# How Much You Should Spend on Pay Per Click Advertising

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.

Now that you have your budget, plug in your average closing rate and calculate how many leads you could turn into sales.

100 leads @ 25% closing rate = 25 sales

Finally, calculate how much revenue you could make. Let's assume each sale is worth \$1,000.

\$1,000 x 25 sales = \$25,000 in revenue

There you have it, a step-by-step guide to calculating a profitable PPC budget.

Posted in PPC

#### About the Author: Nick Supapol

Nick Supapol leads the PPC team (and is consistently the #1 ranked ping-pong player) at Search Engine People.

#### If You Only Build It, They Won’t Necessarily Come

In compliance with Ontario’s non-essential business closure our physical offices are closed until further notice. Fortunately our willingness to adopt work from home and the required technology over the past two years has allowed us to continue our operations without impact. For our valued clients and partners you can expect the same great level of service and execution you have become accustomed to.

Many clients/prospects have reached out to us in an effort to introduce new campaigns as quickly as possible. In an effort to help our clients pivot we have increased our campaign build capacity. We are now able to turn new campaigns over in 2-3 business days opposed to the typical 5-7 business day turnaround time. Please note that campaign launch approvals from the vendor side (Google, Bing, Facebook, Instagram etc.) may be delayed as those companies migrate to work from home.

For existing clients please reach out to your account manager with any questions you may have.