Diving into pay-per-click advertising can be a big decision, and you might have more than a few burning questions.

Will it actually bring in leads for my business? Will the investment be worth it?

Most likely, the answer is “yes.” PPC has a high return-on-investment for many companies, especially those that are local and provide a time-sensitive or location-based service.

Even if you’re confident that PPC will be a profitable tactic, how do you determine how much you need to invest? This is one of the most common questions we get.

That’s why we put together this guide: so you can understand all of the costs associated with Google AdWords and learn how to estimate your own campaign budget. Google AdWords is certainly not the only PPC player, but it’s the main one, and many aspects of this guide will apply to other advertising platforms too.

Here’s how to calculate a starter budget for Google AdWords and understand what that budget will get you.

How much should you budget for AdWords?

To estimate your monthly ad spend, you’ll want to start an AdWords campaign and invest enough to get a minimum of 10-15 clicks per day. This minimum sample size is necessary to see meaningful results in a timely manner. If you’re receiving less than 10 clicks per day, you won’t be able to assess the account and perform optimizations quickly enough.

For instance, clicks for ads in a home service-based industry like plumbing and extermination might cost $5-8 per click. On the other hand, industries with high price points, such as legal services, are more competitive and could command up to a few hundred dollars for each click.

For now, let’s say your cost is $5 per click. At 10 clicks per day, you will get approximately 300 clicks a month.

How many leads will your budget buy for you?

Cost-per-click is important, but only because it helps you calculate your cost-per-lead. This is the average amount you pay for each person who takes action once they land on your website. The action might be filling out a form, calling your business, or making a purchase.

To calculate your expected cost-per-lead, you’ll need to make some assumptions about the effectiveness of your landing pages. A landing page will normally convert anywhere from 2-10% of visitors depending on the industry and it’s design.

Let’s use 5% for this example.

How much is an average customer worth to you? Use your own numbers for this calculation, and see if your cost-per-lead is lower than the average amount a customer typically spends over the course of their relationship with your business. If so, investing in PPC would be a smart and profitable choice.

Is a PPC agency worth it?

In our totally non-biased opinion, absolutely!

All jokes aside, it’s really a matter of how you prefer to pay for the cost associated with running your AdWords campaign. Regardless of which way you decide to go, there is a cost.

On one hand, you could run AdWords campaigns yourself. This won’t require you to pay for hiring someone, but it does require time to learn and manage AdWords—time you could be spending elsewhere. If you’re well-versed in AdWords, the initial learning curve will be shorter, but there will still be time spent on monthly upkeep.

Another option is to hire a freelancer or consultant to manage your AdWords campaigns. While this will save you time and might be cheaper than hiring an agency, you have some risk when only one person is running your campaign. They may make some costly AdWords mistakes, go on a long vacation, or decide to take a full-time job elsewhere.

Finally, you could hire a professional agency. It will probably cost more than hiring one person, but the team’s combined expertise is likely to decrease your cost-per-lead, which will save you more in the long run. Also, an agency is more likely to have a larger support structure to keep any speed bumps (like a long vacation) at a minimum.

An experienced team can get you more conversions for your money, or even decrease your budget while maintaining the same number of conversions.

How do PPC management businesses price their services?

If you decide to explore having a PPC company manage your campaigns, here are the pricing structures you can expect to see.

• Flat fee: Some companies charge a flat fee each month. The fee is normally tiered, meaning that it will increase as your ad spend increases.
• Percentage of ad spend: With this pricing method, your fee is a percentage of your monthly ad spend. Note that many PPC companies who use this structure require a high minimum ad spend each month or have some sort of minimum in place.
• Base fee + percentage of ad spend: Some companies use a blend: a base fee every month, plus a smaller percentage of ad spend. At ParaCore, we use this method because it’s a balanced fee structure that works for a variety of businesses.

Want to get a better idea of how much AdWords costs?

Let us do the math for you. We’ll put together a free AdWords analysis for your business that includes a behind-the-scenes look at your competitors’ campaigns, as well as a plan for getting started with your own ads. Get your free report!

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