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0:00 The #1 Mistake Business Owners Make With Paid Ads

7:17 Choosing a competitive goal

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13:13 How to change your MER goal in the middle of a campaign

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#googleads #googleperformancemax #googleadsbestpractices

Hey everyone.

2

It's Regina from Starter PPC.

3

Today I want to talk to you about the

number one, by far biggest mistake that

4

our clients make when they hire us.

5

this is the thing that we end up

communicating with clients about

6

more often than anything else.

7

Some clients follow our

recommendations and some clients don't.

8

And so what I'm going to do is I'm going

to break it down with some numbers.

9

I'm going to show you a scenario

where a client doesn't follow

10

our advice and then a scenario

where they do follow our advice.

11

the thing that I'm referring to, the

big mistake that clients make They

12

don't know their numbers intimately.

13

And I know this sounds cliche, you guys,

but I'm going to show you with math,

14

how this can hurt you and keep you from

growing and keep you from making a profit.

15

They don't know their numbers.

16

And because of this, there's

spiraling consequences.

17

For example, let's take a look at scenario

one and I'll show you what I mean.

18

And then we'll look at stick scenario two.

19

for example, here's a client.

20

They've come in.

21

Let's say they've said that

they need a 300 percent return.

22

So you'll see here that I've

put return, meaning MER, which

23

is media efficiency ratio.

24

That's just a number where you

can kind of look at the overall

25

return on your media spend, right?

26

On your ad spend.

27

Without actually honing in on one

platform and, relying on the ever

28

decreasing tracking abilities

of Google Ads or whatever.

29

You're kind of just looking

at the total business.

30

Gross sales and dividing it

by the total media spend.

31

So ad spend, flyers, radio ads,

whatever it is that you're paying for.

32

Basically ROI, return on your media spend.

33

Let's say their profit margin is 40%.

34

So we've said to them,

well, what's your goal?

35

And they've said, well, I want 300.

36

I need a 300 percent return.

37

So for every dollar I spend,

I want to make 3 in return.

38

they start out with an

ad spend with a budget.

39

Of 1, 000 and right off the bat, their

Google ads account is getting 290%.

40

Now, when you're only spending 1, It's

actually easy to get a higher return

41

sometimes when you're spending really

small amounts of money because what's

42

happening is you're kind of just

scooping up the low hanging fruit, kind

43

of just getting the ones at the bottom

of the barrel that are easy to get.

44

And then when you start

to scale, it becomes.

45

a little more competitive, right?

46

You start to go up the sales funnel

and try to get people that are

47

maybe slightly less ready to buy.

48

Maybe they have to click two times instead

of one before they convert or three times.

49

maybe you're bidding on the more

competitive products, right?

50

Because those are the ones where you

make a higher profit margin, but they're

51

also the same ones that your competitors

make a higher profit margin on.

52

So you want to sell them, but they're

also more competitive, which means

53

you're paying more for a click, right?

54

So it gets a little bit more

competitive once you kind of

55

get up off the very bottom of.

56

The floor of the sales funnel.

57

okay.

58

So they're only spending a thousand.

59

So it's pretty easy to

get it to hold 290%.

60

And so this month, the way that this

math works is this is just taking

61

the ad spend times the return.

62

And it's telling you what

the gross sales are, right?

63

You spend 1, you make 2.

64

9, that's 2, 900.

65

And so their profit is 160 once you

account for ad spend and profit margin,

66

profit margin is basically like cost of

goods, cost of fulfillment for that sale.

67

So you subtract 40%, you subtract the ad

spend and you're left with only 160 in.

68

Profit and you have

that to pay your bills.

69

it's very hard when you're a small

business to pay your bills because

70

your profit is only 160, right?

71

So you need scale because you need

enough money to pay your bills.

72

This is why it's so difficult

for small businesses to compete.

73

Okay.

74

So because they're not at 300%, the

second month comes around and they don't,

75

grow, They don't increase their spend.

76

they're waiting for the

account to optimize itself and

77

figure out how to get to 300%.

78

And sometimes.

79

I don't think they're ever gonna

get to what, 300%, which is why you

80

can see here that for the entire

year, the account never gets to 300.

81

Why?

82

Because 300 is an unrealistic

goal for industry that has

83

profit margin averages of 40%.

84

If the competitors can operate their

business on a return that's lower

85

than 300% and they're making a profit.

86

Then you have to too, unfortunately.

87

And so the way, the way that we

like to calculate this is you

88

figure out how many times does 40.

89

40 goes into 100 2.

90

5 times.

91

Okay, so that means that in order to

break even on a sale you need to make 2.

92

5, right?

93

250 percent return because

You're going to pay 60 percent

94

in cost of goods and fulfillment.

95

And, you're going to pay the

other 40 percent in ad spend

96

with that scenario, right?

97

So you're breaking even 250%.

98

Now your competitors are going to go,

okay, all we really need is like 270.

99

They know they don't need

300, they only need 270.

100

And so they're kind of setting

the cost per click, right?

101

It's a, it's an auction

system in Google ads.

102

So whatever your competitors

are operating at that's the

103

competitive goal that you also have

to be able to operate at or else.

104

Unfortunately, you can't just

hit whatever goal you want.

105

You have to hit a competitive return.

106

What happens is the competitors go,

okay, we're getting this much on

107

our conversion rate on the website.

108

We're getting kind of this much

on our click through rate based

109

on our ad copy and everything.

110

And because we have a

profit margin of 40%.

111

We can afford to pay

this much for a click.

112

And so they're the ones that

are setting the cost per click.

113

And that's what you have to

pay for cost per click as well.

114

So assuming you're getting a similar

click through rate as them and a similar

115

conversion rate as them, you're also

paying a similar cost per click as them.

116

So it's kind of a closed system.

117

You also have to operate at the same

return that they are operating at.

118

300 percent all year, and because of

this, you're never growing because

119

you're waiting for that return to happen.

120

And I don't think it ever will happen

cause it's not a competitive goal.

121

At the end of the year,

you've made 1, 920 that year.

122

Okay.

123

Let's look at scenario two, and this

is the scenario where some of our

124

clients take our advice and they choose

a competitive, goal, a competitive mer

125

goal, So in this case, we've said to

them, Hey, your profit margin is 40%.

126

Your mer goal is.

127

should be around two 70.

128

Okay.

129

So for the first month, it's

the same scenario, right?

130

They're spending a thousand dollars.

131

They make 160 because their

Mer is 290 that month.

132

They go great.

133

That's actually higher

than our goal of two 70.

134

Let's add 20 percent to the budget.

135

So they add 20 percent to grow

the business a little bit.

136

Now, this is where it's very

tight for small businesses, right?

137

You only made 160, but

I'm asking you to add 20%.

138

Unfortunately, I know I say this

all the time, but there is a little

139

bit of an upfront investment.

140

You have to come up

with that extra 40 here.

141

Because.

142

Once you scale the business,

it does get easier and easier.

143

As you can see the profit margin,

the profit goes up and up.

144

And so it becomes easier

to come up with that money.

145

But for now it's just very tight

and making ends meet means you

146

need to scale a little bit first.

147

All right.

148

So they scale 20 percent and because

of this, the Mer goes down to 270.

149

this happens, right?

150

Like I said, sometimes when you're

kind of just scooping up the bottom of

151

the barrel, it's easy to get a higher

return as you start to scale your.

152

Account finds this it levels

out at a competitive mer.

153

That just kind of happens.

154

As you scale.

155

So to 70 in this case, because

the profit margin is 40 percent

156

40 percent goes into 102.

157

5 times.

158

That's 250 percent for the break even.

159

tack on another 20 percent to that number

so you can pay your bills and you've

160

got 270 as the goal for this industry.

161

270 percent here is what we're seeing in

month two after we've scaled a little bit.

162

Now the profit is actually less.

163

That makes sense, right?

164

Cause the return went down.

165

But you did make more in

sales and the algorithm has a

166

little bit more power, right?

167

Because it's getting some frequency,

some conversion frequency.

168

So it's learning a little bit more

about the target market, a little bit

169

more about the placements that it can

utilize, a little bit more about the

170

products that you're selling, or if

you're a lead gen account, the services.

171

that you're selling, since we hit the goal

this month, we decide let's scale again.

172

So we add 20 percent again, and

now the profit starts to go up.

173

Now it's very tight

this first year, right?

174

You're still a very, very small business.

175

You're only spending this much

and you're only making this much.

176

But by the end of the year,

you now are A bigger business.

177

You're making 600 in profit every month.

178

So you can now start to

pay some of those bills.

179

You're making 20, 000 in sales and look

180

instead of 2000, a little over 3000.

181

And now the algorithm has that power that

it needs to have to continue scaling, in

182

fact, a more realistic picture is this.

183

I think once you get to.

184

A higher number, the algorithm sometimes

has more power to get a higher return.

185

And that happens because of

what I'm talking about with the

186

frequency of conversion data.

187

some, sometimes when you're a larger

business, if you need to hit like a 280,

188

you can find ways to do that, right?

189

You can kind of be like, okay,

for this month, we're just going

190

to lean into this one product.

191

We don't want the algorithm

to do any learning this month.

192

We're just going to force it to hit

goals because we need to pay some

193

bigger bills this month and you can

make it hit like 280 that month if

194

you need to, which is really handy

when you're a bigger business.

195

But this type of thing is very

difficult when you're small.

196

So that is the number one biggest

mistake that I see businesses making.

197

Many of our clients follow this

scenario when I wish that they

198

would follow this scenario.

199

Every single, if you know your

numbers really well, every

200

single time you're hitting them,

add 20 percent to your budget.

201

Okay, couple of side notes

while I have you guys here.

202

If you choose a MER goal that...

203

you hit it for a month and you discover

that your business was actually

204

like losing money that month and you

can't afford to do that for too long.

205

Okay, incrementally add, add

to it just a little bit, right?

206

Add 5 percent to your goal or add 10

percent to your goal for a while and

207

see if that helps you hit your numbers.

208

I know I mentioned that sometimes

you do have to operate at a slight

209

loss for the first few months.

210

There is a barrier to entry.

211

This is bigger for some

industries and smaller for others.

212

So it's very difficult to sum up

and it's even difficult to know.

213

Because it just varies so greatly

from industry to industry, business

214

to business, quarter to quarter.

215

But you know, sometimes you might

find that you've chosen a murgle

216

that's a little bit too competitive

for you to be able to handle.

217

That's fine incrementally at it, but don't

just pick a number out of thin air, like

218

300 and tell us that that's what you need.

219

These numbers need to be known.

220

They need to be based on reality.

221

And I have an article for you

guys that I wrote called what

222

should my mergold be and why?

223

And it breaks down the math that I was

talking about, about what you're putting,

224

how to calculate your profit margin.

225

First of all, how to calculate your

mer based on your profit margin.

226

and why the logic behind why that is.

227

So it breaks the whole thing down for you.

228

I will include the link

in the description.

229

It's called What should

my Mergol be and why?

230

So check that out.

231

Okay.

232

The other side note that I

want to mention is in reality,

233

it's not this smooth, right?

234

It's not two 70 month

over month over month.

235

So sometimes it's going to be two 60 and

other months it's going to be two 80.

236

And so it's a little bit of a rocky.

237

path.

238

And so sometimes if you hit 260 that

month, you might choose not to do

239

the 20 percent increase that month.

240

in reality you might grow a

little bit slower than this.

241

But I would encourage you guys if at

all possible to add 20 percent to your

242

budget every single month, unless your

business is hemorrhaging money and you

243

can't afford it because it is going

to be easier for you in the long

244

run than staying very, very small.

245

Everything just gets a little bit

easier once you have more money

246

coming through the door later on.

247

It's just, it's just tough for

small businesses out there.

248

Okay guys, we're doing

what we can to try to help.

249

If you liked this video, don't

forget to like and subscribe.

250

We're Starter PPC and we work with

businesses that operate on budgets

251

between 1000 and 5000 per month.

252

So if that sounds like you, we've

developed super affordable management fee

253

because we want to help small businesses.

254

Small businesses succeed.

255

Check us out.

256

It's starter ppc.

257

com.