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How Much Should a Small Business Spend on Google AdWords?

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How Much to Spend on Google Adwords

Ah, the money tree that is Google AdWords. We won’t try to hide the fact that it’s the most expensive pay-per-click service out there. We’ve said it before in our overview on “Picking the Best PPC Platform,” and we’ll say it again. It can be expensive. Especially for the small business that’s never dealt with PPC before.

So, how much does Google AdWords for a small business tend to run? Realistic answer: it depends. Nothing about AdWords marketing is set in stone. You won’t be paying the same cost per click (CPC) as everyone else advertising on there. It all depends on your industry and who your competitors are.

The Adjustment Period

Frugal PPC Budget

Forgo the frugal budget theory. If you put $10 into the Google machine, expect to run out of cash fast. The only thing you get at the end is a waste of $10 that could have been put to better use. Better to use a more realistic budget, for one thing.

You can’t dip your toes into AdWords marketing. It’ll just lead you to waste money in smaller amounts, which will add up quickly for a small business. There is what we call an "adjustment period" of typically 1 month in any Adwords accounts. See this screenshot below of the beginning of one of our new accounts:

Adwords Ramp up Period

Notice how in the first month, results were mediocre. Then in month 2, the results skyrocket? That's because any expert needs to spend money to determine what works best for you. Which keywords convert the best? Which landing pages convert the best? Which geo locations convert the best? Times of day, devices, income levels, etc.? You may think you can anticipate some of these, but you simply can not know until you've spent the money and determined what works and what doesn't. Once you make these adjustments and eliminate wasted spend, the sky is (usually) the limit.

This is the very heart of why small businesses fail at PPC. They fail too quickly without giving time to adjust accounts. They see a poor first month and fire their PPC manager. This platform requires a "both feet in", patient mentality. But when you ARE patient, you're usually rewarded heavily. Set a reasonable budget and work with your PPC manager to set realistic expectations in month 1, 2, and beyond.

Small Monthly Budgets or Large Quarterly Budgets?

Budget Calculator

Let’s say you’re willing to set a monthly budget of $500 for Google AdWords marketing. If you run things this way for a year, you’ll spend a total of $6,000. But did that small monthly budget really pay off as much as it could have? Was it worth spending the year on?

Instead, what if you took that annual $6,000 you would be spending over 12 months and spent it in 4? Don’t freak out about the idea before considering how it could seriously help your advertising strategy attempts.

For all intents and purposes, you’d be spending the same amount, just in a smaller chunk of time. Instead of a $500 monthly advertising budget to work with, you’d bump it up to $1,500 per month. How would that be in your best interest?

For one, you’d save 8 months’ worth of time. Rather than wasting a year on a pay-per-click strategy that didn’t work, you’d only be spending a quarter of that time coming to the same conclusion. After four months, you can bail on this advertising channel if you want, and move your attempts elsewhere. Spending more money quicker also allows the PPC manager to make adjustments more quickly, reducing that "adjustment period". If you drag it out, your "adjustment period" may last 6 months instead of 1.

The second benefit sounds more like an actual benefit. By spending the same amount over a quarter of the year, your monthly budget more than doubles. That puts you in a better position to successfully compete on the terms your competition is targeting. It varies by industry, but some of these keywords could have been way out of the question for small business PPC with a $500 monthly budget to bid on. Some keywords could cost up to $50 a click. Just for one measly click that may not even lead to a conversion. Suddenly 20 clicks a month would have run your budget into the ground.

If you have it in you to take the risk and invest the money, consider the quarterly vs. yearly budget to really get a look at how successful AdWords could be for you. Worst case scenario, you find out it’s not working right now, but at least you saved time and spent no more than you would have. Best case scenario, it works wonderfully and you get to increase your budget for the next quarter.

Cost-Per-Click and Targeted Keywords

CPC Targeted Keywords

Here’s your warning: the right keywords are easy to spot, because they’re the pricey ones. They cost more per click for a reason. That’s where your competition is, and those are the keywords that are going to bring your small business a better return on investment (ROI). To us at Digital Position, CPC is irrelevant - it's your bottom line that matters. We'd rather pay $10 per click for a keyword that's bringing in thousands of revenue, versus a keyword that costs $0.10 per click but never drives any profitable revenue.

Your keyword choice is important if you want to control the best place to put your money. Don’t target the keyword “pets” if you’re advertising for a pet store. Be more specific, and you’ll get more relevant traffic. There are thousands of reasons why someone would search “pets.” They could be looking for suggestions for a new one, how to take care of one, etc. They may not be interested in buying dog food from you. Aim for keywords like “pet store Connecticut” or “pet supplies Connecticut.” These already have the searcher’s intent in mind. That way you won’t pay for clicks that aren’t at all relevant to your business.

Word Games: Spending vs. Investing

Spending vs Investing

Some slight change in wording can change your outlook on AdWords marketing. If you’re spending money with AdWords, every dollar that didn’t go anywhere will seem devastating. Think of it as investing instead, because it is.

Investing in AdWords is investing in your small business’ success. There will be some money wasted. It’s called trial and error. Not every strategy will be a successful one, but that doesn’t mean it was for nothing. It means you know not to try that approach again! The more you experiment with your small business PPC, the better and more profitable your campaigns will become. You have to invest a bit of money before it starts coming back to you. It’ll help if you track your progress so you can see exactly what your business is getting out of this.

Danger: Don’t Spend if it’s a Last Ditch Effort

Danger Sign

Good businesses do better on AdWords. Bad businesses don’t. If your small business is turning to AdWords as a means to get itself back in the upswing of things, it’s not a good move. Your competition will outbid you, you’ll waste what money you have left to invest, and you’ll probably blame AdWords for being a hack. The time to spend in Google AdWords advertising is when your business is in good standing all around. You aren’t struggling to make ends meet, other marketing attempts have done well, you have strong support from customers, etc.

Overall, you’re in control of your budget. If you want to spend $5 a day instead of $1,000 a month, that’s your call. But keep in mind the benefits of spending more up front in order to get more in return. You’re not spending money just to spend it, you’re spending it to create something that will grow with time.

If you’re unsure what you should spend on Google AdWords, let us give you a quick evaluation and some small business marketing advice.


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Roger Parent Image

Roger Parent

Owner

Roger Parent is the Owner and Founder of Digital Position. He's been a developer, designer, and online marketer for almost 10 years spanning a variety of markets. He's also a very "passionate" (overly competitive) volleyball player.

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