How to Calculate PPC Budgets for Your Business

Jessica is a Google Analytics certified Digital Video Analyst at WebFX. She has created over 100 videos for the WebFX YouTube channel (youtube.com/webfx) in the last two years. Jessica specializes in video marketing and also loves content marketing, SEO, social media marketing, and many other aspects of digital marketing. When she's not creating videos, Jessica enjoys listening to music, reading, writing, and watching movies.

In this video, Chris from the WebFX Internet Marketing team will share the formulas for calculating your PPC campaign investment.

Transcript:

Your money is valuable, so the last thing you want to do is throw it away on an unoptimized PPC campaign. 

Learning how to calculate a PPC budget will help you figure out just how much you need to invest to hit your business goals. 

That’s what I’m going to teach you in this video. I’ll go through a breakdown of what goes into a PPC budget and how to get the most from your spend.

If you’re looking for a specific section of the video, check out the timestamps in the description. 

PPC budget basics

With PPC, which stands for pay-per-click advertising, you pay when people click your ads. More on how to calculate PPC budgets in a bit. 

First, let’s cover some basics of PPC advertising. 

PPC ads work via an online auction. When you launch PPC ads, you typically tell the ad platform how much you want to spend on your entire campaign. Then, you set a bid for the amount of money you’d like to spend on every click. Keep in mind, you’re trying to beat out other advertisers for a chance to get in front of your audience.

The cost-per-click, or CPC, may fluctuate since it’s a bidding system. Factors such as your ad’s quality, targeting, or competition may impact your CPC.

When running PPC campaigns with a platform like Google Ads, you’ll find the average CPC in your campaign menu. On social media, you’ll likely view your CPC in your platform’s ad management tool. 

You can calculate an estimated average CPC with this cost-per-click formula:

Cost to advertiser / Number of Clicks = Average CPC 

We have a tool that will calculate CPC for you if you’d prefer not to manually estimate your cost. 

If you’re targeting certain keywords with your ads, use a tool like Google Ads Keyword Planner to get an idea of the search volume and cost of those keywords. Whatever ad platform you use may make recommendations based on your targeting. 

You also need to be aware of your ad campaign’s ROAS, or return on ad spend. While you should, without a doubt, pay attention to your budget, the return you get from your campaigns is just as important. You don’t want to spend more than you make from your campaigns, so if you notice that’s the case, it’s time to reevaluate your spend and how you’ve optimized everything for your audience. 

The ROAS calculation looks like this:

Total Revenue / Total Cost = ROAS

Setting goals remains a crucial part of every campaign you run. When you know what you want to achieve, you can more easily figure out the investment it takes to get there. 

Make those goals specific, measurable, attainable, relevant, and timely, a.k.a. set S.M.A.R.T goals. Saying you want to increase website conversions by 25% over your business’s fourth quarter is much easier to plan than saying you want more people on your website. What’s the end goal there? 

There really isn’t one number that says whether your PPC calculation is good or bad. If you hit your goals, see a positive ROAS, and stay within your budget, those are the signs of a good campaign. 

I probably should mention that you’ll want to think about all aspects of your digital marketing before you budget for PPC. You don’t want to sink all of your money into ads and then not have enough to pay a web designer or SEO specialist. Think of the big picture.

Next, I’m getting to the good stuff. The calculations. 

How to calculate your PPC budget

UpCity laid out a great revenue-focused process for calculating your PPC budget on its website. You start by figuring out how many customers you need to hit your goals.

The formula looks like this: 

Number of Customers (NoC) = [Revenue target / Number of sales periods campaign will run] / Average Sales Per Customer

Once you have that number, you can plug it into the PPC budget formula, which looks like this: 

PPC Budget = [(NoC/ Sales Team Conversion Rate) / Website Conversion Rate] x CPC

If you have a target budget already and just want to see how much you should allocate for each day, here’s the formula for that. It’s much simpler. 

Daily budget = Monthly budget / 30.4

Don’t start the next video yet. I have a few tips for getting the most from your investment. 

Use our proprietary keyword research tool, KeywordsFX, to help you find high-quality keywords for content and PPC campaigns. Identify Top Keywords for Free

How to make the most of your PPC investment

1. Be flexible

You and your team may be in love with an ad campaign, but it’s not a guarantee that your audience will love it.

Pay attention to your campaign metrics. If you notice a lower-than-normal click-through rate (CTR), your ad copy or creative may not be grabbing the attention you thought it would. If your ad’s CPC is extraordinarily high, you may want to refine your targeting. 

The solution will come with some digging and testing.

2. Refine your keyword targeting

If you are targeting keywords with your PPC ads, use negative keywords to limit the number of unqualified clicks you get on your ads. With a platform like Google Ads, this tactic ensures that you don’t show up for unwanted searches, saving you money and reaching an audience that’s more likely to make a purchase. 

We have a video on negative keywords if you’re looking for more details. 

3. Use automation

It’s the robot takeover! Just kidding. It’s the automation takeover! 

Many ad platforms have built-in automation tools to help you get the most from your campaigns. Use them! Whether you take advantage of automated bidding, testing, or reporting, let technology take some work off of your plate. 

Use Google’s Smart Bidding. Use third-party tools to optimize your social media ads. Partner with us for our MarketingCloudFX technology. 

If you have any additional tips for how to calculate a PPC budget or how to optimize your ad campaigns, drop them in the comments! 

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