Wouldn’t it be great if you had an unlimited Google Ads budget that you could just run wild with? Not in this world! Marketers are constantly trying to figure out just how much to budget, how to get the most out of the budget they do have, and how much other marketers are budgeting (and paying!) to in order to double check their own work.
Budgeting for any platform, especially Google Ads, is a chore that’s never complete, and a challenge without one fixed answer. The good news is that the more you know about budgeting and the more experience you have with it, the faster you’ll be at setting budgets, optimizing mid-stream, and squeezing value out of every last penny.
How to set a budget for Google Ads
Find your benchmarks
Not determining your benchmarks is like playing pin-the-tail-on-the-donkey. Take the blindfold off so you can see what you’re aiming for! The most accessible benchmarks you can get your hands on are the ones you’ve already set for yourself, aka, past performance. Run reports to determine your numbers Y/Y and M/M. But, and that’s a big BUT, do not consider these to be your KPIs. Those numbers you’re holding there are old news. You’ve learned a lot since then. You have new strategies, new ideas, and you’re ready to navigate any of the pitfalls you stumbled into in the past. Your past numbers are now your minimums, and you’ll use those to calculate how much better you can do.
In addition to knowing how you did in the past, it’s good to dig up some info on the competition, too. Our benchmark reports reveal CPC, CPM, and CTR for millions of clicks and impressions across industries.
Set SMART goals
Before you start throwing money here and there, you have to determine what you’re working toward. That means what you want to buy and how much you’re willing and able to pay (CPC, CPM, CPL, etc).
When it comes to your leads, you need to have a clear picture of who you’re going after, since it will affect the cost. The two main considerations are:
- Where they are in the buying cycle (top-of-funnel is usually cheaper than bottom-of-funnel)
Image from WordStream PPC Budget Guide
Then, you want to set SMART goals based on the type of customer you’re going after:
- Specific: Every goal should have a quantifiable number attached to it.
- Measurable: If you’re sticking with traditional metrics, this won’t be a problem, but you will need to make sure you have an effective tracking strategy set up.
- Achievable: It’s great to set your sights high, but don’t set yourself up for failure, This is where your benchmarks come in handy.
- Realistic: A goal might feel achievable, but not realistic. Gut check that you actually have everything you need to hit your KPIs.
- Timely: Anything is achievable if you have forever to accomplish it. Set a timeline so you can track progress and optimize before it’s too late.
Your whole team should understand and believe in these goals, and know how everyone will individually contribute to make it happen.
Understand your business with marketing math
Every single lead needs to be cherished and every single lead requires a fair amount of nurturing. To make sure you’re running a profitable program, you have to make sure you’re treating every lead as high value. Currently, in PPC marketing, 1% of leads turn into customers. Knowing that, you can use the marketing math below to work backward into the numbers you need.
If you know that you need to drive more SQLs, for example, you can prioritize which initiatives or projects you need to work on. Use this math to identify the lowest hanging projects, what can help move the needle the most, which KPI will the projects move, and how your math changes above and below as a result.
Play around with this formula to better understand your funnel. This exercise will show you where your leaks are and which levers can be pulled. On top of this formula, you MUST have a system in place that's tracking your full-funnel efforts, especially if you’re spending money to acquire customers. Otherwise, you won’t know your ROAS and how effective your efforts were at producing results.
Use Keyword cost to get started
Google might not tell what each ad costs, but it gives some pretty darn good starting points with the cost of keywords. Use Google Ads Keyword Planner to figure out what you’d pay for the keywords you want to go after. Keep reading to see how you should use this initial research to optimize your campaigns later.
Tools to make setting a budget for Google Ads easier
Now let’s get to some of the tools that will make all of this a little bit easier on you. Google’s new Budget Planner forecasting tool gives you insights into how changing your spend could impact campaign performance, and we have to warn you, it’s quite addicting to play around with.
In your Tools menu, you’ll see a Budget Planner option.
From there, you’ll be taken through a tutorial. Depending on what your goals are, you can create plans based on clicks or conversions (we suggest conversions since that will better help you prove your influence on ROI), and the option to choose a target:
If you are working with a target, you can input your own numbers or ta-da choose “previous period” or “same time last year.”
Then, Google will generate a draft budget plan. You can move the spend curve based on different goals to see how more or less money could affect your numbers. But, be aware that Google drafts the budget plan using your past data, so if your campaigns don’t have enough history, the tool won’t work.
Google’s Budget Planner forecasting tool won’t spit out the magic number that tells you how much budget you should start with, but this combined with the other strategies we share here will help you determine the right amount.
How much do Google Ads cost?
Figuring out how much Google Ads cost is a little like going to the car lot to buy a new car. You ask yourself questions like: How much is the car really worth? What have other people paid for the car? How could I possibly get this car for less than other people have paid or less than I’m actually willing to pay? No one skips onto the car lot eagerly anticipating the process, and it’s the same thing for marketers who are trying to determine how much to pay for the Google Ads. There’s no price sheet for Google Ads since there are so many fluctuating factors that go into determining their market price. This is where your benchmarks come in. Our benchmark reports reveal data for millions of clicks and impressions across industries, so you can get a good idea of what other marketers are actually spending on CPC, CPM, and CTR. That’s essentially how much Google Ads cost — basically, what other people are willing to pay for them.
Again, do your research. You’d be surprised how many agencies and companies are willing to divulge secrets. Keep a spreadsheet of all the data you come across, and use those numbers to set your own KPIs.
Below, check out WordStream’s fabulous roundup of Google AdWords benchmarks by industry.
Setting a Google Ads budget in your Google Ads account
Now that you’re feeling good about your math and you’re ready to match budget to campaign, it’s time to log into your Google Ads account and get started. Here’s the step by step on how to do just that:
- Sign in to your Google Ads account.
- Navigate to Campaigns and click the campaign you'd like to edit.
- At the top right, click the pencil icon .
- Enter a new avg. daily budget.
- Click Save.
How to optimize your Google Ads budget
Pull reports as often as possible
AdStage Report can do that for you automatically. Use it to automate your regular reporting with web-based, PDF, or Excel reports that are refreshed and sent out on a daily, weekly, or monthly schedule. Even if you’re not making tweaks based on what you see in the report, you should always know what’s going on with your campaigns and accounts.
Shift budget to top performers
Once you see what is working (usually 30 days after a campaign is launched), shift your budget to top performers. For keywords, that means those that have the greatest chance of converting. Remember we’re no longer focused on top of funnel movements. We want to see action that is the closest to proving out ROAS.
Though it sometimes may not feel like, managing your Google Ads budget is manageable. Figure out what you’re working toward, how much you can and are willing to pay, and then monitor and tweak until you find your sweet spot. Don’t forget to come up with an easy way to streamline your data so you can calculate your own historical CPC, CPM, and CTR, too.