Setting the right AdWords budget that suits your small business is tricky. Finding answers to your questions can be trickier. We’ll help you find the right amount for you.
We at Teacup, believe it is important to be mindful of budgets. Especially when it comes to small business budgeting. More often than not, small businesses have slim AdWords budgets and less wiggle room. Deciding on a budget isn’t fun at all. Finding straightforward answers to the question of how large your budget should be is frustrating. Don’t worry though, by the end of this article, we’ll have you deciding on your ad spend with confidence and it might be lower than you think.
Google obviously isn’t shy when it comes to getting to know you and getting your first campaign running. However, it is still a rather forward question that many of would need some reference of how to answer. With our passion for making AdWords work for any budget we are here to help.
An Actual, Straightforward Answer to AdWords Budgeting
When Teacup’s founder, Dean, first started tackling AdWords, he searched high and low for the answer to “how much should a small business spend on AdWords?” Most responses online were… “it depends.” Not much of an answer. While we’re going to dive into the details and calculations below, we did want to at least give you a clear answer:
$10 per day and $300 per month is a good minimum AdWords budget.
We’ve seen campaigns run adequately with budgets much smaller than this, but a $10 daily budget gives you a fair amount of data. If your main keywords have a cost-per-click of above $2.50 then you might want to increase the budget but we’ll tackle all this shortly.
What is Daily Spend?
Upon creating your AdWords account you have to decide how much you want to spend. This question refers to your Daily Spend, aka: your daily AdWords budget. As Google defines it Daily Spend is:
An amount that you set for each ad campaign to specify how much, on average, you’d like to spend each day.
Seems like a simple enough concept. With most of us thinking “I’d like to spend the least amount as possible please!”. This is how you keep your budget from getting wild and wacky. Once you set your daily budget, AdWords shows your ad as much as possible until your budget is reached for the day. This means when your budget is reached your ad stops showing for the day.
Google determines a monthly cost based on your daily budget by multiplying your daily budget by 30.4 and then works around that number. Whether the spend goes over or under during a single day depends on popularity and activity. This will be evened out by the end of the month. So don’t panic if your spend on Tuesday is higher than your daily budget, by the end of the month, your overall costs will average out to your preferred daily budget.
How Much Should I Be Budgeting Daily For AdWords?
A strategy to ensure your ad is being show as often as people are searching your keywords you would probably have to have super big budget. Most of us don’t have that luxury. So how much should you budget? Begin thinking a bit bigger first. If the daily spend is averaged out every 30 days, think about how much you would want to spend per month. If $600 is around the number you would like to be spending towards AdWords per month then your daily cost will be about $20.
When setting this budget, keep in mind you are not going to have great results your first month. Patience will be key. For campaigns to become profitable it will take about 2-3 months. So consider whether you can comfortably spare the same monthly budget for up to 3 months. It is an investment towards marketing and business growth. However, if you are very limited on how much you can spend, some business have been able to run campaigns for less than $100 a month! A major downside to this is that results may come in even slower.
How Ad Delivery Impacts AdWords Budget
Obviously everyone’s ads can’t be shown all at the same time. You get to chose your Ad Delivery Option. Depending on which option you pick will decide how your budget is dispersed. This then determines how quickly your ad is shown in the day.
- Standard delivery: This is the evenly distributed option, where your ad is shown throughout the day. Rather than a sort of a pump and dump in the first part of the day, and no viewing time later. A day is 24 hours, 12 a.m to 11:59 p.m. We always recommend choosing this option because it spreads your budget out across the entire day.
- Accelerated delivery: Are you one of those who would rather be racing right out the gate? Then accelerated is certainly the right choice. Where your ads are shown with more intensity in the first part of the day till your budget is used up. Only choose this option if your budget is very large or you have some compelling reason to get the early worm (though we can’t think of a good reason offhand).
If you are doing automated bidding you will not be able to choose the accelerated option, it will be set to the default option of standard. And that’s for the best!
Understanding Daily Spend Over-Delivery
We all know that business is better some days while a bit flat on others. Some days we have subscriptions, orders or lots of people coming in. Other days it’s desolate. AdWords understands this. While you have set your daily AdWords budget, it may go a bit over of what you had specified or your daily average. This is so when traffic is up you ad can get more exposure.
This is also true for the inverse. When traffic is down and chances for your ad to be seen is lower your daily budget will not be fully used. This is how it keeps your monthly AdWords budget balanced and prevents it from being overspent. This is the known as the monthly charging limit. As Google considers it, your monthly budget limit is to be 30.4 times your daily budget. Now it is possible to be super popular all month, which you would probably be super stoked about. But your budget goes a bit over what you planned, in this case Google may credit you for the next month. Google also alerts you that your campaign is limited by budget.
How Cost-Per-Click Can Affect Your AdWords Budget
One of the biggest items to consider when setting your budget is Cost-Per-Click, because this is what your daily budget is going towards. This is the amount you’re willing to spend when someone clicks on your ad. When the clicks are going up, so is your ad spend. You want people clicking on your ad. Looking at more competitive markets, like many online businesses, the cost per click will be higher. The higher the cost per click, the faster or easier your daily budget will deplete with not as many clicks as a less competitive market.
To determine your CPC (cost-per-click) and how competitive the market is, depends on the keywords you choose. Google will show you the competitiveness of each keyword and a suggested bid. The keywords you choose determine your CPC, which then determines how much you should be setting your daily AdWords budget. But this can get complex quickly so start with a low number to be begin, you want to start this feeling relaxed.
“Watch the costs and the profits will take care of themselves.” – Andrew Carnegie
Fact is, starting with a very low bid is fine, provided you’re willing to be patient. Google will show you the avg. position. If you average position is below 3, then you’re probably showing on the second page of the search results. Bidding higher will get you higher up on the search results and it is totally fine to start low and incrementally increase. Often, paying less for a lower position let’s you learn without paying top dollar for the top spot. You may get less clicks but you’re wasting less too.
Budgeting For Your Daily Spend Can Be Easy
Having a large AdWords budget to spend on our marketing is something we all dream about as small businesses. However, there are solutions to make considering your AdWords Daily Spend easier. With Teacup we handle the complex budgeting stuff for you. We don’t surprise you with a large bill later or making you commit to a certain amount of ad spend. We keep cost low and transparent, so there is no need to concern your accountant. Just reach out anytime and ask us anything!