Facebook Pixel for LeadDigital

What You Need to Know About PPC Budgets & Bidding

My Post - 2019-07-04T171428.906.pngA PPC budget is how much money is committed to online traffic acquisition efforts since advertising charges only accrue after a prospect clicks on your ad.

What should the monthly amount be?

Here are three ways to estimate this.

How to Determine a PPC Budget

1. Establish a Profitability Goal

If there is a measurable outcome for your campaign, then back into your ideal budget by first knowing the answers to these critical business questions:

  • Average Order Value (AOV)
  • Gross Margin Percentage ((Revenue – Cost of Goods Sold)/Revenue = Gross Margin)
  • Cost per Acquisition (if unknown, set a goal to remain profitable)

Say your company would like to see the Google Ads program drive $5,000 in profits in month one.

You know the average order value of your product is $450 per sale, and the gross margin is 55 percent.

You would want to budget $7,375 per month for click fees, and never exceed a $147.50 cost per acquisition while running the ad campaign.

Number of Sales * AOV * Margin – Budget = Profit

50 sales * $450 of revenue per sale * 55% Profit Margin – monthly Google Ads budget = $5,000 in profit in the first month.

Use this equation to determine your ideal budget. – Read more