I always get the question, “How much should I budget for Google Ads?”. Typically, small businesses budget between 3% and 5% of their revenue for all their marketing expenses. Sometimes, I get a number from the client. They only have so much money to spend on Google Ads.

I get it. You may have limited money to spend on Google Ads, but if you plan to start a campaign, you must set the proper budget and expectations. So, I’ve put together the steps I use to start a new campaign. This helps me and my client better understand what to expect based on their monthly budget.

You will see that the budget number can significantly affect the number of leads and the cost per lead. However, if you follow the steps below, you will have a good idea of what to expect, whether your budget is $15, $30, or $100 per day. 

For the samples below, I used the three primary aspects of my business. Because the process is the same, you can swap out my examples with your business’s services. Let’s get started.

Determine What Words You Are Bidding On

To get started, you will need to determine what keywords you will use. This is a major part of determining your budget. Choosing the right keywords is a skill and trial and error. Inversely, selecting the wrong ones is a money suck. 

Single-word searches are expensive and may not be cost-effective, depending on the keywords. There are thousands of searches each day for those keywords, thereby thousands of campaigns bidding on those keywords. Another reason is that a one-word search is, in many cases, about finding information. A better plan is to use a keyword that shows intent, for example, “SEO company,” instead of just “SEO,”  because an intent search is more likely to get a click. I wrote an article on some strategies to save money on keyword searches.

That said, once logged into your Google Ads account, you will see Tools in the left-hand sidebar. Click on that, then click on Keyword Planner.

Select the account you want to work with. If you just set up your account, there should only be one choice: select it, and you will move to the next screen. You will want to start with Discover New Keywords, which will bring you to a screen that looks like this:

I recommend that you use “Start with Keywords.” The reason is that Google will not pick good keywords unless your site is well-optimized for search engine optimization and well-organized. Besides, you want to focus on your services, so start with those and add them into the field where it says, “Enter products or services closely related to your business.” I would, however, add your website to the bottom field. It does help filter out non-relevant keywords. Once that’s done, click Get Results, and Google will show you the average monthly searches for your services and additional ideas for keywords—a few things to note.

The results are for the United States for the last 12 months. To change the location or the date range, click on the top bar and edit the location and date range. 

When you click on the location, you can enter individual states, counties, and towns. Just be sure to uncheck the United States. Once you do that, the numbers will readjust to the new location(s). This will give you a more accurate account of the search volume of your keywords. 

Tips on Picking the Best Keywords in the List

At this point, you will have a list of potential keywords. At the top of the list are the keywords you put in, and below are Keyword ideas. You may have a few keywords or several hundred, depending on the terms you used to start. 

For example, I put in “search engine optimization,” “digital marketing,” and “website design,” and my result was 758 keyword ideas available. I quickly read through the keyword ideas and realized many wouldn’t apply to my business. The other thing to look at is the average monthly searches. You will notice that the more words there are, the lower the monthly searches are. That’s not necessarily a bad thing. 

My first tip is to look at the list of keywords to determine if they are intent or informational in their intent. For example, “web design” can be either, but more likely, they are looking for information on web design, but “web design company” is more intent-based. 

The second tip is to look at whether it is a high, medium, or low level of competition. High-competition words will be more expensive at the top of the page, and the opposite will be true for low-competition words. Your campaign should have a balance of all three.

Finally, look at the bid range. This will give you an idea of the cost per click. Again, the higher the competition, the more expensive the click. However, that is only sometimes the case.

When selecting keywords for your campaign, consider all three factors. Choosing too many high-competition keywords will raise your budget; however, too many low-competition keywords may not get you the desired results.

Choose the Best Keywords for Your Business

It is time to start choosing keywords. Start checking the ones you want to use by clicking the checkbox next to the word. When you do, a blue bar will appear above the list. We’ll get back to that in a minute, but for now, you want to get a list of around 20 or more keywords, if possible. Once you finish your selections, it’s time to move on to the next step. 

In the blue bar on the right, select Copy.

Then select Saved keywords on the left.

Under Saved keywords, click on the blue button on the upper right, and paste your keywords in the box that appears. Click Save at the bottom of the box, and the list will appear below it. 

This view has some helpful information, but we are moving on to the Forecast page for our purposes. This is where we will determine how much this will cost each month, and so on to the next step.

Getting a Budget Forecast and a Cost Per Lead

In that left-side menu, click Forecast to see a page like this.

Click on All saved keywords, and it will load an initial forecast. 

Google uses the United States as the region, the next month, and a $30 average daily budget for the initial forecast. They assume around a 4% conversion rate. If you are good with that, then your budget is set. If you want to fine-tune your results, there are several controls you can change that will affect the numbers. I will walk you through them. 

Tweak Your Numbers to Be More Inline With Your Objective

Update your Bid Strategy

By default, Google will select conversions, which is what most of us want. However, if you are more interested in driving traffic, you can switch it to Maximize Clicks. When you do that, it will automatically update the number of conversions and all the figures on the chart.

Update your Match Type

The Match type is how the search term is related to the keyword. A broad match will give you the most results. This is why Google uses it as the default. Remember that this tool is meant to persuade you to spend money on Google Ads. If you switch it to one of the other options, then the results will change.

Update your Location

If you changed your location while doing your keyword search, you may want to change it here to get a more accurate conversion rate. Click on the area, and the map will show up for you so you can add your location(s). Again, remember to deselect the United States.

Update the Forecast Timeframe

If you have a seasonal business, there may be better times to advertise than February. You can change the timeframe to a specific week, month, quarter, or custom time period.

Measure Clicks or Conversions

Previously, you may have changed the Bid Strategy to Maximize Clicks. You probably noticed that it didn’t change the chart. The reason is that you might want to know how many conversions you are getting, even though you may choose to drive more traffic with clicks. If you want to know how many clicks you will get on your ad, click Conversions to change it to Clicks. Unlike other metrics you changed previously, the only number that will change is the number in front of Conversions. It will change to the number of clicks for the time period you selected.

Update your Daily Budget

The daily budget is the final and most important number. Changing this number up or down will give you your monthly budget and what you will be spending to acquire a lead. When you change that number, you will see a new chart section. This bell curve will show you quickly how many conversions (or clicks) you are estimated to receive based on how much you spend daily. 

A Quick Budget Sample

In the charts above, if I spend $30 daily, I would receive 100 conversions per month. I changed some metrics in the chart below to give you a quick example of how they affect the numbers.

I changed the Bid Strategy to Maximize clicks, Match type to Phrase, the location to New Jersey, and my daily budget to $15, and the results are below. 

There are some things to take notice of in this chart. The average CPA or cost per acquisition went from $8.44 to $23, and the average CPC or cost per click went from $0.40 to $0.85. The number of clicks went down not by half but by around 75%, the conversions were down nearly 80%, and you may notice that the estimated conversion rate went down from 4.77% to 3.76%. Why is that? You’re going through your budget quicker.

The cost per click stays the same, but you are spending less, so your ad doesn’t appear as much. It’s hard to get clicks if the ad doesn’t appear. The average CPA is the cost ($420) divided by the number of conversions (19). Depending on what you determined your cost per lead is this number might be acceptable. If not, you may have to readjust your budget. This is why you don’t throw a number at it based on what you can afford. It should be based on a number that gives you the best opportunity to succeed and see a return on your investment.

Wow, That’s A Lot of Steps

Yes, there are many steps, but going through these steps will give you a better idea of how well your budget will perform. However, you can skip the steps and apply the “Throw s**t up against the wall” method, which is quicker and may produce good results. Or, as a friend likes to say, you could be making a monthly donation to Google. The choice is yours.