Paid Search

How to Determine What Your PPC Budget Should Be

Everyone knows that you want your PPC budget to be just enough to make you a profit, but you have to have an initial budget to test how much you can get for each dollar you put into paid search advertising, or pay per click advertising (PPC). Having this budget ready to go before you start creating your PPC strategy is crucial. Your budget may very well change over time, so it’s important to understand how to set a budget and why it matters. Fortunately, it doesn’t have to be as overwhelming as many may think.

Setting Up an Estimated PPC Budget

The reason that so many people dread coming up with a budget is because there are many different ways to get to your rough estimate. In the end your goal is to perfect your budget, but you initial budget just has to be a good solid estimate. SEO agencies can help you perfect your budget in the end, but it helps a lot to have you own idea of a budget before you even go speak with an SEO agency. It’s not completely necessary, but again, that ballpark estimate will help speed up your path to success.

Below are two choices you have for coming up with a good initial budget:

            Choice #1: Think about your end goal.

What you need to do here is think of an end-goal, whether that be to have a certain amount of sales dollars, producing a number of leads, etc. Once you have your end goal in mind, you think about the target CPA and do the math from there.In other words, you’re working backwards.

Wordstream wrote a great article discussing the importance of working in an order to come up with your budget. You have to first know the answers to the following questions:

  • What is your goal cost per lead? Ex: $30 per lead.
  • What is your new client goal per month? Ex: 150 per month.
  • What is your average close rate of leads? Ex: 12% close rate.

Once you know the answers to these questions, you can start putting some numbers together to come up with a rough budget. Using the numbers from the questions above, this is the way that the math would look:

  1. Find how many PPC leads you need. For 150 clients from a 12% close rate, you need to do this math: 150/0.12 = 1,250 PPC Leads.
  2. Determine budget. Take your number of leads and multiply that by your goal coast-per lead: 1,250 leads X $30 cost per lead = $37,500.

Of course the value of a lead will depend on several factors including geography, bounce rate, interaction, etc., so there are ways to better control this quality (such as using negative keywords). Check out the WordStream article or talk with our PPC experts here for more advanced information.

            Choice #2: Analyze your past PPC campaigns.

If you had a PPC campaign in the past, you can use some of that data to help you determine where to set your budget this time around. Look at what worked at what didn’t for the goal you had in mind. For example, if you had a goal cost per action (CPA) of $200, go look at what you spent previously and see what met that mark.

Once you have narrowed down what worked, look at the impression share. Those with low impression share will give you the chance to earn more volume by having a larger budget (or increasing your bids). You then need to ask yourself: How much additional budget will I need based on the current impression share? When you add up all of your estimates you’ll have a rough budget.

The Takeaway

Once again, the above options are very basic in nature. When you start working with an SEO agency or expert you can start to get into quality aspects and other factors that might come into play. Until then, having an idea of your budget is an important thing to keep in mind as you start talking to more professionals or creating a strategy.

Robert Brady, head of PPC at Righteous Marketing, said in best in this article when he talked about the importance of understanding your own budget:

Optimization implies choosing better options over less desirable options. Without knowing all constraints, of which budget is a MAJOR one, it is very difficult to make the best optimization decisions.”

Do you have any tips for coming up with a budget for a new PPC initiative? Let us know your experiences and your thoughts in the comment section below.

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