How to Calculate Your PPC Budget: A Guide for Businesses

As much as we would like them to, potential customers generally don’t come into our business looking to purchase products or hire us to provide services without something leading them to our lobby or eCommerce website. That’s where having an effective and robust digital marketing strategy comes into play. 

A well-thought-out marketing strategy should guide your small business on a monthly, quarterly, and annual basis. The system should also consider how much revenue should be generated based on how much you’ve spent on paid ads, website maintenance, and other marketing-related costs.

Marketing plans create layers of strategies that help guide customers from external platforms back to your internal channels and websites, where your sales team can focus on lead conversion. While content and engagement play significant roles in inbound marketing channels, Pay-Per-Click strategies also play an essential role in leading potential clients back to your sales team. However, these PPC strategies should not be a one-size-fits-all approach, and in fact, are best deployed when scaled to the size of the business.

Breaking Down The Specifics Of A PPC Campaign

A pay-per-click campaign is built around creating highly targeted advertisements on specific ad platforms, such as search engines (e.g. Google ads), and then paying a fee for anytime the ad is clicked on by a potential client.

To create effective PPC ads, your organization must have a clear understanding of the target audience and the market in which you’re operating and use that understanding to create highly specific buyer personas. With buyer personas firmly established on a foundational level, it will be easier to construct efficient advertisements.

However, constructing these campaigns requires an overarching cognizance of how the structure impacts the costs of these campaigns. Before we consider costs, however, we have to consider the key elements that go into an effective PPC advertisement campaign.

Keyword Identification

A primary component of pay-per-click advertising is that you’re paying to use keywords relevant to your messaging and brand. Using tools like Google’s Keyword Planner, businesses can avoid wasting money on extremely competitive search terms. The wrong keywords that attract customers unlikely to buy, or keywords that end up being meaningless to their target audience. 

It’s important to choose competitive and affordable keywords to balance the cost of the campaign while remaining focused on words showing intent to convert. Marketers should balance relevant keywords with an appropriately high search volume.

With the growing use of voice search across devices, brands are finding that long-tail phrases are increasingly providing more value in the PPC realm. Long-tail words increase the ad copy’s relevance in which they appear and trigger the ranking algorithms of search engines looking for natural speech pattern matches to search queries.

Advertising Copy Executed With A Purpose 

The type of ad you create to execute your PPC campaign will heavily depend upon what you’re trying to accomplish. Increasing lead generation and inbound calls are one type of ad, while brand awareness and product education are another. Attracting new customers is another altogether. Choose your goal and correlating type of ad, then create ad groups to test out different formats and copy to fine-tune each ad you create.

Content Is King For PPC Campaigns

Your copy team must create engaging and impactful ad copy that will be supported by the more mechanical, keyword research results and ad format. Focus on the pain points you’ve identified in buyer personas to inspire the right messaging and language.

The most important element to remember behind all of this is that your PPC advertising campaigns are driven almost exclusively by the amount of money you invest into the foundation.

Creating The Right Budget For Your PPC Campaign

There’s no magical chart or number your marketing team or managed services partner can point to when you start talking about creating an advertising budget appropriate to your business’s size. Instead, you’ll need to break out your historical sales data and spreadsheets. To create a PPC budget that meets your organization’s needs, you’ll need to have a grasp of a few key metrics from past sales performance or sales projections if your organization is fairly new.

To establish your overall Pay Per Click ad budget, you must:

• Understand your overall measurable marketing strategy

• Define your number of customers

• Define the average conversion rate at the sales team level

• Define the website’s average conversion rate of visitors to leads

• Know the cost you’re paying in your PPC campaign 

• Define relevant benchmarks

From this data, you can construct the necessary formulas to budget out the PPC campaign that you can then work with your marketing team to convert into actionable live campaigns. So let’s first talk about what values we need to establish at the start to calculate the average cost-per-click. 

Number of Customers

At a basic level, you need to know how many customers minimum you need to visit your site or view your ads. This number will be impacted heavily first by your website’s conversion rate of visitors to leads and then by your sales team’s conversion of leads to sales. 

Revenue

You must know what your revenue target is for this campaign. That target revenue is what your leadership team has determined necessary to meet stakeholders’ needs or the organization itself. This number is often considered monthly or quarterly, so it’s important to establish from the start the sales period your campaign is tied to. 

Average Sale Per Customer

Your ad campaign is likely tied to a specific product or service, so it’s important to include the average sale per customer in your calculations to help establish a proper target customer count. 

With these values in hand, you can calculate out first the required number of customers to meet your target as: 

Number of Customers = (Revenue target / Number of Sales Periods Campaign Will Run) / Average Sales Per Customer 

Using that value for the number of customers (NoC), you can then establish your PPC budget sufficient for your company size as follows:

PPC Budget calculator = [(NoC/ Sales Team Conversion Rate) / Website Conversion Rate] * Cost per Click established by Ad Platform

How the Size of Your Company Impacts Your PPC Ad Spend

Company size plays a significant role in creating a PPC budget. Larger organizations with more revenue requirements necessary for sustaining a larger, broader infrastructure, will of course mean that either more campaigns or larger-scale campaigns will have to be executed to achieve targeted income from PPC campaigns.

Conversely, with smaller organizations, it will be necessary to be extremely efficient and targeted in creating such campaigns–with extra attention given at the front end of the planning process to ensure PPC campaigns are executed as efficiently as possible with no wasted costs in inefficient ads and keyword identification. 

Other Methods For Defining An Effective PPC Budget

For businesses that are extremely new and don’t have the historical data to calculate a proper, informed budget, there are other data-driven methods to accomplish the same outcome. Many of these methods revolve around competitor analysis–that is, finding businesses selling similar products or services.

From here, you determine what those competitors are spending for online advertising, which keywords they are using, their social media presence, and what products they are advertising. Performing an in-depth competitor analysis helps new businesses hit the ground running and make informed marketing decisions from the start.