How to calculate your Google Ads budget correctly?

Do you want to advertise your products in Google Ads but you don’t know how much it will cost you? Determining your budget is one of the toughest tasks before you kick off your PPC campaign. Well-planned budget is a key element for success in Google Ads. Here are some tips that will help you calculate your optimal budget.

What a PPC campaign budget depends on?

Google Ads budget is determined in a very flexible way for advertisers. Basically, it’s up to you how much you are willing to spend on a sponsored links campaign. You have control over the total sum to invest and over where and how your money should be spent.

But there’s a catch: if you spent too little, your ad wouldn’t be delivered to your customers. You could also exaggerate and overestimated your budget. Then, you would spend more than needed and your budget would be wasted on ineffective clicks that didn’t reach actual customers.

How much should I spend on Google Ads to reach my goals and conversions?

Every advertiser starting their journey with Google Ads is facing this problem. Unfortunately, there is no fixed answer because determining an optimal budget depends on many factors.

The most important of those factors are, among others:

  • competitors/industry
  • campaign objective
  • campaign duration
  • required test period
  • location
  • impression share
  • quality score
  • campaign structure
  • average ad position
  • number of running campaigns
  • introduced changes

An advertising budget for a niche product targeted at a tiny group would differ from a budget for products aimed at a wide range of people. To sell a luxury car and a summer dress mean different difficulty levels and budgets, don’t they? Also, you’d plan your spend differently for campaigns whose objectives are conversions & brand awareness.

To summarize, a campaign budget is an individual matter. To define optimal budget, you must consider various elements that determine how much you need to spend on your advertising.

How to start? Keywords, of course

In a Google Ads PPC search campaign, you pay only for clicks. That means, you spend money only when a person clicked your ad. If your ad was displayed in Google search results a thousand times but nobody clicked it, you wouldn’t spend a cent.

You need to know — while estimating your budget — how much each click will cost you. The total budget, or money you eventually spend on advertising, depends on difficulty and competitiveness of the keyword you used to advertise on.

That’s why it’s good to start planning your budget from carrying out a simple simulation in Google Keyword Planner. Thanks to that free tool, part of Google Ads Editor, you’ll be aware of estimated cost of an ad click.

To get such information, prepare a few keywords related to your ads. In the “Discover new keywords” view, stay in the “Start with keywords” tab and insert them in the text field. Alternatively, you can switch to the “Start with a website” tab and enter you site address, which will result in Google proposing a list of keywords based on your site content.

Either way, Keyword Planner returns a list of related keywords along with maximum bids required to display a given ad in the selected location. This way, you’ll know how much you’re going to pay for a single click. It’s worth noting that the tool provides estimated values based on historical data from similar campaigns. In practice, bids can be lower or higher.

What about CTR?

Once your keyword research is done, you can determine your campaign’s estimated CTR. To help yourself, you can use a tool that forecasts searches and clicks on your ads. Go again to the Keyword Planner main view, choose “Get search volume and forecasts” and provide some of your keywords.

Google will inform you how many impressions & clicks you can get, as well as it will forecast your CPC & CTR.

Let’s calculate!

After getting such basic information, you can estimate your first campaign budget. To calculate monthly budget, multiply your daily budget by 30.4 (average number of days per month).

If, say, total spend for a bunch of ads was $4.97, monthly budget would be $132.24.

$4.97 x 30.4 = $151.09 per month for a bunch of ads

You can perform similar calculation for each bunch of ads and a different set of keywords. The sum of those calculations will give you an estimated budget for the first month.

Now, your budget has been planned. After the first month you will have already had data to help you optimize your advertising spend. Good luck!