Kyle Sulerud - October 24, 2019This is the most common question from prospects and potential clients. It’s natural and smart for people to want to know straight away how much they are going to spend for ads.
If you have experience in a certain city and type of business, you already have an idea on how much to spend on ads.
However, in this blog, I won’t give an exact amount. Instead, we are going to discuss how much you should be spending on ads in order to make the most profit possible.
The short answer is:
Whatever the amount that’s going to create the most profitable campaign for your business, that’s what you should be spending.
If spending $100.00 a day means that you’re going to reap much profits, that’s what you should be spending. On the other hand, if you’ll be more profitable spending $1000.00 a day, that’s what you should be spending. And if you’re not profitable at $100.00 a day but you are profitable at just $10.00 a day, then that’s what you should be spending.
That’s easy to say, but I know that you need to start somewhere.
In my opinion, that “somewhere” that you start should just be an amount that’s comfortable for you during the testing phase.
If we’re talking about a monthly budget, my advice is that it should be an amount that you are comfortable losing. If nothing works out in a campaign, if nothing goes right, you will be fine taking that loss. You shouldn’t plan for a monthly budget that requires you to make an immediate return on investment.
Because things don’t always work out, especially on the first try, you don’t want to be financially dependent on something that is unfamiliar to you. If you’ve never made money running Google Ads for your business profitably, then that’s not something you can count on at that moment. You should be prepared just in case nothing works, so that when it does work, you’re way ahead.
Again, for starters, you should just start with an amount that you are comfortable losing. That may be $10.00 a day. $100.00 a day, $500.00 a day, depending on your type of business.
If you are working with someone who is experienced, you probably don’t need a whole month to figure out if something is working or not. Perhaps they will be able to tell you within a couple of weeks how well the campaign is going. In that case, you can plan for a shorter period of time for testing. But that initial test phase should always be done with an amount that you are comfortable losing in case nothing works out.
When things do start to work out, that’s the time to start making adjustments to the budget.
If things are really profitable for you at whatever amount that you are spending, usually, you are going to get more traffic if you’re going to spend more.
As you’re spending more, keep in mind that your profit margin might go down. In order to get in front of more people, we have to pay more for that privilege. There might be some low-hanging fruit for us. But as we expand and reach into new types of targeting, new audiences, new keywords, better position on the page, all of these take more money. Don’t be alarmed when your profit margin decreases because it is normal.
The profit margin isn’t what’s important. What’s important is your overall profit.
If I can spend 10x as much, and my profit margin goes down a little bit, that’s fine because my overall profit is going to go up.
Of course, you don’t want to just keep spending more, indefinitely. At some point, the profits that are coming from the campaign will start to diminish. There’s always going to be some kind of sweet spot in spending where you’re maximizing that spend in a way where you’re getting the most profit possible. But that’s not going to be a static point. It’s always changing and you have to be on top of it.
What’s the Bottom Line?
There is no generic amount of budget that will fit all types of businesses, especially at the beginning.
At the start (test phase), it’s all going to depend on how comfortable you are on spending a certain amount of money, knowing that there’s always a possibility that it might not work. You might not get back anything back from it, so you need to be comfortable losing it. Adjustments to the budget will then depend on how profitable the campaign is.
Trust yourself and play it smart
Eventually you’ll get to a point where you’ll figure out a budget that seems to be producing the most profits for you. Once you get there, you can work on optimizing the campaign within that budget.