Investing in a PPC platform like Google AdWords can have a huge impact on your business.
In fact, according to Google, the average advertiser on AdWords makes two dollars for every dollar they spend.
That means the majority of people on the platform are doubling their investment.
It all sounds nice in theory, right?
But how much does Google AdWords cost — and more importantly, how do you come up with the initial capital needed to advertise on Google?
Here’s how to calculate your AdWords budget so that you don’t end up swimming in a sea of debt.
Most marketing activities are costly and can deplete your budget fast.
You can’t afford to have that budget go to waste either.
Misusing your budget can lead to a wasted expense that only generates a few, low-quality leads.
But if you’re too hesitant to jump off the deep end, you’re probably also losing out on sales.
Every second you aren’t advertising on AdWords is another second that you’re not doubling your ROI.
If you don’t know how much Google AdWords can cost, you might be in for a surprise (good or bad).
How Much Does Google AdWords Cost?
Depending on your industry, keywords can be extremely cheap or grossly expensive.
And if you’re targeting high-volume keywords with tons of monthly searches, you could be paying a pretty penny for that traffic.
One of the biggest mistakes in launching a PPC campaign is failing to do the proper research before jumping in.
Based on your industry, you could be paying anywhere from 19 cents a click to over five bucks.
But even within each industry, there are huge variations in keyword costs and average costs per click.
How much does Google AdWords cost? It depends on what you’ll be advertising.
To get some deeper data, you need to research individual keywords that your business is likely to target.
How To Calculate Your Google AdWords Budget With Keywords
Calculating your budget means first figuring out what that budget needs to be.
Open up SEMrush and start by searching for terms related to your business.
If you’re not sure of which keywords to search for, try brainstorming what people usually search to find your business.
For example, do you run a flower shop? If so, people likely search for “local flower delivery” or “local florist.”
If you still can’t think of anything, you can also use the keyword planner in AdWords for free.
Head to your account and open up the keyword planner:
From here, select the first option from the list:
Now, you can enter your homepage or a landing page (if you have one) to get keyword ideas based on your site:
Search via your landing page, and you’ll get a targeted list of keywords.
Now download that list and head back to SEMrush.
Search for these keywords directly in the tool, and you’ll get tons of valuable data on cost per click:
If you scroll down further, you can see related keywords with their cost per clicks as well:
Repeat this process for 4-5 different keywords and make sure to jot them down in a spreadsheet.
Make sure you include the following in your spreadsheet:
- Volume (how many searches per month)
This will help you do some basic math that’s needed to decipher a budget.
Once you have a few keywords in your spreadsheet with their respective volume and CPCs, you can calculate your costs.
According to WordStream, the average click-through rate across all industries on AdWords is 1.91%.
Depending on your industry, you can take the average click-through rate and calculate how many clicks you’ll get a month based on the keywords you chose.
To do this, refer back to your list of keywords and analyze the volume.
For example, if you have a keyword and the volume is 1,000 searches per month, you could expect to get 19 clicks per month at the average CTR of 1.91%.
Here’s a formula to see how many clicks per month you’ll get on a specific keyword:
Keyword Volume * Average CTR for your industry = Clicks per month
Next, take the cost per click of that keyword and multiply it by the monthly clicks.
For example, if my keyword theoretically costs five dollars per click, I can expect to pay $95 per month for that keyword.
Here’s the formula to see monthly cost of a given keyword:
Clicks per month * cost per click = monthly cost for that keyword
Now simply repeat that process by using those two formulas for each keyword you want to target.
At the end, add up all of the monthly costs for each keyword to get an idea of how much your monthly budget will likely be.
Once you calculate this data, you’ll know how much money you need to set aside for your budget.
So, how do you come up with the money now?
Here’s a simple, actionable way to generate a budget from nothing.
How To Audit Your Google AdWords Budget
Money doesn’t generate out of thin air, meaning you’ve gotta find some place to get money from. And if you aren’t looking to re-invest money into your business or take money from your bank account to do it, it’s gotta come from somewhere.
Hopefully not one of those “I need cash now” commercials, though. Please don’t do that. Ever. 😥
In all seriousness, if you don’t have any money left in the budget and can’t afford to take from your bank account, you have one option:
Auditing your existing budget to find any gaps or wasted spend that you can use.
You can do this in a few different ways.
Option 1. Measure labor costs and adjust from there
It’s not always as cut and dry as analyzing a concrete number like sales from X platform.
Remember: Time is money, too. Your time is the most valuable thing you have.
So if you’re spending 10 hours a week on social media campaigns, even cutting back by five could free up tons of room in your budget.
To calculate this, you’ve gotta take your hourly rate (if you pay yourself a salary or are on a salary, divide it in half to get your hourly rate) and multiply it by the number of hours you spend on a task.
Hourly rate * hours spent working on X task = cost of that task in labor
Let’s suppose that your hourly rate for salary or services is $50 and that you spend 10 hours a week on social media campaigns.
Cutting back five hours would save you $250 in labor every single week.
That’s $1,000 extra each and every month in saved labor costs/overhead.
Now you can use that extra time/money to invest in a new platform, like AdWords.
Option 2. Trade one for the other
Another concrete way to generate a budget from thin air is by simply trading one platform for another.
But this isn’t always that easy.
The trick here is to analyze specific conversion data to see which platforms are taking up too much time and money with a low impact on your overall revenue.
For example, are you running email campaigns via a software that costs you $99 a month? What are the conversions like? What results do the campaigns get on average?
The goal here is to figure out where you can trim the fat. Where you can eliminate budget wasting efforts that aren’t driving sales.
If you can do that, you can free up room for AdWords.
To do this, you need to start analyzing your conversion data.
If you have goals set up in Google Analytics, you can measure goal completions and costs:
If you don’t have goal values set up, you can still calculate your costs by using an average lead value:
Total revenue generated by closed leads / total number of closed leads
Using this, you can analyze how much value a given platform is generating for your business.
Is Pinterest generating three leads per month? Multiply it by your average lead value.
Now analyze how much money you’re spending on direct spend and labor on that platform.
Is the labor and direct spend more than the average lead value or total monthly revenue from those leads?
Dump the platform and use that money on AdWords.
Option 3. Audit your tool costs
The last option is to conduct a quick audit of your existing overhead costs in the form of tools.
Most marketers will have a diverse toolset that they use. Keyword research tools, monitoring tools, social scheduling, and more. There literally is a tool for everything.
For example, I use dozens of tools on a monthly basis that cost money.
Now, if I needed room for my budget, I could probably cut a tool like Evernote out simply because it’s not essential to my business. I can take notes for free on it. I’ll just lose some functionality. But if that means getting to spend an extra $50 on AdWords, it could be worth it.
Take a minute to concretely analyze how much these tools cost and what your monthly bills look like.
Try eliminating non-essential tools or ones that aren’t helping you convert users into customers and using that extra room to form an AdWords budget.
Start Small And Double Down If It Works
Earlier in this post, I gave you an example of how much it would cost me monthly for a sample keyword.
It was only $95.
Meaning all you’d need to start on AdWords is less than $100 in some cases.
That should be relatively easy to scrape up by using one of the three options listed above.
Contrary to popular belief, you don’t need a monster-sized budget to advertise on Google AdWords.
Starting small is better in most cases, as it gives you less room for error.
If you’re setting a monthly budget of $1,000 on AdWords right from the start, you have a ton of risk.
You’re new to the platform, and being new makes it much easier to blow your money without realizing it. But if you’re only investing $95, your risk is much lower.
The key with AdWords is to start small and adjust your budget from there.
If you go all in too fast, you risk losing that money. If you start slow, you can adjust based on performance.
If campaigns are going well, you simply add more money because you’re making more money that you can reinvest.
According to Google, doubling your return on investment is the norm for advertisers on their platform.
In AdWords, make sure you’ve set up your conversion tracking properly and that you’re tracking the right metrics.
Direct sales and direct profit into your bank account should be the determining factor for success.
Did your ads generate 15 sales for a cost per sale of $5? If that’s affordable, make it sustainable by doubling down.
Start small, adjust based on results, and double down if your campaigns are generating affordable and profitable sales.
When you want to explore a new platform like AdWords, you can’t do it without money.
But creating room in the budget isn’t always easy or fun.
Thankfully, there are a few quick ways to create an AdWords budget from scratch.
First, you can start by researching how much your keywords are going to cost.
This gives you an idea of how much money you’ll need to set aside for AdWords, and somewhat answers the question “how much does Google AdWords cost?”
Once you’ve done that, you can conduct a simple, quick audit of your existing budget.
Where is your money currently going? What platforms? Are specific tools costing you a fortune without results?
Can you sacrifice one to test AdWords? Can you cut out five hours weekly from a task to save yourself labor costs?
If so, it’s time to put that money into action. Start small.
Lastly, all you’ve gotta do is monitor your campaigns and double down if they work.
That’s all, folks!
Now it’s up to you. Try to put all this into practice and let us know your results!