Over 80% of businesses throughout the world use Google Ads. That might be enough to convince you to try Google Ads, but it may also leave you wondering, “How much should I spend on Google Ads per month?”
As a general guideline, it isn’t unusual for small businesses to spend several thousand dollars on Google Ads each month. It also isn’t uncommon for medium-sized businesses to have five-figure Google Ads budgets or for large businesses to allocate six- or even seven-figure budgets to Google Ads.
Keep reading to find out how you can come up with a monthly budget for Google Ads campaigns for your company.
Best ways to determine how much you should spend on Google Ads per month
When you find yourself facing the question, “How much should I spend on Google Ads per month?”, it’s best to begin by researching a few key areas. Consider the following topics when making this decision.
List your future business goals
Think 12 months into the future. What do you want your business to look like? Think about the lead generation you must do between now and then to reach that goal.
Study your sales close rate
Figure out the typical close rate in your sales funnel. Use this number to calculate the number of leads you must generate to reach your goal for the business in 12 months. If you have multiple products or services with dramatically different close rates, factor this into your calculations.
Understand your industry
When answering the question, “How much should I spend on Google Ads per month?”, know that certain types of businesses spend more on Google Ads than others. Even within a particular industry, spending may fluctuate. Placing your business correctly in that spectrum ensures you don’t spend too much — or too little.
When setting a law firm marketing budget, for example, firms focusing on personal injury will likely spend far more than estate planning lawyers on pay-per-click (PPC) ads because of the greater competition for keywords. Personal injury lawyers also stand to receive higher payouts than estate planning lawyers, so they’re willing to spend more on Google Ads campaigns since they can provide a strong return on investment (ROI).
Use Google metrics
Google offers numerous metrics that help you understand the estimated bids for Google Ads based on keywords commonly found in various industries. The Google metrics show the range of costs of the Google Ads bids for each keyword and an estimated average cost. Search for your industry and the keywords you want to target to see your estimated cost-per-click (CPC) and PPC to generate leads.
Multiply the number of leads you need to generate each month by the average cost per lead, determined by Cost per Click and Conversion Rate. You’ll then have an idea of how much you should spend on Google Ads per month and can calculate the rest of your PPC management budget.
Google Ads’ requirements and limitations
You do not have to spend a certain amount to use Google Ads. However, if you spend too little, you may not gain meaningful data on the performance of your campaigns. You won’t have a clear understanding of what’s working if you’re only seeing a handful of clicks per week.
You have to spend enough to generate useful data to make informed decisions about the success rate of your Google Ads dollars.
Taking advantage of Google’s algorithms
As part of your Google Ads spend, the service uses automated algorithms to optimize and sharpen your campaign. The algorithms can help you target more customers who are likely to convert, but they need data to operate efficiently.
At a minimum, Google’s algorithms need to see your campaign average 30 conversions from Google Ads over 30 days to effectively target your ads toward searchers who are likely to convert. Reaching this many conversions requires spending money consistently over a few months rather than cutting spending haphazardly after a few days of results you don’t like.
During the process of building toward averaging a conversion rate of one per day for an entire month, you also need to devote time to optimizing your campaigns to improve efficiency. This will help you reach that threshold faster while keeping your costs down.
Maintaining consistency in Google Ads spend
Determining how much you should spend on Google Ads per month also requires committing to consistency in your budget. Google’s algorithms don’t perform as well when your ad spend varies wildly.
If you run ads for a couple of months and then decide to cut spending drastically, you throw off the algorithms. If you restart your normal level of spending a few months later, the algorithms reset themselves. Because of the spending pause, they cannot build on the data they generated in the first two months and must re-learn how your ads interact with the marketplace.
Committing to a consistent budget from month to month gives the algorithms the best chance of making meaningful conclusions.
What kinds of results can I expect from Google Ads?
Results will vary when it comes to the success of Google Ads campaigns based on the types of campaigns you choose to run. See what kinds of results you can expect from the various campaign types.
Using standard search ads
Search ads are effective at generating immediate conversions, but they can come at a high cost. They command higher prices because they provide companies with access to target audiences that are actively looking to buy the products and services they sell.
If your company can find room in your daily budget to run standard search ads, the cost-per-click (CPC) on these ads might be well worth it. However, you might also want to explore using other Google Ads types or, better yet, spread your Google Ads buys across several different types. This can help your company target people earlier in the buying process and boost brand identity.
Using options beyond standard search ads
We often find that clients who are willing to use Google Ads options beyond search ads can generate excellent results at every stage of the funnel.
- Display and Video: Display and Video ads can target potential customers far earlier in the buying process than what is possible with search ads. This gives you a chance to establish a relationship with potential consumers.
- Performance Max: Performance Max ads can deliver advertising across a variety of platforms, such as YouTube and Gmail. When you provide customer data in your campaign setup information, Performance Max ads can focus tightly on your target audience.
- RLSA: Remarketing Lists for Search Ads, or RLSA, is a strategy that allows you to share a list of customers with Google who have already interacted with you. Google Ads allows you to bid within search ads when those customers conduct web searches. This targeted use of search ads can potentially give you a better ROI by keeping your ads in front of customers who have made purchases from your company before.
Final thoughts
“How much should I spend on Google Ads per month?” is a question clients routinely ask us at Connective. We always recommend that your monthly Google Ads spending and overall digital marketing budget should take everything from your revenue to the competitive landscape within your industry into account.
To get advice on using Google Ads or our other professional marketing services, contact us today.
Frequently asked questions
Here are other questions we often hear regarding Google Ads.
How do I manage my Google Ads spend per day?
Managing your Google Ads spend per day is easier than you may think when you use a strategy called “pacing.” This allows you to compare the amount you expect to spend with what you’re spending in a daily budget. Let’s say you budgeted a campaign to spend $100 per day, but you spend $700 over the first 10 days. This means your campaign is pacing at 70% of the goal. You then can adjust the budget accordingly after studying the results for a campaign.
Why should I spend more when my ads already aren’t working?
Your first instinct as a business owner might be to cut down on ad spend if a campaign isn’t working. But with Google Ads, a lack of spending could be to blame for your poor early results, and spending more could benefit your business. Use Google’s competitive metrics to see whether you’re targeting relevant search traffic rather than overly broad keywords. Utilize the metrics to determine who you are competing against with your ads, which may help you decide whether a larger budget is the solution for better lead generation.
Is there a minimum budget for Google Ads?
Outside of “How much should I spend on Google Ads per month?”, this is one of the most common questions we hear from clients. You don’t have to spend a minimum amount on Google Ads, but our experience has shown you should set a budget that generates a minimum of 10 clicks per day. This will deliver realistic performance data you can study to determine how you want to adjust your campaigns.
