Everyone knows that you want your PPC budget to be just enough to make you a profit. But you have to have an initial budget to test how much you can get for each dollar you put into paid search advertising, or pay per click advertising (PPC).
Having this budget ready to go before you start creating your PPC strategy is crucial. Your budget may very well change over time, so it’s important to understand how to set a budget and why it matters. Fortunately, it doesn’t have to be as overwhelming as many may think.
Setting Up an Estimated PPC Budget
The reason that so many people dread determining PPC budget numbers is because there are many different ways to get to your rough estimate. In the end, your goal is to perfect your budget, but your initial PPC budget has to be a good solid estimate.
SEO agencies can help you perfect your budget in the end, but it helps a lot to have you own idea of a PPC budget before you even speak with an SEO agency. It’s not completely necessary, but again, that ballpark estimate will help speed up your path to success.
Below are two choices you have for coming up with a good initial budget.
Choice #1: Think About Your End Goal
What you need to do here is think of an end-goal. Whether it be to have a certain amount of sales dollars, producing a number of leads, etc. Once you have your end goal in mind, think about the target CPA and do the math from there. In other words, work backwards.
Wordstream wrote a great article discussing the importance of working in a specific order to come up with your budget. You have to first know the answers to the following questions:
- What is your goal cost per lead? Ex: $30 per lead.
- What is your new client goal per month? Ex: 150 per month.
- What is your average close rate of leads? Ex: 12% close rate.
Once you know the answers to these questions, you can start putting some numbers together to come up with a rough PPC budget. Using the numbers from the questions above, this is the way that the math would look:
- Find how many PPC leads you need. For 150 clients from a 12% close rate, you need to do this math: 150/0.12 = 1,250 PPC leads.
- Determining PPC budget. Take your number of leads and multiply that by your goal cost per lead: 1,250 leads X $30 cost per lead = $37,500.
Of course the value of a lead will depend on several factors including geography, bounce rate, interaction, etc. So there are ways to better control this quality (such as using negative keywords).
Choice #2: Analyze Your Past PPC Campaigns
If you had a PPC campaign in the past, you can use some of that data to help you determine where to set your budget this time around. Look at what worked at what didn’t for the goal you had in mind. For example, if you had a goal cost per action (CPA) of $200, go look at what you spent previously and see what met that mark.
Once you have narrowed down what worked, look at the impression share. Those with low impression share will give you the chance to earn more volume by having a larger budget (or increasing your bids). You then need to ask yourself, “How much additional budget will I need based on the current impression share?”
When you add up all of your estimates you’ll have a rough budget.
Once again, the above options are very basic in nature. When you start working with an SEO agency or expert you can start to get into quality aspects and other factors that might come into play. Until then, having an idea of your budget is an important thing to keep in mind as you start talking to more professionals or creating a strategy.
Robert Brady, head of PPC at Righteous Marketing, said it best when he talked about the importance of understanding your own budget:
“Optimization implies choosing better options over less desirable options. Without knowing all constraints, of which budget is a MAJOR one, it is very difficult to make the best optimization decisions.”
Do you have any tips for coming up with a budget for a new PPC initiative?
Republished by permission. Original here.
Budgeting Photo via Shutterstock
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Thanks for the mention of my SearchEnginePeople post. Budgeting is a big problem for most PPC advertisers.
Interesting ideas! Personally I believe that understanding the amount you are ready to pay for a lead is an ideal long-term decision. At first of cousre the bid per click will be very approximate, but when you’ll understand the conversion, you’ll be able to set exatly the budget you are comfortable with