When should I increase my Google advertising budget?

Google Ads is one of the most powerful advertising platforms for small businesses.

When we speak with potential clients and host webinars about Google Ads, one of the most common questions wehearis:

How much should I be spending in Google Ads?

Thats a great question and there are really 2 answers to this question

First, Start with a Test Budget.

When youre just starting out, youll want to contain your costs, because you dont know whats going to work.

Youre in testing mode. Its possible that your initial test campaign will be profitable, but you may only break-even, or you may lose a little money. Weve created a lot of campaigns that were profitable right out of the gate, but you shouldnt expect this to happen. Instead, your mindset should be that youre investing in market research.

With your initial testing, youll gain insights into what ad messages are resonating with your target market, and youll also learn what keywords are converting into qualified leads and customers. Plus, youll be able to test which messages on your landing pages are working best for converting clicks into leads and customers.

What should your test budget be?

You can roughly calculate your test budget by multiplying the number of keywords you want to test by the cost per click and by a minimum of 100 clicks. As a general rule, youll want to get at least 100-200 clicks on a keyword to determine whether it converts for you.

So, for example, if youre going to test 10 keywords with a cost per click of $1, wed recommend you plan on a test budget of $1,000 to $2,000. Most likely, youll have a mix of winning and losing keywords, ads and landing pages from this initial test. As you see the results come in, youll prune your campaign keeping the winners, dropping the losers to bring your campaign to profitability.

Then, Ditch the Budget.

Once your campaign is profitable, you should ditch the budget.

The most successful advertisers dont cap their budgets. They know that effective advertising is one of the best investments you can possibly make in your business.

Think about it: If youre investing $1 into Google Ads and getting $2, $3, $4 or $5 in return, why would you want to put a cap on that?

Assuming you want to grow your business, you should want to make that investment as many times as possible.

Focus on ROI, Not Cost

If you want to be the dominant advertiser in your market, you cant just focus on managing costs you must focus your energy on maximizing your return on investment (ROI) from advertising.

We have a client who spends more than $100,000 per month with Google Ads. And hes happy to do so because he earns a healthy profit on that advertising. In fact, every month, hes asking us for ideas for how he can invest MORE money into advertising!

So how do you get to the point where youre scaling up your advertising and capturing more market share?

Focus on EPC, Not CPC

You cant just focus on cost per click (CPC). Many advertisers just focus on getting their CPC down. They try to write better ads to improve their Google Ads quality scores so they can get cheaper clicks. But thats only half the equation.

Of course, you should always be looking for ways to make your advertising more efficient. But minimizing CPC is NOT where the real leverage is located.

Instead, the real leverage in Google Ads is in increasing your Earnings Per Click (EPC).

If you have the highest EPC in your market, you can outbid your competitors and gain more clicks, more leads, and more customers. Thats how you really win the Google Ads game.

How To Calculate Your EPC

Its simple.

Just multiply your conversion rate (the percentage of people who click you become paying customers) by your customer value (the amount of money you earn, minus fulfillment costs, from 1 new customer).

Heres the equation: EPC = Customer Value X Conversion Rate

For example, if an average customer generates $100 and you have a conversion rate of 1%, then your EPC is $1.00.

That means you could advertise profitably on keywords with a CPC under $1.00.

But what would happen if you increase your EPC to $1.50 or $2.00? Well, youd be able to profitably increase your bids and gain more market share. In our experience, when you can increase bids by 50% or 100%, you typically will gain much more than 50% or 100% more traffic (typically its a multiplier effective where you can get a TON more traffic).

So if you really want to dominate your competitors in Google Ads, you need to focus on maximizing your EPC.

Need Help With Google Ads?

Click here to request a quote.If youre just getting started with Google Ads, well send you a quote to get your campaign up and running. And if youre already advertising in Google, well giveyou a quote to manage your campaigns.