Like most other things in business, answering the question how much should I spend on Adwords is a balancing act. With a budget that’s too small, your pay-per-click (PPC) campaign won’t receive enough traffic to be profitable. On the other hand, if you set aside too much for PPC, you won’t see a return on your investment because not enough people are searching for what you’re offering.

Finding that magic number for your paid ad campaign can be difficult for the uninitiated, but with a little help, you can start fleshing out your budget today. Luckily, I’ve got a few tips that will help get you started.

Research CPC, Search Volume, and Keywords

When I trying to figure out how much should I spend on Adwords, I start with research. The way PPC works is in the name—you pay when someone clicks on your ad. But not all ad costs are created equal. People are online right now searching for products similar to yours using keywords and keyword phrases, and depending on how often people search for a certain keyword (search volume), the cost-per-click (CPC) varies.

When it comes to keywords, it’s all about purchase intent when you’re starting out. Think of what people are searching for within your niche—for instance, “skin cream” if you sell skincare products. A high-intent keyword could thus be something like “buy skin cream,” or something of that nature.

Choose a Target

Once you choose your keywords, it’s time to pick a target for your campaign. In short, you should target three details about your intended audience: geography, time, and device.

Let’s start with geography. If you’re a local business, you can really benefit from focusing your campaign on nearby areas. You might be able to target a local demographic that you know is interested in your product and drive clicks that way. Even if you’re running a nationwide campaign, starting local and expanding on the keywords that work can save you some money.

You can also choose to run your campaign at certain times of the day. You might want to do this if, after looking at results, you notice that you get the most clicks during a certain two-hour period.

Depending on your product, you might also want to target the type of device your audience is most likely to use. Low-cost products and services tend to get a lot of traffic from mobile devices, while more expensive items are more likely to be purchased from a computer.

Monitor Your Results

I know, I know. You’re still asking, “But Diane, how much should I spend on Adwords?” Let’s get to it.

There’s a pretty simple formula that can help you decide how much to spend. It looks like this:

DC ÷ CCR% x Average CPC = Your PPC Budget

Desired conversions (DC) represents the number of leads you want per month.  Your current conversion rate (CCR) is the percentage of leads that you currently convert into sales. Note that if you are only receiving warm referrals today as leads, you may want to reduce your conversion percentage. The average CPC is the cost-per-click of the keyword searches that will result in the types of leads you want to receive. If you’re not sure about this, just ask us and we can perform a keyword analysis for you.

The formula result is your monthly ad spend budget.

Still asking yourself how much should I spend on Adwords?

Like I said, it’s all about finding a balance. Luckily, you don’t have to try to balance too many things at once. If you’re interested in starting a PPC campaign for your business, talk to us today.