How To Set a PPC Budget That Works for Your Small Business

PPC ads offer various benefits, but it's easy to overspend or not spend enough.

Paid advertising is vital for small and midsize business leaders, enabling them to reach new audiences, boost revenue, and enhance customer lifetime value. Enter the pay-per-click (PPC) model, a popular online advertising method where advertisers pay only when users click on their ads.

While this concept works well, it can be challenging to determine how much to budget for PPC advertising and how to set individual, campaign-level budgets based on your goals. If you’re a small-business owner, you might even be concerned about spending too much and wasting money or spending too little and not adequately capitalizing on PPC opportunities.

In this article, we explain how you can start investing in PPC advertising, budget for a profitable PPC campaign, and set measurable goals.

What is a PPC budget?

PPC budget is the amount of money you allocate for PPC campaigns. Since you only pay for clicks on your sponsored product ads, the budget typically consists of a predetermined amount that takes into account your bid strategy, daily or campaign limits, keyword strength, conversion rate, and more.

• Bid strategy: It defines the maximum amount you’re willing to pay for a click. This amount doesn’t take conversion rate into account, so to reach targets and goals, your small business might need to change its bid strategy and limits from time to time. Bid strategy also determines your ad’s ranking on search results. For example, an aggressive bid might beat competitors for the keyword “auto insurance near me” or “home insurance in Trenton, New Jersey.”

• Daily or campaign limits: Your small business can define the maximum amount to spend daily or on a specific campaign. For example, you might want to spend only $25 a day on PPC advertising overall. And if you run multiple campaigns, you could set a $25 daily budget for each.

• Keyword selection: Keyword selection is a crucial part of PPC budgeting and helps decide which keywords are relevant to your business and which aren't. With higher popularity and competitiveness, keywords become more expensive, meaning you need a higher bid and budget to appear in the top search results.

Factors to consider when setting your PPC budget

While PPC advertising offers numerous benefits, it's easy to overspend quickly or not spend enough. Finding the right balance involves having a clear view of your bidding strategy, overall budget, conversion metrics to reach your goals, and other factors like geography, competition, and PPC channels.

Bidding strategies

When it comes to the bidding strategy, there’s no one-size-fits-all plan. Overall, it’s the strategic process of increasing or decreasing your bids to control how much you're spending on PPC ads.

Depending on your ad platform, you’ll have different levers and toggles to play with. For example, Google Ads lets you bid on the keyword, conversion, target cost per conversion, target return on ad spend (ROAS), and more. Additionally, its cost-per-click (CPC) bidding option allows two individual levers to choose from: maximize clicks or manual bidding. All these bidding types depend on what exactly you want to measure and what drives conversions for your business.

Part of the PPC bidding strategy is deciding between manual and automated bidding. With manual bidding, you set a maximum bid amount for each keyword and adjust it as needed. In automated bidding, on the other hand, you set an average daily budget and let your ad platform do the rest. Both bidding strategies allow control, but manual bidding is more time-consuming, and if you're just getting started with PPC ads, automated bidding is simpler to execute.

Geography

For a successful PPC campaign, establish a geographic boundary through your ads platform. This step is even more crucial if you’re a local business since customers frequently search for "near me" keywords. Strong geographic and location-based boundaries will ensure your organization reaches the right customers. Even if you’re an eCommerce store, setting geographic targets (e.g., the United States or Canada) will ensure you're only reaching prospects who can buy and receive your product.

Competition

Competitiveness is a critical component of PPC budget management. When potential customers are actively searching for your closest competitors, it means they could also need your services. Competitive keywords and campaigns are often among the strongest performers, helping maximize your PPC budget. Conduct research to identify what keywords your competitors are bidding on, what their ads look like, and any key takeaways from their landing pages.

PPC channels

As a small business, you have a wide variety of PPC channels to choose from. From the well-known Google Search to the emerging TikTok, test different platforms to see which performs the best for you. Let’s discuss a few popular channels:

• Search: Traditional search networks such as Google and Bing offer PPC search ads. For example, if a user searches "best dry shampoo for curly hair," your PPC ad could pop up at the top of the search results if you bid appropriately. Search typically represents high-intent buyers actively looking for your products or services.

• Social: Social networks such as Facebook, Pinterest, and Instagram serve ads to users scrolling their feeds. If a user clicks on your sponsored product ad, you pay the bid amount. Compared to search channels, social networks bring more passive prospects. That’s because social algorithms make educated guesses regarding which consumers to serve your ads to, but the person viewing your ad might not be in the market for your product.

• Programmatic: Programmatic ad networks are usually not the first option for small businesses, as they're typically more complex and less user-friendly. They include sponsored display and banner ads across the web. These ads are often highly targeted but require a more extensive budget. Companies such as PubMatic, Google Ad Exchange, and The Trade Desk are programmatic ad companies that can help you reach target customers on websites across the web.

How to set your PPC budget

Establishing a PPC budget helps you stay on target with customer acquisition costs balanced with customer lifetime value. It allows your small business to remain cost-effective and agile when tweaking bidding strategies. A Gartner study mentions that PPC bid management is not a “set it and forget it” strategy; it requires constant polishing, optimizing bidding targets, keywords, and more, or else campaigns will underperform.^[1]

Set your business goals

First, determine your business goals. Do you want to increase website traffic, page views, or sales? Depending on your exact goal, work backward to establish a bid strategy, budget, and daily campaign limits.

Define your target market

Establishing your ideal buyer and target market is crucial for maximizing your PPC budget. Decide on age, gender, location, and any other key demographics of your ideal buyer to hone in on the right audience. Your ad platforms will also give you an estimate of how many people you can reach within your target market with your budget.

Calculate your budget

From the first two steps, you should have more clarity around the budget you’ll need to reach your goals and target market. Depending on how much traffic you want to drive or how many sales you want to make, run a quick calculation to figure out your monthly PPC budget or ad spend.

For example, if you want to make 50 sales in one month and your average conversion rate is 20%, you would need 250 website visits to hit that target. To boost website visits, you would need to distribute your PPC budget across campaigns and keywords, adjusting bids to stay within your overall monthly budget while hitting your goals.

Identify relevant keywords

Once you know how much you can spend on different campaigns and keywords, it's time to establish what your potential customers might be searching for. Ask your current customers what they searched for to find your products, and look at the suggested keywords on search platforms. Typically, your ad platform will also make suggestions once you start typing in keywords or phrases.

Test different strategies

The most essential part of running a PPC campaign is testing different strategies and optimizing as you go. For example, you might quickly discover that you’re overbidding on certain keywords your potential customers are not really searching for. Or you might find that customers coming in from competitive keywords have a higher chance of conversion—meaning you’ll need to allocate more budget to that group. PPC management is all about testing and retesting to figure out what works best for your goals, budget, and audience.

Track results over time

After setting your goals, defining your target market, and testing keywords and strategies, it's important to monitor results closely. It's also equally important to allow your PPC campaigns enough time to bring in traffic and create statistically significant metrics. Your ad platform will most likely provide reporting on views, clicks, and conversions. You can also use website reporting tools to track and measure activity on your site.

Use software to fine-tune your PPC campaigns

PPC marketing is a cost-effective, straightforward way to reach your target audience. PPC campaigns are highly targeted yet simple to set up, and as a small business, you don't need a huge budget to see results. If executed correctly, PPC ads can generate high-quality leads and conversions.

As your business grows, you may benefit from PPC software that can help manage the complexities associated with large-scale campaigns. The software can automate manual tasks such as researching keywords, setting or adjusting bids, and auditing landing pages, freeing up bandwidth so you can focus on processes that truly need your attention. And if you’re new to PPC software, here are some free options to test drive and decide for yourself.