AdWords PPC Budget: What should it be?

This question depends entirely on your goals, what location you want to target and what industry you’re in, such as a law firm or hospitality. Are you currently desperate for leads or are you just looking to get an extra job or two a month? At Neon Ambition, our PPC management service starts by working backwards from your goals to help you understand how many visitors you’ll need to send to your site each month in order to get the number of leads or sales you need to hit your goals for growth.

Let’s use “Roy’s Local Landscaping” business for example. Roy’s is looking to get 15 new lawn mowing contracts a month. He’s told me he typically needs 10 leads in order to win 3 new customers so his close rate is 30%. If he wants 15 new customers a month he’ll need 50 new leads a month in order to achieve this. Now as targeted as Google AdWords is, (and I’d argue it’s the most targeted form of advertising there is given your ad only shows when people actively search for keywords we’ve agreed you want to show for and then you only pay when they like the copy of your ad well enough to click on it) not every click is going to turn into a lead. The average website across all industries will convert somewhere between 2-5%. Roy’s website converts 3 out of every 100 visitors into a lead for a conversion rate of 3%. In order to generate 50 leads a month we will need to send about 1750 visitors a month.
 

Rookie Mistake #1 – Underfunding your first PPC campaign

A common mistake with new PPC customers is underfunding their campaign. AdWords does work but only when you give it a chance (and please keep in mind this money is going directly to Google). I’m often telling people they need to spend more on AdWords but it is not for our company’s benefit. It is very hard to make a judgment on the success of a campaign until it has received 300 to 500 visitors. This gives us a large enough sample size to determine which keywords, ads and landing pages generated the best ROI. At the very least, given the average conversion rate of 2-5% you need to send 100 visitors to generate 2-5 leads. Most businesses are looking for more than 2-5 leads a month and need more in order to close a deal. In Roy’s case, with a 30% close rate, if his PPC budget is too low and he only pays for enough clicks to generate two or three leads, there is a good chance he will end up with no customers. Furthermore, there is every chance that he will get no leads on the first 100 clicks but then generate 5 leads in the second hundred clicks because 100 visitors isn’t a statistically big enough sample size to make judgements on. But if he simply sticks with the campaign and sets his PPC budget to allow for enough visitors to get him five or more leads he’ll likely win a new customer.

With an average cost per click of $5, Roy is going to need to spend between $1500 to $2500/month in order to really test the waters. This may seem like a lot but it should generate Roy between nine to 15 leads of which he’ll close 3 to 4.5 new contracts worth on average $3-$5K a year. Some jobs can net up to $15,000! Look at these yards below to see examples: 

So in Roy’s case the AdWords ROI would be pretty good! It’s always important to consider the lifetime value of a client when determining your AdWords PPC budget as the customers first payment might not cover the cost of the advertising but you’ll get your return over the next few months or first year.

In order to achieve Roy’s goal of 15 new customers a month we determined he requires about 1750 visitors a month. The estimated CPC for “Austin Landscapers” right now is $6/click but overall the average amongst the better keywords is about $5. That is a total monthly budget of $8750 which is a big budget for a local business. That seems like a lot of money to invest every month for a landscaping business until you think about the average lifetime value of Roy’s contracts. Assuming his workers do a good job, his average client sticks around for 3 years and is worth $3-5K a year in profit for a lifetime value of $9 to $15 thousand dollars. The other good news for many small to medium size businesses like Roy’s is that you don’t have to start off spending $8750/month. You can start small and prove that the AdWords ROI is going to be there for your starting PPC budget. Then when the sales or leads start coming in and turning into profitable sales, we simply turn up your monthly budget and drive more visitors to the site. Because your website converts at a rather consistent rate, if you got 10 leads from 500 visitors you’re likely to get 20 from 1000.
 

Does PPC make sense for my business?

Calculating the potential return on investment is one of the most important things you can do before considering running a PPC campaign. It makes no sense for us to bring on a PPC Management client if the ROI isn’t there as almost all of your AdWords budget will be going directly into Google, Yahoo! or Bing’s pockets. At Neon Ambition we regularly have to tell clients that we wouldn’t advise PPC for their business because the ROI isn’t there. Here is what we need to know in order to advise you in the first place:

• What is your website’s conversion rate? – If your site is brand new we error on the side of caution and assume a 1%-2% conversion rate. If your site converts higher then fantastic, but we prefer to set expectations low and then hopefully beat them with a better conversion rate. This is where Neon Ambition’s Conversion Optimization service helps improve the ROI from your PPC spend by working to get your site’s conversion rate as high as possible. If the numbers work at 1 or 2 percent then they’ll work even better with a higher conversion rate.
• How many leads do you need to make a sale?
• What is your average client worth in terms of profit? – This is a difficult question to answer but it is very important. I understand some clients are worth more than others and some services are more profitable than others. The better data we can get on average profit per customer for each service the better we can identify which products or services it makes sense to target for your business. As only 2-5% of visitors who click on an ad turn into a sale or lead, your profit per sale needs to be great enough to cover the cost of the other 97% of clicks you pay for that don’t lead to a sale.
• What are your most profitable products/services? – Many companies offer hundreds of products for sale but a small percentage are their most profitable. The same goes for service providers who might offer many “add-on” services but are only interested in generating leads for their most profitable core offering. Others are happy just to get their foot in the door for any service and hope to upsell.

Neon Ambition has experience in providing PPC expertise in a variety of industries, including law firms, home development and tech solutions.

Let’s Discuss Your PPC Budget Today

All of these are important questions to understand to determine what your Adwords PPC budget should be as well as what the potential ROI could be. Our Austin PPC consultants can help you understand what the appropriate AdWords budget would be for your industry and if a return on your investment is likely. Please give us a call today on 512-865-8050 to discuss if a PPC campaign can help achieve your goals.