I often hear from companies that they don’t know how much money they should put into their Google Adwords account. But let me show you how you will get your perfect PPC budget. Step by step.
First of all, Google Adwords (or PPC) is not a cost – it’s an investment. So the question is how much money should you invest in your Google Adwords?
If you invest less than you should, then you are losing a sale right? You could have sold more products than you are doing right now. And if you are investing too much well then you will not get enough return on your investments.
Google Adwords is suggesting your bids and your daily budget – but Google Adwords has no ideas of your Average-Order-Value (AOV) or your Close-Rate (CR) or your business model.
First, you have to estimate how many sales you are expecting to sell. Remember to stay conservative – you can use the minimum number of sales to stay in business. (Let’s say you need to sell 100 products every month).
Take a guess of your closing rate. If you have 100 leads how many of them will actually buy something from you. Again be conservative and get more precise after some few weeks. (If you have a special product it could be 10 percent or even more).
With the expected sale and your Closing-Rate (CR) you can now calculate how many leads you will need to make your sale right?
Now estimate or calculate your target Cost-Per-Lead (CPL) – this is the maximum amount you can spend per lead. You can spend up to this limit and still be profitable.
Now multiply the number of leads with the target CPL. This is how much money you can spend in one month on your PPC.
The last thing is to divide your number by 30 to get your daily budget – and now you are all done.
So if you want to sell 100 products every month and your Closing-Rate is 20 percent you will need 2000 leads. Now if your target cost per lead is 5 dollars – you will need to invest 10000 dollars every month. This will be a daily budget of 333 (10000 divided by 30). This is your perfect PPC budget.
And yes you will still need to improve your Google Adwords ads, your Cost-Per-Click, and your Conversion-Rates.
Your perfect daily PPC budget for an existing product
Now if you have an existing product you already know a lot about your product. So you can use this information to get your perfect PPC budget.
So this is what you can do
First set up your target for your monthly sales
Use your information about Average-Order-Value (AOV), Closing-Rate (CR) and Project Rate of Return (PRR) to calculate your Cost-Per-Lead (Now you don’t have to guess your Closing-Rate).
Simply multiply your target for monthly sale with your Cost-Per-Lead to get your monthly budget.
Divide your monthly sale in 30 to get your daily PPC budget.
And remember that your PPC is not a cost but an investment.
As always – have a great day out there…
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