How to Calculate Your Google Ads Budget

How much should I spend on Google Ads?

Building a Google Ads budget is one of the toughest challenges faced by both new and experienced pay-per-click marketers. Budget planning can feel overwhelming, time-consuming and downright thankless.

But a well-planned budget is an essential part of being successful with Google Ads.

During my career as a digital marketing consultant, I have been asked to plan and adjust Ads budgets on a daily basis. With that frequency, I needed an easy solution that would generate ballpark Google Ads budgets quickly and accurately. So, I built a budget calculator.

The calculator eventually became known as the “Million Dollar Google Ads Tool,” because I followed a similar framework to help clients build million-dollar Google Ads campaign strategies in just a few minutes. Today I am sharing my Google Ads Budget Calculator with you! You can download the Google Ads Budget Calculator for free and use it to plan your budget.

The rest of this post will guide you through the strategy that goes into planning a successful Google Ads budget and show you how to use the Google Ads Budget Calculator.

Quick Navigation

  1. How much should you spend on Google Ads
  2. Plan your Google Ads budget
  3. Use Keyword Planner for estimates
  4. Download Google Ads budget calculator

Google AdWords Budget Calulator

How much should you spend on Google Ads?

Some advertisers spend until they hit a monthly quota. Others focus entirely on revenue to guide their spending.  My strategy preference has always been to focus on maximizing profit within your desired Google Ads budget.

To create a profit-driven budget strategy, we need to know some basic data about our business.

Gathering this data can be difficult, but well worth the payoff. This guide will walk you through how to find data for your Google Ads budget the easy way. The guide and the budget calculator will also help you find estimates when the data you need isn’t available.

How to plan your Google Ads budget

Step 1: Gather your organizational data

Budget Estimate – First, you need a baseline budget. Start out with an amount that you’re comfortable with spending each month. Make sure it's within your company’s expectations as well. You can adjust this number to be more accurate as you gather data from your real-life campaigns after launch.

Average Cost-Per-Click – This is the average amount Google will charge you when one of your ads is clicked on. You can find cost-per-click estimates using the Google Keyword Planner. But be sure to take these estimates as a loose guideline, and feel free to adjust based on historical advertising data you have available.

How to use Google Keyword Planner to find cost-per-click estimates

To obtain estimates in the Google Keyword Planner input any search term that you might want to advertise on into the “product or service” field. If you haven't done any keyword research yet, you can enter your website address into the “landing page” field to generate keyword ideas.

Using the Google Keyword Planner to calculate your AdWords Budget
Google’s Keyword planner will then return a list of keyword ideas correlated with your search term. You can use the number from the suggested bids column as your cost-per-click estimate. Your actual cost-per-click will vary, so make sure to compare your initial budget to your actual results.

Google AdWords Budget cost-per-click

Note: When you start creating ads you will want to go beyond Google’s Keyword Planner to find the best search terms. If you want to learn more about keyword research, our Data Driven Google Ads Certification Course.

Conversion rate – What is the rate your visitors convert into customers on your website? If you don’t know your conversion rate, use ~1-2% to start. That is the “average” for the web, although most sites convert at a much higher, or lower rate.

Step 2: Enter your data into the Google Ads Budget Calculator

This is the fun part!! First, download our Google Ads Budget Calculator provided below. Then follow along with the rest of this guide.

The gold cells in the spreadsheet are variables you can change to see how the adjustments affect your return on investment (ROI).

Google AdWords Budget Calculator

Inputting the data you collected in step 1 will provide you with some preliminary projections.

Step 3: Project how online advertising affects your bottom line

To develop a budget that will accurately reflect your return on the money you spend in Ads you need to include some of your cost and sales data in the Budget Calculator.   These values are defined below. Once again, you can use estimates if this data is not readily available to you.

Average Revenue Per Sale is the average amount of your customer’s total purchase.

Product margin is the amount of income you generate above your cost of goods sold. For example, if your cost of goods sold is $1.00 and your product price is $1.50, then your product margin is 50%.

Qualified Leads represent the rate at which the leads collect from you ads are connected with a sales representative.

Sales Proposals Delivered represents the rate at which your ads result in a customer receiving a price estimate.

Sales Close Rate is the percentage of leads that convert into a new customer.

Agency /In-House Management Fees is the monthly cost of managing your ad campaigns (not including your ad spend).

Factoring your product costs into your Google Ads budget

If you are primarily an online seller, then product margin and average revenue per sale are the only sales metrics you need to adjust. You can set the other sales metrics to 100%.

Evaluate how your sales structure affects your Google Ads budget strategy

If you plan on using Google Ads to traffic customers to any offline sales channels, then you want to have an idea of how successful you’ll be at converting those leads into customers. Offline sales channels can include follow-up calls or emails made by salespeople after a customer submits information into an online form. These metrics are represented in the budget calculator by qualified leads, sales proposals delivered, and sales close rate.

If you sell exclusively online and do not do any lead generation, then all the offline metrics [qualified leads, sales proposals delivered, sales close rate] should be marked 100% in the Budget Calculator. Since you're selling online, the visitors that click through on your ad will either purchase or leave your site. You could also modify this sheet to include details about any lead nurturing funnels you have in place.

With all your data in the calculator, you get a more precise idea of how your costs affect your Google Ads budget.  You can also start to see where your efforts need to be directed to create a profitable advertising strategy.

Step 4: Use your estimated budget to plan your Google Ads strategy

Which areas of your advertising plan or sales strategy do you need to focus on to make your Google Ads budget efficient? Improving your website, landing pages, or sales funnel to increase conversion rate is one of the most common ways to make Google Ads more profitable.

Targeting low-cost keywords to reduce cost-per-click can also have a big impact on your ROI.

If you’re in a low traffic market, you may need to increase the price of your product, or decrease cost, to make your ad campaigns profitable.

There are many adjustments that you can make both on and offline to increase the effectiveness of your advertising. The Google Ads Budget Calculator can be used to focus your PPC strategy, and help you make the most efficient changes.

The key to finding the most effective Google Ads budget formula is to start out small and test your optimizations 

As you make adjustments to your Google Ads marketing strategy, you can input your data back into the calculator and measure the impact on your ROI.  Once your strategy starts to become effective, you can ramp up spending to increase the amount of profit your ads are generating.

Now that you know how to develop a data-driven Google Ads budget, we can answer the initial question.

How much should you spend on Google Ads?

You should spend… Enough to test the optimizations you need to make to your advertising, sales funnel, or product offering. Then, after you’ve found the right formula spend as much as you want, as long as it continues to be profitable!

You can use the Google Ads Budget Calculator to keep your advertising strategy on-track as changes happen over time.

When you download my Google Ads Budget Calculator, you'll get access to an exclusive free training video that shows you step-by-step how to use this tool.

Want to check it out?

Have additional Google Ads budget questions. Post a comment below! And if you're looking for an equally powerful calculator for Facebook Ads, be sure to check out our Facebook Ad Cost Calculator.

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