How to create positive ROI in your Google Ads budget.
One of the biggest questions we get here at Huntington Pacific Media is “How much budget should I spend on Google Ads for my business?”. If you have been asking yourself that, be rest assured you’re not alone.
It’s all about gaining a positive return.
In business digital marketing, the goal is to always gain a positive return on your ad spend. That positive return could be monetary margin gains, brand awareness, lead generation, and much more.
For example, if you spend $1000 per month on ad spend, you should be gaining that $1000 back plus extra margin to cover your product and overhead cost, as well as gain profits for a positive ROI (return on your investment).
How to calculate your ROI formula.
So the question is less about how much you should spend, it’s more about what kind of returns are you needing in order to make a profit on your ads. The formula is (Revenue – Ad Cost – Product Cost – Overhead Cost = Net Profit).
Now you’re asking yourself, “How do I know what my ad net revenue is in order to calculate my ROI if I haven’t even run ads yet?”. The answer is actually pretty simple, you find a lower starting budget and test it out.
I recommend starting with a lower budget like $500 for most small business ad tests to find out what kind of returns you can reap on the lower budget before investing larger amounts. You may even need to run multiple sets of $500 ads in order to optimize the ads for best results.
Once you have proof of positive ROI on a lower budget, you can then increase the budget and start reaping larger profit returns.
Is it right for your business?
Every industry is different and will get different results. Also, some industries work better for Google advertising than others because of the level of competition or demand.
Make sure your site is optimized to convert.
It’s critical that your landing page or website that you are sending traffic to is optimized to convert. A conversion happens when someone clicks on your ad, goes to your website, and then fills out a form or makes a purchase.
If your website hasn’t been setup properly to optimize conversions then you main not gain profitability on your ads at all. It’s like trying to carry water in a bucket full of holes.
Start small, then grow.
So in the end, it comes down to experimenting with a smaller amount of budget to prove profitability, then taking that smaller budget and blowing it up for larger results. Once you have done that, it takes careful management and weekly updating of your ads and keywords to make sure that the system stays profitable and doesn’t stagnate.
If you are looking into Google Ads to drive more customers or sales to your business but aren’t sure where to start, reach out to us and we’d be happy to chat with you about achieving your goals.