97/day.
Google won’t spend more than $1,000 in the month, but it might spend more than $32.97 in a day, if for example, there was a day where your budget was underspent Google will overspend another day to make up for that.
4. Cost Per Click
Possibly the biggest factor of Google Ads pricing is the cost per click in your industry. In Google Advertising, the market sets the price. You have to bid on the keywords that you select for your campaign. If you are willing to bid high for a keyword, your competitors will have to bid even higher, and so on, thus driving up the cost per click.
To keep your cost per click down, you can set a max bid on your keywords, you might show up less often, but it will stop your spend from getting out of hand.
How Cost Per Click is Determined
As previously mentioned, Cost Per Click is determined by the market. Google essentially runs live auctions every time a user initiates a search. You’ll notice that when you search for something repeatedly, the displayed ads change. That’s because Google runs their auction, and the highest bidders will show up. Different ads appear each time, because each bidder will inevitably run out of their daily budget so Google will stop showing them for that day.
To win this auction, you have to be the highest bidder. This is how cost per click gets driven up. When you raise your bids, your competitors will too, and the cost keeps rising.
Google Ads Budgeting For a Small Business
So, how much should you spend on Google Ads as a small business? Unfortunately, there is no one-size-fits-all answer. The amount that a small business should spend on Google Ads varies widely depending on several factors, including the industry, location, business goals and competition. Every business will be different, but here are some steps to help you determine an appropriate budget for your Google Ad campaign.
1. Define Your Goals
You need to know exactly why you are advertising. You might want to generate more web traffic, generate more leads, increase your sales or raise brand awareness. This will influence your budget, because if it is just brand awareness or traffic, then you might not see a return on your investment straight away, whereas with leads and sales, the return on investment will, ideally, be seen much sooner.
2. Know Your Customer Acquisition Cost
Understand how much you can afford to spend to acquire a new customer. This will be based on the lifetime value of a customer. For example, if your average lifetime value of a customer is $500, you might be willing to spend $50-$100 acquiring that customer. If the lifetime value is $100, then you would want a much lower cost per acquisition, so your budget would need to be lower to start off.
3. Research Your Keywords
Use Google’s keyword planner or other search tools to create a keyword plan that sets out the estimated cost per click (CPC) for keywords relevant to your business. If the keywords are too expensive, think outside the box and try to find similar but cheaper keywords. By finding the CPC, it will give you an idea of the potential costs associated with your campaign.
4. Set a Daily or Monthly Budget
Once you have an idea of the keyword costs and your ideal cost per acquisition, you can decide on a budget. Start with a budget that you are comfortable with and be prepared to increase it once your campaign is optimized.
5. Monitor and Optimize
Once you start running your ads, Google will need to fit them into their algorithm. This means that in the beginning your ads might be showing for search terms with low intent. You need to make sure that you are refining your keywords so that your ad is showing up for searches with higher intent that are more likely to convert.
Things you need to look at are Click Through Rate (CTR) and conversion rate. If a keyword has a really low click through rate, then it may need to be paused. If it has a high click through rate and a low conversion rate, then you need to look at the landing page and determine why the customer is clicking through the ads but is not converting. Once you start to hone in on solid keywords with a good CTR and conversion rate, you can increase your budget.
6. Test and Experiment
Use A/B testing to refine your ad copy, landing pages and targeting to improve your results. Once you start to see performance improving, you can start increasing your budget. Google needs time to learn when to fire your ad, so once it is firing in the right place and directing good traffic to your site, it is a good idea to increase your ad spend.
7. Consider Your Competition
In highly competitive markets it might be necessary to allocate a higher budget to compete effectively.
How Competition Affects Google Ads Costs
Highly competitive markets will require higher budgets, as you need to be able to pay more per click in order to outbid your competitors. There are a couple of ways to determine if you need to increase your budget to beat the competition, or at least compete at the top.
1. Search Impression Share
A good metric to focus on is “Search Impression Share”. This shows how often your ad is firing, in situations where it could possibly fire. So let’s say you have a search impression share of 40%, your ad is only firing 40% of the time that your keywords are searched. This could be a sign that your competitors have higher budgets. In order to get more of the search impression share, you will need to increase your budget. It must be noted, however, that doubling your budget will not necessarily guarantee that you double your impression share.
2. Auction Insights
By looking at your auction insights tab, you can see all of the competition in your ad space. It shows how often your ad shows compared to the competition and how often a competitor’s ad ranks above you. If your competitors are outranking you most of the time, this is an indicator that they are outspending you and you should consider increasing your budget.
Keyword Research to Determine Average CPC
During your keyword research phase, you will use tools such as the Google Keyword Planner to determine the average cost per click in your industry. For example, if you were researching the cost per click for self storage related keywords in Vancouver, you would set your location to Vancouver and search for self storage. Google will show you a low bid and a high bid for these keywords over the last year. The low bid is the least that someone has paid for a click, and the high bid is the most.
As you can see, the CPC varies quite a bit. If you think the keywords will be too expensive for the budget that you have in mind, it might be worth leaving them out. However, there are bidding strategies you can use, such as manual CPC, where you can use these expensive keywords and limit the amount that Google can bid on these keywords.
If you had a budget of $18/day and you had “Self Storage Near Me” as a keyword, which costs $17.98, then that keyword will use your entire daily budget and your ad could potentially only receive 1 click a day. This is why you need to be strategic with your keyword research and not just include every term you can think of. If you don’t have experience with manual bidding strategies, it can be tricky to implement them, so probably best to leave out the more expensive keywords or they will just eat your budget up.
Working With A Google Ad Agency (Like Salt Water Digital)
Choosing to work with a Google Ads agency offers several advantages to businesses of all sizes. Here are some of the reasons why you might consider partnering with an agency rather than going it alone on your Google Ad journey:
1. Expertise and Experience
We have a team of experienced search engine strategists who specialize in Google Ads. We have a number of clients across a wide range of industries for whom we have had to research keywords, setup campaigns, write ad copy, choose bidding strategies and continuously optimize their campaigns.
2. Time Saving
Time is money when you are a small business. Google Ads can be really time consuming, especially if you are trying to learn how to navigate its variety of tools with no experience, while also trying to juggle all of your other roles within your business. By working with an agency, you can focus your time and energy elsewhere, while knowing that your ads are running efficiently.
3. Cost-Effective
While management fees might turn you off the idea of working with an agency, it can be much more cost-effective, especially in the long run. Experienced professionals will be able to optimize your campaigns to get better results with your Google Ad budget, potentially reducing your cost per acquisition and increasing your return on investment.
4. Customized Strategies
Google sets all new users up with automated bidding strategies. By using these, it gives Google the keys to your budget and lets them spend it whatever way they see fit. To stop this, you need a manual bidding strategy. They are a lot more work, but will be far more efficient. We have lots of experience running manual bidding strategies, and we will be able to determine which one works best for you, and also experiment with different strategies to see if they can be further optimized while managing your account.
5. Tracking and Reporting
Agencies provide detailed reporting, in our case bi-monthly, and analysis of your campaign performance. This transparency allows you to understand how your budget is being spent and the results that it is generating.
6. Troubleshooting and Problem Solving
If you were to encounter any problems with your campaign, an agency can quickly diagnose and resolve them. This will prevent wasted ad spend and minimize disruptions to your marketing efforts. If your ad performance starts to drop, your agency will be quickly on hand to give the campaign it’s best chance at performing well again.
7. Competitive Advantage
Google Ad markets are becoming ever more competitive. By having an agency’s expertise, you can gain a competitive edge. We can help you outperform your competitors and maximize your visibility in search results. As trends change, we can ensure your ads stay relevant.
8. Budget
After all, this is why you ended up here, you just aren’t sure how to decide on a budget for your Google Ads. Well, if you were to work with an agency like us, we will do all of your keyword research and determine how much you need to spend to beat the competition and get some real return on your ad spend.
Conclusion
Ultimately, your Google Ads budget will depend on your specific circumstances and objectives. It’s important to be flexible and willing to adjust your budget, and your strategy to match, throughout the lifetime of your campaign. Working with an agency, like us, can help you to mitigate all of the stress involved with your Google Ads and their budget. Letting us manage your ads will give you time to focus on all of the other areas that make your business a success.
