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Course Module: 1. AAU Agency/Module 3 - The Client Module 24
Lesson: 09. Figuring Out Your Ads Budget
Duration: 11:59
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[00:00 -> 00:05] Okay, so now we are going to talk about determining your advertising budget.
[00:05 -> 00:09] Now this is something that you need to approach carefully.
[00:09 -> 00:14] One of the biggest mistakes that people make is they go all in because they think Google
[00:14 -> 00:20] is going to be this magic pill that basically brings them millions of dollars.
[00:20 -> 00:22] It can be.
[00:22 -> 00:23] Don't get me wrong.
[00:23 -> 00:28] But you have to go in understanding that it takes time for this to work.
[00:28 -> 00:31] Does that mean you won't get leads right away?
[00:31 -> 00:32] Absolutely not.
[00:32 -> 00:36] But you need to understand that the longer this works, the more money you put out it,
[00:36 -> 00:38] the better it's going to work.
[00:38 -> 00:42] Now you're probably wondering, well, how quick, how quick can it work?
[00:42 -> 00:48] My fastest time in running all the years I've run ads was we turned a campaign on and 11
[00:48 -> 00:52] minutes later, I got an email from a client saying, is this a joke?
[00:52 -> 00:56] Because I literally was talking to her on the phone and I said, I'm making your campaign
[00:56 -> 00:58] go live right now.
[00:58 -> 01:00] And I got that email 11 minutes later.
[01:00 -> 01:02] That's as fast as I've ever seen it.
[01:02 -> 01:04] Now that was also an industry.
[01:04 -> 01:08] There wasn't a lot of competition and they had a good ad budget and everything was ready
[01:08 -> 01:10] to go and we turned it on.
[01:10 -> 01:13] But you will not see that anymore.
[01:13 -> 01:18] Once you turn a Google ads campaign on, it has to go through an approval process and it
[01:18 -> 01:19] did back then too.
[01:19 -> 01:21] But we had it all approved and everything.
[01:21 -> 01:26] But it was a situation where now we are seeing, you know, can you get leads?
[01:26 -> 01:27] Is the first day?
[01:27 -> 01:28] Absolutely.
[01:28 -> 01:29] Can you get sales right away?
[01:29 -> 01:31] Yes, you can.
[01:31 -> 01:34] But what you need to understand is you have to be patient.
[01:34 -> 01:38] We are seeing more and more where campaigns take off very well for the first week or two.
[01:38 -> 01:42] They run extremely well and then they go through a lull.
[01:42 -> 01:44] And in this lull, it might last a few days.
[01:44 -> 01:49] It might last a week, maybe a week and a half where we just had a campaign that's spending
[01:49 -> 01:54] up to $500 a day and it killed it right out of the gate.
[01:54 -> 01:55] They got a ton of leads.
[01:55 -> 01:57] They made some good amount of money.
[01:57 -> 02:00] They already made their return on investment the first week for the entire month.
[02:00 -> 02:02] It was a great campaign.
[02:02 -> 02:07] But then it went through about a seven day period where I think it only got one or two conversions.
[02:07 -> 02:09] After that seven days, it started picking back up.
[02:09 -> 02:13] We didn't make a lot of changes because we know that this is how the algorithm works.
[02:13 -> 02:15] So you have to be patient.
[02:15 -> 02:21] So in determining your ads budget, you want your budget to be what you can afford comfortably.
[02:21 -> 02:24] If I can afford $1,000 a month comfortably, that's fine.
[02:24 -> 02:29] If I've got $1,000 in my bank account and that's all I have until next month, I do not
[02:29 -> 02:31] want to spend $1,000.
[02:31 -> 02:35] You are buying data, especially at the beginning of your campaign.
[02:35 -> 02:39] Your campaign will waste some money and you need to understand that.
[02:39 -> 02:42] So you need to budget what you can afford comfortably.
[02:42 -> 02:46] Second, you want to build a buffer of ad spend.
[02:46 -> 02:49] What you don't want to do is say I have $1,000 to make this work.
[02:49 -> 02:53] I'm going to put it all in in a couple of weeks and see what happens.
[02:53 -> 02:58] Every one of our campaigns, the campaign runs better month two than it does month one.
[02:58 -> 03:02] Every campaign runs better month three than it does month two because we take the data and
[03:02 -> 03:04] we make the appropriate changes.
[03:04 -> 03:08] So you want to have a buffer so you know you're going to be running this for a few months.
[03:08 -> 03:13] The more you understand this upfront, the better chance you're going to have for success.
[03:13 -> 03:17] I tell every one of my clients, listen, does that mean you're not going to be getting leads
[03:17 -> 03:19] or clients or sales right away?
[03:19 -> 03:21] Absolutely not.
[03:21 -> 03:26] But we tell them that we want them to be ready for 60 to 90 days for us to really get the
[03:26 -> 03:28] campaign running.
[03:28 -> 03:32] And the reason is that we can't make changes until we get data.
[03:32 -> 03:35] You can't get data until you spend for those clicks.
[03:35 -> 03:40] So I've had people come to me and we didn't set their expectations correctly.
[03:40 -> 03:46] This is back in the beginning of my agency and they would have $500 a month to spend.
[03:46 -> 03:50] And we might only get maybe the clicks are, you know, maybe it's an expensive industry
[03:50 -> 03:52] and the clicks are $10.
[03:52 -> 03:55] Well, we're only getting 50 clicks over the entire month.
[03:55 -> 04:00] That's not very much data for us to make the correct changes to get that campaign running
[04:00 -> 04:01] quickly.
[04:01 -> 04:05] Now, if we have a client who's spending a lot of money, you know, we've got a client where
[04:05 -> 04:09] we turned it on it, you know, we started it at two or $300 a day.
[04:09 -> 04:11] We get a lot of clicks right away.
[04:11 -> 04:16] So within a few days, we can get it ramped up and dialed in much, much faster.
[04:16 -> 04:21] But we tell all of our clients to prepare for a 60 to 90 day period for us to really
[04:21 -> 04:22] get these churning.
[04:22 -> 04:24] And that really is the same thing.
[04:24 -> 04:27] You need to prepare yourself mentally for that.
[04:27 -> 04:31] Third one is how much are you willing to spend to get a customer or client?
[04:31 -> 04:33] And that's something you need to ask yourself.
[04:33 -> 04:38] So if I make $200 per client, how much am I willing to spend to get that client?
[04:38 -> 04:41] Now I might be willing to spend more if I've got a new business.
[04:41 -> 04:44] I'm really trying to get running and off the ground.
[04:44 -> 04:47] But if I have an established business, I already may know, you know what, I'm only
[04:47 -> 04:54] willing to spend $75 to get a client because we're going to make $225 is for supplies.
[04:54 -> 04:57] So I'll make a hundred bucks for every client that we get.
[04:57 -> 05:00] So you know exactly how much you're willing to spend.
[05:00 -> 05:03] That's going to help you determine what you need for your budget.
[05:03 -> 05:06] Now, this is a return on investment calculator.
[05:06 -> 05:08] This is something that I've just put together.
[05:08 -> 05:09] Don't let it confuse you.
[05:09 -> 05:15] But what I do is I would just skip right now down to the return on investment calculator
[05:15 -> 05:16] number three.
[05:16 -> 05:17] You can play with these.
[05:17 -> 05:22] What you want to do is just enter in the areas where there's yellow cells and it will compute
[05:22 -> 05:23] some answers for you.
[05:23 -> 05:25] Okay, but go down to calculator number three.
[05:25 -> 05:31] Okay, so the way this works is let's say you have a monthly pay-per-click or Google Ads
[05:31 -> 05:33] budget of $1,000.
[05:33 -> 05:36] Now your average product or service, let's just say use a number and say it's $200.
[05:36 -> 05:40] Every time you get a client, it's on average $200.
[05:40 -> 05:43] I understand that you might get a client worth a thousand, but sometimes you might get a
[05:43 -> 05:44] client with a hundred.
[05:44 -> 05:46] Go with the average number.
[05:46 -> 05:49] How much profit per product or service do you make?
[05:49 -> 05:55] Let's say you make $200 a job, but it costs you $20 for your tech to go out and do that
[05:55 -> 05:56] job.
[05:56 -> 05:57] It takes him an hour.
[05:57 -> 05:59] He makes $20 an hour and $5 in gas.
[05:59 -> 06:02] That's $25 in services.
[06:02 -> 06:06] So $200 minus $25 is $175.
[06:06 -> 06:10] $175 is profit.
[06:10 -> 06:15] So $175 divided by $200 is 87.5%.
[06:15 -> 06:17] That's how much you make profit on a job.
[06:17 -> 06:19] Now, cost per click.
[06:19 -> 06:23] If you never run Google Ads before, you have no idea what your cost per click is going to
[06:23 -> 06:24] be.
[06:24 -> 06:27] So when you set up your account or if you have an hour, if you do it later, what you
[06:27 -> 06:31] are going to want to do is go up to tools and settings and go to keyword planner.
[06:31 -> 06:33] And this is what you will see.
[06:33 -> 06:35] You can just type in things like discover new keywords.
[06:35 -> 06:40] Let's go with our example and be like floor refinishing.
[06:40 -> 06:42] And let's go floor sanding.
[06:42 -> 06:47] Now you need to make an update here in just a second and say get results.
[06:47 -> 06:51] Right here, you want to make sure that you change this to your area.
[06:51 -> 06:57] So I want to target, let's just say the Minneapolis area.
[06:57 -> 07:00] So Minneapolis, St. Paul, let's say our target area.
[07:00 -> 07:02] And I want to remove the United States here.
[07:02 -> 07:06] So we're going to target, that's, oh, that's a Nielsen rating.
[07:06 -> 07:11] That's why Minneapolis, St. Paul, let's just go with Minneapolis.
[07:11 -> 07:12] It's fine.
[07:12 -> 07:13] Okay, perfect.
[07:13 -> 07:15] And we're going to click save.
[07:15 -> 07:20] So that will adjust some of this because it will take into consideration competition.
[07:20 -> 07:21] Okay.
[07:21 -> 07:27] So as you can see right here, floor refinishing, the average cost per click is $7.32.
[07:27 -> 07:31] Now this used to not be very accurate.
[07:31 -> 07:32] It's gotten much better over the years.
[07:32 -> 07:35] But what you, I don't want these numbers to scare you away.
[07:35 -> 07:37] And here's why.
[07:37 -> 07:42] $7.32 average cost per click for this particular keyword.
[07:42 -> 07:49] But what they're taking into account is everybody running ads under that keyword.
[07:49 -> 07:53] Now if somebody sets their campaign up very poorly, if they don't optimize it, if they
[07:53 -> 07:58] don't know what they're doing and they're not giving Google what they're looking for,
[07:58 -> 08:01] Google is going to charge them more.
[08:01 -> 08:03] And you'd be surprised at how many people that is.
[08:03 -> 08:07] And what that does is it drives this cost per click up.
[08:07 -> 08:11] I can't tell you how many times I see a cost per click and we start running a campaign and
[08:11 -> 08:13] our cost per clicks are half this.
[08:13 -> 08:14] Okay.
[08:14 -> 08:15] We can't guarantee it.
[08:15 -> 08:19] We have no idea what it's going to run until the campaign starts.
[08:19 -> 08:20] This is just an idea.
[08:21 -> 08:24] Now I want you to look over here on the other side.
[08:24 -> 08:26] Top of page bid, the low range.
[08:26 -> 08:31] So when you do a search, there might be one, two or three ads that come up at the top.
[08:31 -> 08:37] And you can see that the low range of what people are bidding is $3.29, $3.52.
[08:37 -> 08:39] You see how that differs here.
[08:39 -> 08:41] But this gives us an idea.
[08:41 -> 08:46] So just based on if we're running keywords for floor refinishing and floor sanding, we
[08:46 -> 08:49] might want to just go after floor sanding.
[08:49 -> 08:50] For two reasons.
[08:50 -> 08:51] One is there are more searches.
[08:51 -> 08:55] There's more competition, but the cost per click might be cheaper.
[08:55 -> 09:00] Now once again, we won't know until we turn these ads on, but I don't want these numbers
[09:00 -> 09:01] to scare you.
[09:01 -> 09:05] There's a way to put a limit on it and we'll show you that when we're doing the campaigns.
[09:05 -> 09:10] So for this example, let's just say our average cost per click might be $4 is kind of an average
[09:10 -> 09:11] of these two.
[09:11 -> 09:15] Let's go back here and estimate our cost per click at $4.
[09:15 -> 09:16] All right.
[09:16 -> 09:17] Conversion percentage.
[09:17 -> 09:23] So e-commerce, you're probably looking a typical conversion rate for an e-commerce site is 1
[09:23 -> 09:24] to 3%.
[09:24 -> 09:29] Now with service businesses, we have businesses that we've been running working with for years
[09:29 -> 09:32] that are getting a conversion rate of 25%.
[09:32 -> 09:36] So for every four people that land on their landing page who've clicked their ads and land
[09:36 -> 09:43] on their landing page, we're getting one out of four to fill out the form or call.
[09:43 -> 09:46] So our conversion rates are extremely high on those.
[09:46 -> 09:50] But for a new campaign, and we actually have something that are even higher than that,
[09:50 -> 09:53] but for a brand new campaign, you need to shoot low.
[09:53 -> 09:54] You're not going to get that out of the gate.
[09:54 -> 09:58] These are campaigns that we have optimized over years.
[09:58 -> 09:59] Okay.
[09:59 -> 10:02] It's not saying you can't get there quickly, but you will not start there.
[10:02 -> 10:05] So let's just use a conversion rate of 8%.
[10:05 -> 10:08] And then over here, conversion percentage of leads in the customers.
[10:08 -> 10:14] So remember we earlier we talked about on average, if you get 10 phone calls, how many of those
[10:14 -> 10:18] people do you convert into actual customers?
[10:18 -> 10:20] It may be six, it may be seven, whatever it says.
[10:20 -> 10:22] I go conservative, let's just say half.
[10:22 -> 10:23] Okay.
[10:23 -> 10:24] So 50%.
[10:24 -> 10:25] All right.
[10:25 -> 10:31] So the way this works is you will get approximately now these are just numbers to give you an idea.
[10:31 -> 10:39] 250 clicks a month, 20 leads, you convert 50% of those so you get 10 clients out of 20
[10:39 -> 10:40] leads.
[10:40 -> 10:41] Okay.
[10:41 -> 10:43] So the revenue is two grand.
[10:43 -> 10:49] The cost to acquire those customers is $1,000 because that's how much your ad spend is.
[10:49 -> 10:51] And the cost for services is 250.
[10:51 -> 10:56] Remember we talked about 25 bucks on average to do that job.
[10:56 -> 10:58] So that's times 10 jobs as 250.
[10:58 -> 11:02] So your profit would be $750.
[11:02 -> 11:06] So essentially it's a costing you $50 to get a client.
[11:06 -> 11:09] That's with ad spend and your cost to services.
[11:09 -> 11:11] And then just gives you some other numbers here.
[11:11 -> 11:13] It really is not that important.
[11:13 -> 11:17] What you're most worried about are these numbers, this one specifically.
[11:17 -> 11:18] Okay.
[11:18 -> 11:22] Now, if you start playing around with these, let's just say that your conversion rate is
[11:22 -> 11:25] actually 60%.
[11:25 -> 11:29] You can see that goes from 750 to 1100.
[11:29 -> 11:32] Maybe your conversion rate on your page is 10%.
[11:32 -> 11:35] You can see that 1100 goes to 1625.
[11:35 -> 11:37] Maybe you get your cost per click lower.
[11:37 -> 11:41] Maybe we go after some keywords that aren't as expensive.
[11:41 -> 11:44] Maybe they are $3.
[11:44 -> 11:46] You can see how fast this changes.
[11:46 -> 11:50] So this is just kind of a fun little tool to mess around with that will help you figure
[11:50 -> 11:54] out kind of an idea of what you need to budget for your ad.
[11:54 -> 11:55] Okay.
[11:55 -> 11:58] Hope that helps you come up with an idea for budget and I'll see you in the next video.

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Okay, so now we are going to talk about determining your advertising budget. Now this is something that you need to approach carefully. One of the biggest mistakes that people make is they go all in because they think Google is going to be this magic pill that basically brings them millions of dollars. It can be. Don't get me wrong. But you have to go in understanding that it takes time for this to work. Does that mean you won't get leads right away? Absolutely not. But you need to understand that the longer this works, the more money you put out it, the better it's going to work. Now you're probably wondering, well, how quick, how quick can it work? My fastest time in running all the years I've run ads was we turned a campaign on and 11 minutes later, I got an email from a client saying, is this a joke? Because I literally was talking to her on the phone and I said, I'm making your campaign go live right now. And I got that email 11 minutes later. That's as fast as I've ever seen it. Now that was also an industry. There wasn't a lot of competition and they had a good ad budget and everything was ready to go and we turned it on. But you will not see that anymore. Once you turn a Google ads campaign on, it has to go through an approval process and it did back then too. But we had it all approved and everything. But it was a situation where now we are seeing, you know, can you get leads? Is the first day? Absolutely. Can you get sales right away? Yes, you can. But what you need to understand is you have to be patient. We are seeing more and more where campaigns take off very well for the first week or two. They run extremely well and then they go through a lull. And in this lull, it might last a few days. It might last a week, maybe a week and a half where we just had a campaign that's spending up to $500 a day and it killed it right out of the gate. They got a ton of leads. They made some good amount of money. They already made their return on investment the first week for the entire month. It was a great campaign. But then it went through about a seven day period where I think it only got one or two conversions. After that seven days, it started picking back up. We didn't make a lot of changes because we know that this is how the algorithm works. So you have to be patient. So in determining your ads budget, you want your budget to be what you can afford comfortably. If I can afford $1,000 a month comfortably, that's fine. If I've got $1,000 in my bank account and that's all I have until next month, I do not want to spend $1,000. You are buying data, especially at the beginning of your campaign. Your campaign will waste some money and you need to understand that. So you need to budget what you can afford comfortably. Second, you want to build a buffer of ad spend. What you don't want to do is say I have $1,000 to make this work. I'm going to put it all in in a couple of weeks and see what happens. Every one of our campaigns, the campaign runs better month two than it does month one. Every campaign runs better month three than it does month two because we take the data and we make the appropriate changes. So you want to have a buffer so you know you're going to be running this for a few months. The more you understand this upfront, the better chance you're going to have for success. I tell every one of my clients, listen, does that mean you're not going to be getting leads or clients or sales right away? Absolutely not. But we tell them that we want them to be ready for 60 to 90 days for us to really get the campaign running. And the reason is that we can't make changes until we get data. You can't get data until you spend for those clicks. So I've had people come to me and we didn't set their expectations correctly. This is back in the beginning of my agency and they would have $500 a month to spend. And we might only get maybe the clicks are, you know, maybe it's an expensive industry and the clicks are $10. Well, we're only getting 50 clicks over the entire month. That's not very much data for us to make the correct changes to get that campaign running quickly. Now, if we have a client who's spending a lot of money, you know, we've got a client where we turned it on it, you know, we started it at two or $300 a day. We get a lot of clicks right away. So within a few days, we can get it ramped up and dialed in much, much faster. But we tell all of our clients to prepare for a 60 to 90 day period for us to really get these churning. And that really is the same thing. You need to prepare yourself mentally for that. Third one is how much are you willing to spend to get a customer or client? And that's something you need to ask yourself. So if I make $200 per client, how much am I willing to spend to get that client? Now I might be willing to spend more if I've got a new business. I'm really trying to get running and off the ground. But if I have an established business, I already may know, you know what, I'm only willing to spend $75 to get a client because we're going to make $225 is for supplies. So I'll make a hundred bucks for every client that we get. So you know exactly how much you're willing to spend. That's going to help you determine what you need for your budget. Now, this is a return on investment calculator. This is something that I've just put together. Don't let it confuse you. But what I do is I would just skip right now down to the return on investment calculator number three. You can play with these. What you want to do is just enter in the areas where there's yellow cells and it will compute some answers for you. Okay, but go down to calculator number three. Okay, so the way this works is let's say you have a monthly pay-per-click or Google Ads budget of $1,000. Now your average product or service, let's just say use a number and say it's $200. Every time you get a client, it's on average $200. I understand that you might get a client worth a thousand, but sometimes you might get a client with a hundred. Go with the average number. How much profit per product or service do you make? Let's say you make $200 a job, but it costs you $20 for your tech to go out and do that job. It takes him an hour. He makes $20 an hour and $5 in gas. That's $25 in services. So $200 minus $25 is $175. $175 is profit. So $175 divided by $200 is 87.5%. That's how much you make profit on a job. Now, cost per click. If you never run Google Ads before, you have no idea what your cost per click is going to be. So when you set up your account or if you have an hour, if you do it later, what you are going to want to do is go up to tools and settings and go to keyword planner. And this is what you will see. You can just type in things like discover new keywords. Let's go with our example and be like floor refinishing. And let's go floor sanding. Now you need to make an update here in just a second and say get results. Right here, you want to make sure that you change this to your area. So I want to target, let's just say the Minneapolis area. So Minneapolis, St. Paul, let's say our target area. And I want to remove the United States here. So we're going to target, that's, oh, that's a Nielsen rating. That's why Minneapolis, St. Paul, let's just go with Minneapolis. It's fine. Okay, perfect. And we're going to click save. So that will adjust some of this because it will take into consideration competition. Okay. So as you can see right here, floor refinishing, the average cost per click is $7.32. Now this used to not be very accurate. It's gotten much better over the years. But what you, I don't want these numbers to scare you away. And here's why. $7.32 average cost per click for this particular keyword. But what they're taking into account is everybody running ads under that keyword. Now if somebody sets their campaign up very poorly, if they don't optimize it, if they don't know what they're doing and they're not giving Google what they're looking for, Google is going to charge them more. And you'd be surprised at how many people that is. And what that does is it drives this cost per click up. I can't tell you how many times I see a cost per click and we start running a campaign and our cost per clicks are half this. Okay. We can't guarantee it. We have no idea what it's going to run until the campaign starts. This is just an idea. Now I want you to look over here on the other side. Top of page bid, the low range. So when you do a search, there might be one, two or three ads that come up at the top. And you can see that the low range of what people are bidding is $3.29, $3.52. You see how that differs here. But this gives us an idea. So just based on if we're running keywords for floor refinishing and floor sanding, we might want to just go after floor sanding. For two reasons. One is there are more searches. There's more competition, but the cost per click might be cheaper. Now once again, we won't know until we turn these ads on, but I don't want these numbers to scare you. There's a way to put a limit on it and we'll show you that when we're doing the campaigns. So for this example, let's just say our average cost per click might be $4 is kind of an average of these two. Let's go back here and estimate our cost per click at $4. All right. Conversion percentage. So e-commerce, you're probably looking a typical conversion rate for an e-commerce site is 1 to 3%. Now with service businesses, we have businesses that we've been running working with for years that are getting a conversion rate of 25%. So for every four people that land on their landing page who've clicked their ads and land on their landing page, we're getting one out of four to fill out the form or call. So our conversion rates are extremely high on those. But for a new campaign, and we actually have something that are even higher than that, but for a brand new campaign, you need to shoot low. You're not going to get that out of the gate. These are campaigns that we have optimized over years. Okay. It's not saying you can't get there quickly, but you will not start there. So let's just use a conversion rate of 8%. And then over here, conversion percentage of leads in the customers. So remember we earlier we talked about on average, if you get 10 phone calls, how many of those people do you convert into actual customers? It may be six, it may be seven, whatever it says. I go conservative, let's just say half. Okay. So 50%. All right. So the way this works is you will get approximately now these are just numbers to give you an idea. 250 clicks a month, 20 leads, you convert 50% of those so you get 10 clients out of 20 leads. Okay. So the revenue is two grand. The cost to acquire those customers is $1,000 because that's how much your ad spend is. And the cost for services is 250. Remember we talked about 25 bucks on average to do that job. So that's times 10 jobs as 250. So your profit would be $750. So essentially it's a costing you $50 to get a client. That's with ad spend and your cost to services. And then just gives you some other numbers here. It really is not that important. What you're most worried about are these numbers, this one specifically. Okay. Now, if you start playing around with these, let's just say that your conversion rate is actually 60%. You can see that goes from 750 to 1100. Maybe your conversion rate on your page is 10%. You can see that 1100 goes to 1625. Maybe you get your cost per click lower. Maybe we go after some keywords that aren't as expensive. Maybe they are $3. You can see how fast this changes. So this is just kind of a fun little tool to mess around with that will help you figure out kind of an idea of what you need to budget for your ad. Okay. Hope that helps you come up with an idea for budget and I'll see you in the next video.

