How Much Should Local Businesses Spend on Google Ads?

Antonella Saravia

12 months ago

It is possible to confuse the fees of Google Ads (previously called Google Adwords) with those of other advertising channels, such as radio spots or highway banners. 

While these channels have fixed costs regardless of the industry, Google Ads operates differently as it functions as an auction marketplace where the item being sold is website visitors. 

Consequently, the fees you pay for Google Ads will be more influenced by your industry rather than the advertising channel itself.


How Much Should Local Businesses Spend on Google Ads

The Answer Is: It Depends

It may be assumed that advertising expenditure is being allocated to Google Ads, but in reality, the funds are being directed towards specific markets within the platform. Each keyword group comes with its own pricing and considerations to take into account.

Furthermore, when you place a bid for clicks or website visitors on Google, you’re not competing for the same clicks as the entire world. Rather, you’re only competing for clicks that are relevant to your business and your competitors.

As Google Ads functions as a keyword auction website, determining a suitable budget is contingent on the cost of the keywords you intend to bid on. If several advertisers are bidding high on a particular keyword, the cost for that keyword will increase, thereby impacting your budget. This can fluctuate significantly depending on the industry.

Minimum Amount you Should Spend on Google Ads

There is no minimum spend on Google Ads, but it’s nearly impossible to benefit from a $2 or $5 as daily budget. Over the years, our strategists have regularly heard the following argument:

“I just want to test with a small budget, and if it works, then I will increase my budget.”

The theory behind this makes sense, but the platform isn’t designed to render results this way. 

Comparing this to traditional advertising, it’s like buying a small classified text-based ad in a newspaper. If you get any results from that tiny ad, then you will buy the big full-page ad. 

The logic that the small, inexpensive ad has to produce results to buy the bigger, more expensive, and more efficient ad is flawed at its core. The more expensive something is (especially when the pricing is auction-based), the higher value it should have under ideal circumstances.

Note: As you acquire data, aim to reach at least six clicks per day. If you sell car insurance, the average CPC is roughly $25. In this case, you would need a budget of $150 per day to achieve those six quality clicks. 

Recommended Monthly Budget You Should Allocate to Google Ads

Our strategists recommend starting budgets ranging from $1,000 to $10,000 monthly based on factors such as the client, industry, objectives, and targeted locations.

The starting budget for your Google Ads campaign should be determined by your level of expertise in building and optimizing such campaigns. A higher starting budget is recommended for those who are more proficient in this area.

For those who are new to using Google Ads for their business, it is advisable to start with a low budget that still allows for competitiveness. However, if you have prior experience, a higher budget may be considered.

Increasing your spending will result in more clicks, providing you with more data to work with. And data is a valuable asset that you will find extremely useful.

One Big Investment Over a Quarter or a Minor Investment Over a Year?

Another common mistake is investing in a small monthly budget without increasing it over time. Perhaps over a year, it may sum up to $12,000 with little to show for it.

If they had taken those $12,000 and invested them in a single quarter ($4,000 per month), it would have resulted in the following:

  • A shorter time frame to evaluate whether an advertising channel will produce workable results or not.
  • The ability to compete on even terms with other advertisers.

Some industries are notorious for having keywords with a very high cost per click, upwards of $30-50 PER CLICK! Though this isn’t common, the following are industries where you can run into a few of these:

  • Financial Services
  • Pest Control
  • HVAC
  • Plumbing

On average, the keywords for these industries range from $10 to $30. Ergo, $1,000 per month campaigns won’t generate noticeable results. You may even categorize Google Ads as a non-functional marketing channel. But the truth is that you didn’t have the right information for proper set-up. 

How to Find Out How Much Your Cost Per Click Will Be?

If your CPC costs and budgets are based on upper-funnel keywords, you may be creating some confusion. Upper funnel words are cheaper as they do not show buying intent. As you travel down the funnel and closer to purchase intent, this will change.

The right keywords – the ones that attract new customers – are more expensive than other keywords. 

For example, if you are a cleaning company, you shouldn’t use the keyword cleaning; instead, go after keywords that are more specific and have a higher intent to purchase, like:

  • Cleaning company Miami
  • Housekeeping services
  • Maid pricing

These keywords are more expensive because they are in high demand and have more competition. Keywords are popular when they have a higher ROI associated with them. 

A potential customer is much more likely to be looking after an actual cleaning company if they use keywords like cleaning company in Miami vs. keywords like cleaning, maid, etc.

The Difference in Cost Per Click Between Keywords With Intent to Buy and Informational Keywords

As mentioned before, where you are in the buying funnel will influence CPCs within the same industry.

For example, let’s assume that you are a local cleaning company. The first list of keywords represents keywords that are typically used in search queries to find more information:

  • Cleaning jobs = CPC $1.05.
  • Salaries as a cleaning lady = CPC $2.18.
  • Cleaning supplies company = CPC $2.81.

At the same time, if we review the average CPC for keywords that are typically used in search queries with high intent, then the cost per click goes up:

  • Cleaning company = CPC $12.23.
  • Cleaning company Miami = CPC $9.53.
  • Local cleaning company = CPC $6.43.

That’s why it’s so important to base your cost-per-click and budget on the right keyword list.

Note: If you are a cleaning company and don’t recognize the CPCs listed here, then remember that there are differences in prices based on your Quality Score, geographical targeting, and ad position.

How to Think Of Your Costs As An Investment vs. Expense

One of the most significant concerns among new advertisers is Google Ads fees. Many of them are concerned that it will cut into their existing profits. 

It’s common for advertising to be considered an expense. However, it’s not to be seen as something that takes revenue away. Instead, it’s an investment that will bring income.

The way to turn a PPC budget on its head from an expense to an investment is by tracking it.

Tracking will help you understand what you get out of your investment. Some examples of how to do this on your campaigns are:

  • Conversion tracking
  • Ecommerce tracking
  • Transaction tracking
  • Lead form tracking
  • Call tracking

Will Google Ads Be A Good Investment?

Answering this question is always enjoyable for us in the office. If you have a reputable business and are considering PPC advertising, then investing in Google Ads would be a wise choice.

While it is essential to take into account your website, industry, and competitors, advertising for a good business is far easier than for a poor one.

If you have tried several advertising models without success, have been unable to generate word-of-mouth business, and are struggling to make ends meet, turning to Google Ads will not be the solution to turn your business around.

On the other hand, if your business is thriving and your customers are aware of what sets you apart in the local market, opting for Google Ads could be one of the most beneficial decisions you will make in your business career.

Takeaways

Before we conclude, please take note of the following:

  • The amount you should spend on Google Ads varies depending on the industry you belong to.
  • The necessary ad expenditure significantly varies across industries.
  • When estimating your costs, ensure that you use the appropriate keywords.

Your expenditure should align with your budget and make sense to you. The platform offers significant value to businesses that are prepared for the increased attention, traffic, and demand it will generate.

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