Figuring out how much to invest in Google AdWords can be harder than you might think.

Investing in digital advertising can make or break your business depending on how you go about it. That’s why it’s important to make sure you’re informed and know what you’re doing before you dive into running marketing campaigns and fail because of misinformation. You also don’t want to keep dumping money into something that isn’t working, so it’s important to have a budget when first starting your Google AdWords campaign so that you can minimize any risk and don’t end up getting a bad first impression of the world that is digital marketing.

Before you can start your Google AdWords campaign, you’ll need to think about how much you’re willing to spend or every marketing campaign, also known as a budget. What budget you should set depends on a variety of factors, which is why it can be hard to determine how much is too much, and how much is too little.

Below you’ll find a comprehensive guide on you can find the right Google AdWords budget for your business, which will potentially help grow your business while also keeping your checkbooks happy.

The Truth Is: There’s No Set Amount

In Google AdWords, you don’t just pay to have random people look at your ad, as this would be very inefficient and cost a ton of money without any return. Instead, you bid on keywords related to your niche (“best chiropractor in LA”, for example, which has a CPC (cost per click) of $2.28), which vary wildly in cost depending on the demand and competitiveness of the keyword you’re bidding on.

When it comes to Google AdWords, you also typically pay per click, also known as CPC. In our previous example, the CPC of the keyword “best chiropractor” was about $2.28, which means that each time someone clicks on your ad, it will cost you $2.28.

The CPC of your desired keyword is important because it will be the main metric used to determine how much you should budget for a Google AdWords campaign. For example, if the CPC for “best antivirus” is $50, it may not be worth it to run a $1,000 campaign, as this would only reach 200 people. However, if your CR (Conversion Rate) is quite high, then as long as you calculate costs and potential revenues accurately, it shouldn’t hurt to try running even such a small campaign, this metric shows that the people who click on your ad convert (e.g. make a purchase) into revenue.

Another factor that affects what budget you should set for your AdWords campaigns is how much money your small business generates. Of course, we get that you want to invest as much as possible into your business to produce growth, but you can’t spend what you don’t have, and you also don’t want advertising expenses to get in the way of your normal business expenses, which would do more harm than benefit.

Using The Right Keywords

When it comes to Google AdWords, choosing the right keywords can be the difference in how much you spend on your campaign and how effective it is. In general, the more likely a potential purchaser uses a keyword, the more expensive that keyword’s CPC will be.  

For example, keywords like “auto repair company” fetch $3 per click, while “auto repair jobs” only cost $1.61 per click. Now you may be asking, “why is there a 50% increase between keywords when they’re so similar”? Well, that’s because Google can tell that a person who is looking for a job isn’t likely to purchase, whereas a broader term that includes the word “company” is likely to be used when looking for a service or item to purchase.

Here’s where the trick to testing out ad campaigns comes in (albeit with a bit of risk). If you’re new to the online marketing world and don’t want to spend too much money on your first marketing campaign, you should target low CPC keywords, so that you can understand how the process works without breaking the bank. Keep in mind that the low CPC comes at the sacrifice of a much lower conversion rate, so if you’re looking for results this is not the approach to take.

In the event that you don’t mind targeting the higher CPC keywords, I’ve got some good news for you. As previously mentioned, a high CPC means that as purchasing customer is likely using these terms, so you’re also going to have a higher conversion rate. Targeting high CPC keywords is great from those with a modest budget (e.g. $5000 a month), as it delivers results you would otherwise not get to see with lower CPC keywords. However, this is not such a good approach for those with smaller budgets to take, as not enough data will be collected within the campaign to make any accurate inferences about what works and what doesn’t.

How Much Should You Spend?

Now that we know that ad campaign costs depend on the industry you’re in and what the difference between using certain keywords is, let’s get into how much you should spend on your Google AdWords campaign, whether you’re an experienced digital marketer or a small business owner who is simply looking for some exposure.

If you’re a small business who has only recently gotten into digital marketing, then I would suggest going with low CPC keywords at first, spending around $1000-$2000 at first, which should give you an idea of what kind of results you can expect from campaigns. As your general knowledge of Google AdWords increases, you can then start investing in more expensive CPC keywords, which will hopefully provide the results you’ve always been looking for.

If you’re an established business with an idea of what you’re doing and/or in a competitive industry, I would suggest you go all out and hunt those high CPC keywords, setting around a $4000-$10000 budget aside every month so that you can competitively rank for those keywords you really want, bringing you a much higher return on investment than if you were to go for low CPC keywords.

Is Google AdWords Right For You?

By this point, you may have realized that Google AdWords can quickly become very expensive, with CPC’s ranging from mere cents all the way to the double digits.

This means that although Google AdWords may prove beneficial to most that use it, it’s imperative that you perform your due diligence before investing thousands of dollars into something you know nothing about.

If your small business is just starting out, Google AdWords may not be for you as the results associated with low CPC campaigns typically aren’t worth the headache, especially with the restricted budget that a new small business operates on.  

However, if you have a moderate budget and are willing to go through several trial runs to determine what it is that really works for your business, then, by all means, Google AdWords would be a great addition to your digital marketing portfolio.

In the end, it’s all about the results. If you see results you like, keep putting money into it. If not, it’s time to try something else.