How to Calculate PPC Budget: Easy Formulas + Expert Tips

To calculate your PPC budget, you need to identify the cost to bid on your target keywords along with your desired revenue goals. Read this guide to learn the formulas we use to help our clients hit their goals.

Pay-per-click (PPC) budgets can be tricky. Factors like your industry, marketing objectives, and competition all play a role in that final number.

We created this guide to help you set a PPC budget that supports your desired goals, with expert tips on how to make the most of your spend.

How to calculate your PPC budget

When calculating your PPC budget, you can choose between two main formulas, depending on your goal:

• Drive more revenue
• Increase conversion volume

Drive revenue

To determine the total budget needed to reach your revenue goal, multiply your average cost per click (CPC) by the number of visits needed.

Average CPC x (Revenue goal / (Average order value X Conversion rate)) = Total budget needed

For example, if your revenue goal is $10,000, your average order value is $100, your conversion rate is 2%, and your average CPC is $1, then your total budget needed would be:

$1 x (10,000 /( 100 X 0.02)) = $5,000

Increase conversions

To determine the total budget needed to reach a conversion volume goal, use the following formula:
(Number of conversions needed / Website conversion rate) x Average cost per click = Total budget needed

For example, if your conversion volume goal is 100 leads, your website conversion rate is 5%, and your average cost per click is $2, then your total budget needed would be:

(100 / 0.05) x $2 = $4,000

Key factors to consider when setting a PPC budget

While budgeting formulas are a good starting point, other factors may influence your final marketing budget, such as:

• Revenue goals: How much revenue do you want to generate from your PPC efforts?
• Average CPC: What is the average cost of each click in your search campaigns?
• Conversion rate: What is the current percentage of visitors who complete the desired action?
• Average order value (AOV): What is the average amount of money a customer spends per transaction?
• Clicks needed: How many clicks do you need to meet your revenue or conversion goals?
• Competitive landscape: Are you bidding against aggressive competitors for high-value keywords?
• Platform differences: Are you using Google Ads, Bing Ads, or Meta Ads? Each platform has different costs.
• Industry trends and seasonality: Consider seasonal spikes or dips in search volume, along with typical CPC and conversion rates for your industry.

5 expert tips to maximize your spend

No experience putting together a PPC campaign budget? No problem. Consider this advice to help you make the most of your money.

1. Leverage automation

Using automation capabilities can help you achieve better results in less time. This can include:

• Automated ad rotation: Changes ad variations to show the ones performing best.
• Dynamic search ads: These ads use a website’s content to automatically generate ad headlines and landing pages.
• Smart bidding: This feature considers algorithms and real-time data to cut guesswork from the optimization process.

2. Update your keywords

Your keyword list should be a living document that evolves as you accumulate more data over time.

Revisit Google Keyword Planner for ongoing keyword research and closely analyze search terms to identify new keywords to add to your lists and negative filters.

Cut ones that aren’t generating clicks or conversions. Then, organize keywords for better management as the list grows.

3. Increase your Quality Scores

Improving your Google Ads Quality Score should be top of mind. Higher scores lead to better ad placement at lower costs per click, which is a big budget win.

Here are several factors that make up your score:

• Ad relevance
• Landing page experience
• Load speed
• Mobile optimization

4. Be strategic with targeting

Getting hyper-targeted with your digital advertising allows you to tailor messaging to specific segments.

Goal-focused segments, past site visitors, and lookalike audiences can all be targeted based on interests and behaviors.

Retargeting is another tactic to re-engage site visitors who previously showed interest but didn’t convert. Remarketing with customized ads brings them back by reminding them what caught their eye on a previous visit.

Not sure where to start with this method? You can gather information about existing and potential audiences that platforms make available when you open an account.

Use it to get granular with who sees what ads to maximize relevance and conversions.

Further reading: How to Set Up a Remarketing Campaign in Google Ads

5. Harness your data

A PPC strategy is a great start, but be ready to adjust as you gain more information.

If your click-through rates are low on certain ads, it’s time for a refresh. Not getting conversions from a product-focused campaign? Consider that you may need to focus on awareness first.

Then, once customers start rolling in from your campaigns, look at your customer lifetime value (CLV).

The key is optimizing based on real insights versus assumptions. Keep testing new messaging, bids, and targeting methods. With regular analysis, you’ll be able to improve your campaigns and see a better ROI.

7 common PPC budgeting mistakes (and how to avoid them)

Want to jump into PPC ads and get better results immediately? Avoid these pitfalls to maximize the value of your campaigns.

1. Overlooking platform differences

Every PPC platform is different, from search engines like Google Ads and Microsoft Ads to social media platforms like Meta.

Understand their different cost structures, the audience who uses them, and the benefits before investing in each.

2. Skipping keyword research

All keywords are not equal. Research is critical for targeting the right audience and saving yourself from wasted ad spend.

Further reading: How to Do Keyword Research: Tools to Use + Proven Tips

3. Prioritizing ad position

Visibility is important, but not as important as your overall return on investment (ROI). Instead, aim to strike a balance between the two.

4. Ignoring data

Adapting based on real-time campaign performance is critical to maximize your monthly budget.

Regularly review key metrics and optimize accordingly. For instance, a low CTR may mean your ad campaign copy or visuals aren’t compelling enough to attract clicks.

Be proactive with your budget management in PPC campaigns. When you notice that certain ads or keywords hit the mark, shift more of your budget their way.

On the flip side, if some parts of your campaign aren’t delivering as expected, it’s wise to scale back your spending in those areas.

5. Overlooking A/B testing

Routine testing gives you data to refine aspects of your ads and landing pages so they perform better.

For example, you may find that a CTA that references a special offer performs better than a more general CTA like “buy now.”

ConversionIQ, HawkSEM’s own proprietary software, reveals who’s clicking your ads (and converting), so you can personalize your marketing campaign and messaging for better results.

In fact, that’s how our experts helped HomElectrical nearly double its revenue in just 10 months by using our PPC strategies.

6. Missing seasonality and trends

Ignoring seasonal elements can lead to your ad budget getting hit by unexpected costs.

On the other hand, being proactive and responsive to seasonality and trends helps you capitalize on high-demand periods and avoid wasting budget when demand is low.

7. Ignoring mobile

Mobile accounts for a large amount of web traffic worldwide. In the last quarter of 2024, mobile devices generated over 62% of global website traffic.

If you aren’t catering to those users, you’re missing out on a number of clicks and conversions.

Advanced budgeting methods for PPC campaigns

You may need a more advanced budgeting strategy to meet your specific goals as you continue working with PPC campaigns for your business.

Here’s a closer look at common methods advertisers use.

Prior-year budgeting

This method takes your last year’s PPC spend and performance into account, using those numbers as a starting point for the new budget.

This works best when you have several existing campaigns. That way, you can factor in growth and strategy shifts when comparing previous years.

Percentage-of-sales budgeting

Another option is to tie your PPC budget to a percentage of total company revenue.

Tying spend to revenue makes your budget flexible, so it scales along with your business growth. As sales increase, so does your advertising budget.

Objective-based budgeting

Campaigns connect to other parts of your digital marketing strategy. Events happening in your business may influence your decision-making process for ad spend.

For example, you may be:

• Introducing a new product
• Entering a fresh market
• Hitting industry benchmarks

Using an objective-based approach considers the whole picture, and may boost your budget to get an edge over competitors.

How to determine your PPC goals

Spending money without a strategy is one of the fastest ways to waste your budget.

So, how do you land on the choice for your business? Your campaign goals and how much you invest should align with your brand’s objectives.

Here’s a look at the most common PPC goals:

Brand awareness: To boost brand visibility, focus on metrics like impressions, reach, and traffic. Keywords may be broader to reach a wider target audience.

Lead generation: To drive leads using forms, prioritize metrics like click-through rates (CTR), conversion rates, and cost per lead (CPL).

Sales: To increase sales, monitor the number of purchases and your cost per customer acquisition (CPA). For this goal, target keywords with purchase intent and use compelling ad creatives and strong CTAs.

To ensure your campaigns are effective, use tools like Google Analytics to track these metrics.
“Tracking is an essential part of any PPC campaign, especially for budgeting purposes,” says Rambod Yadegar, co-founder and president of HawkSEM.

“It’s crucial to set an optimal budget where return on ad spend (ROAS) is growing year over year.”

The takeaway

Running a PPC program requires adjustments as your business evolves, and your PPC management price may vary. As you learn, you can dial in the budget and figure out what works best for your brand.

Use this guide on strategic budgeting best practices as a blueprint. This will save time and money by building campaigns that align with your goals.

Want to put together a PPC advertising campaign that converts? We’d love to help — get in touch with our experts today.

This article has been updated and was originally published in February 2024.