When your boss asks you how much budget you need for the year, unfortunately, “All of the money” is not an appropriate answer. Or at least it won’t yield you what you want. Determining a realistic but effective ppc marketing budget is perhaps one of the more anxiety-inducing challenges a marketer faces. And most likely, no matter how much you get, it probably still won’t feel like enough.

Find your benchmarks

Not determining your benchmarks is like playing pin-the-tail-on-the-donkey. Take the blindfold off so you can see what you’re aiming for! The most accessible benchmarks you can get your hands on are the ones you’ve already set for yourself, aka, past performance. Run reports to determine your numbers Y/Y and M/M. But, and that’s a big BUT, do not consider these to be your KPIs. Those numbers you’re holding there are old news. You’ve learned a lot since then. You have new strategies, new ideas, and you’re ready to navigate any of the pitfalls you stumbled into in the past. Your past numbers are now your minimums, and you’ll use those to calculate how much better you can do.

In addition to knowing how you did in the past, it’s good to dig up some info on the competition, too. Our benchmark reports reveal CPC, CPM, and CTR for millions of clicks and impressions across industries. Below, check out WordStream’s fabulous roundup of Google AdWords benchmarks by industry.

Image from WordStream Google Ads Benchmarks for Your Industry

Set SMART goals

Before you start throwing money here and there, you have to determine what you’re working toward. That means what you want to buy (leads) and how much you’re willing and able to pay (CPC, CPM, CPL, etc).

When it comes to your leads, you need to have a clear picture of who you’re going after, since it will affect the cost. The two main considerations are:

• Quality

• Where they are in the buying cycle (top-of-funnel is usually cheaper than bottom-of-funnel) Image from WordStream PPC Budget Guide

Then, you want to set SMART goals based on the type of customer you’re going after:

• Specific: Every goal should have a quantifiable number attached to it.

• Measurable: If you’re sticking with traditional metrics, this won’t be a problem, but you will need to make sure you have an effective tracking strategy set up.

• Achievable: It’s great to set your sights high, but don’t set yourself up for failure, This is where your benchmarks come in handy.

• Realistic: A goal might feel achievable, but not realistic. Gut check that you actually have everything you need to hit your KPIs.

• Timely: Anything is achievable if you have forever to accomplish it. Set a timeline so you can track progress and optimize before it’s too late.

Your whole team should understand and believe in these goals, and know how everyone will individually contribute to make it happen.

Understand your business with marketing math

Every single lead needs to be cherished and every single lead requires a fair amount of nurturing. To make sure you’re running a profitable program, you have to make sure you’re treating every lead as high value. Currently in PPC marketing, 1% of leads turn into customers. Knowing that, you can use the marketing math below to work backward into the numbers you need.

If you know that you need to drive more SQLs, for example, you can prioritize which initiatives or projects you need to work on. Use this math to identify the lowest hanging projects, what can help move the needle the most, which KPI will the projects move, and how your math changes above and below as a result.

Play around with this formula to better understand your funnel. This exercise will show you where your leaks are and which levers can be pulled.  On top of this formula, you MUST have a system in place that's tracking your full-funnel efforts, especially if you’re spending money to acquire customers. Otherwise, you won’t know your ROAS and how effective your efforts were at producing results.

Google’s Budget Planner forecasting tool

In your Tools menu, you’ll see a Budget Planner option.

Images from Clink Digital Marketing Google Ads Digital Planner

From there, you’ll be taken through a tutorial. Depending on what your goals are, you can create plans based on clicks or conversions (we suggest conversions since that will better help you prove your influence on ROI), and the option to choose a target:

If you are working with a target, you can input your own numbers or ta-da choose “previous period” or “same time last year.”

Then, Google will generate a draft budget plan. You can move the spend curve based on different goals to see how more or less money could affect your numbers. But, be aware that Google drafts the budget plan using your past data, so if your campaigns don’t have enough history, the tool won’t work.

Google’s Budget Planner forecasting tool won’t spit out the magic number that tells you how much budget you should start with, but this combined with the other strategies we share here will help you determine the right amount.

Facebook’s campaign budget optimization

Facebook’s campaign budget optimization feature is pretty darn handy. So handy, in fact, that the company is making it the default allocation system for all accounts starting in September 2019. The feature works by automatically allocating more spend to higher performing ad sets.

Budget optimization is an always-on feature that works in real-time to capture the max number of results for your budget so your costs are lower. You’ll spend less time managing your campaigns and be able to squeeze more out of every penny.

Image from Facebook Campaign Budget Optimization

If you’re not already using campaign budget optimization, it’s a good idea to make those changes now. Hopefully, you start seeing immediate benefits, and it’ll give you the chance to familiarize yourself before it becomes the standard.

As we’ve highlighted before, the more you’re able to prove out your contribution to ROI, and more importantly, exactly how (ahem, attribution, in other words) you affected the company’s bottom line, the more sway you’ll have with your boss to show him or her why giving you a bigger marketing budget is an excellent idea.