Without fail, I am asked this question at every discovery meeting about Google advertising, “How much should I spend on Google ads?”. We all want to know how much money we need to spend on advertisements in order to get the number of new clients we need, right? It makes sense! In business, we all want to create a repeatable, sustainable process for funneling new revenue into our bank account.
For most, this number is elusive, and admittedly it has been for me too, until today. Here is quick synopsis of how to calculate what you need to spend in order to even “possibly” get the number of new clients you’d like to see walk in the doors from Google (or any advertising, really).
The math is deceitfully simple, and here is the math to reverse engineer your magic number.
Step #1. “I can realistically handle _______ new clients per month as of today.”
First, you need to determine how many new customers you want per month. This sounds ridiculous, but if you consider how many new clients you could realistically handle this month, that should be the number. If you suddenly took on one-hundred new clients, would it crash your business? If you don’t already have the trained people ready to take on the workload, then yes, it will. So choose this number realistically:
Step #2. “My typical close rate for cold new business (ie. NOT referrals) is ______ %”
Determine your close rate. DO NOT consider referrals in this number. The easiest way to calculate this is to think to yourself, “self, if ten new people called me today for a quote, how many would normally close?”. This number is typically between 20% and 50%, but it varies by business and industry, of course.
Step #3. “In order to close _____ new clients, based on my close rate, I need to have ______ conversations this month.”
We will work backwards from your two previous numbers to calculate how many conversations you need to have to close this many new clients. Here is the equation for calculating how many conversations you need to have this month:
Conversations = (Desired Number of New Customer/ (Your Close Rate * 100)) * 100
So, if you want to close ten (10) new clients this month, and you have a close rate of say, twenty percent (20%), let’s run the numbers and find out how many conversations you need to have to close that many clients:
- Conversations = (10/(20% *100)) *100
- Conversations = (10/20) *100
- Conversations = .50 * 100
- Conversations = 50
At a close rate of twenty percent (20%), you will need to have fifty (50) new conversations with interested parties in order to close ten (10) new customers. Next we will calculate how many people you need to get in front of in the Google Search Results in order to have fifty (50) new conversations.
Step #4. “In order to have fifty (50) new conversations, I need to show up in front of _____ people when they are looking for my services.
So then the question is, “How do I show up in front people who are looking for my services on Google? This is the next major step in understanding how much money you need to spend to hit your growth goals!
Luckily for us, Google tells marketing and advertising agencies like Enspyre Digital how many searches show up for products and services each month. We are able to calculate how much opportunity exists in Google advertising and Search Engine Optimization for your company every single month. If you would like to know how much opportunity exists in your market, reach out to us and we would love to produce an “Opportunity Report” showing you how much money you can make by investing into Search Engine Marketing (SEM).
But for the sake of knowledge, let’s continue down this path for a moment longer. Google tells us that the top Google Maps result has about a thirty-two (32%) CTR rate, meaning thirty-two percent (32%) of people looking for a service will call the top result. So let’s do a little reverse engineering.
If you are going to receive thirty-two percent (32%) of the calls, and you need to have fifty (50) conversations we can work a similar equation to determine approximately how many “high-intent” searches you need to show up for every month:
Required Searches = (Conversations/(CTR Rate * 100)) * 100
- Required Searches = (50/(32% * 100)) * 100
- Required Searches = (50/32)*100
- Required Searches = 1.56 * 100 = 156 high intent searches
“In order to have 50 conversations, I need to show up in front of 156 people who are directly searching for my products and services.”
That is great! Now that we know how many times you need to show up, we can look at the average Cost-Per-Click for those searches and make a more educated judgement as to how much money you will need to spend to close your goal of ten (10) new clients per month.
“Step #5: If the average Cost Per Click bid is _______, I need to prepare to spend roughly $__________ per month on Google Ads and/or Search Engine Optimization.”
Now that we have our basic information set, we know the following information:
- I want to get 10 new clients per month
- I need to have 50 conversations to close 10 new clients per month.
- I need to show up in about 160 “high-intent” searches to get 50 calls/conversations.
Now, typcally you will need to work with an agency to find this type of information (unless you want to become a digital marketing expert, of course!), but we can find the average cost per click information through our Google dashboards. For the purposes of this training, let’s go with $10 CPC Bid (Cost Per Click).
So if you need to show up in 160 results, then you need to outbid your competitors and tell Google, “Google, I am willing to pay you up to $10 per click if you will show my ad to your visitors”. So right off the bat, we know that you need at least 50 clicks, so your monthly budget should be $500, right? Well, maybe. Let’s look at a couple more numbers.
ClickCease is the foremost expert on Google advertising fraud, and estimates that about 14% of all clicks are going to be fraudulent and not have any value to you. This means you need to expect that you are going to waste about 14% of your budget to fraud. If you have a larger budget, using a tool like ClickCease can help reduce this, but for smaller budgets it just doesn’t make sense right now for the price point.
So at 50 clicks, 7 of them are out the window, leaving you with 43 potential conversations. We need to make up for this number. In reality, you need about 60 calls, so we’re going to estimate you need to cushion your budget by about 20% to ensure you’re getting the number of calls you need to close a deal.
“If the Average Cost per Click is $10, then I need to prepare to spend roughly $600 per month to close 10 new clients per month.”
Conclusion
When you’re approaching an agency to run ads for you, always understand there is a management fee associated to running ads. Also know that in addition to the management fee, you are going to have to pay the platform to show the ads. The average legitimate agency charges anywhere from $500 to $2,500 per month for managed marketing services including ad management, which is less than full time, unskilled employee at minimum wage.
Because of our experience with the platforms, industry and generally marketing knowledge, we are able to operate at scale for our clients and offer more affordable pricing options. In this scenario, if you were to spend about $600 on the ad spend, you would be spending a total of roughly $1,100 to $1,600/mo. on to obtain 10 new clients per month. You will need to determine if your profit margin, based on your business model, supports that type of advertising spend for net new business.
Of course, if you would like to learn more about how Enspyre Digital can help you with your digital marketing efforts in Bakersfield or anywhere in the United States, give shoot us an email or give us a call and we can discuss options with you over a meeting. Thanks for reading and good luck out there!
Charles Sears
CEO, Enspyre Digital