A Step-by-Step Guide to Calculating a Profitable AdWords Budget

Now more than ever, companies are turning to online advertising to attract new business. But if you're just starting out, knowing how much to spend can be a little unclear. That is why I have put together this easy guide to help you calculate a PPC budget.

The guide (tailored for Google AdWords), is broken down into 3 sections:

1. Research Tools

2. Numbers You Need to Know

3. Step-by-Step Calculation

Section One: Research Tools

The first thing to do is research keywords that relate to your business offering and determine on average how much it will cost to bring a visitor to your website.

Once you have a solid list of relevant keywords, use the Google Traffic Estimator to get an idea of how much a click will cost on average.

A quick walkthrough of the Traffic Estimator:

Step 1: Select your location, language and network

Step 3: Enter your Max CPC (the maximum cost you are willing to pay per click)

Set the Max CPC where the average ad position falls between 1.5 and 3.0.

If you set your average CPC too high, Google could provide an estimate for a click in position 1, which might not be necessary for your business.

Section 2: Numbers You Need to Know

Website conversion rate:

A Digital Marketing firm can provide insight on this metric if you don't know.

Let's assume 1 out of every 10 visitors to your website fills out the Contact Us form. Your website's conversion rate is 10%. Impressive...must be that great content!!

The percentage of leads that turn into a sale.

Let's assume 1 in every 4 leads turns into a sale. Your average closing rate is 25%. Equally as impressive!!

Section 3: Step-by-Step Calculation

Let's assume the Traffic Estimator projected a \$5 average CPC.

Cost per visitor (Average CPC): \$5

We determined your website converts at 10%.

1 lead / 10 visitors = 10% conversion rate

Since you will still have to pay for the 10 visitors, it will cost \$50 per lead.

\$5 per visit x 10 visitors = \$50 per lead

Let's assume your sales team has the capacity to handle 100 leads per month. Your online advertising budget should be \$5,000 per month.