What Budget Is Too Small for Google Ads?

23rd November 2022 • The Google Ads Podcast • Solutions 8

00:00:00
00:12:44

Regina answers one of the most common questions she gets asked when advertising with Google Ads- "What is the minimum budget recommended to get started with Google Ads?"

Regina Bellows, executive director of StarterPPC, discusses the main factors that go into determining your ad budget, and how it can affect your conversions. She also provides examples of small-budget accounts and their ad performance for the first 30 days.

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Related videos:

How Much Budget vs. How Many Products? https://youtu.be/BfYbg2JUfaw

🤕 Growing Pains: Scaling Brings Costly Conversions: https://youtu.be/ehZN9Ss0TrM

💰 Performance Max for Small Budgets: https://youtu.be/kFbKjSILv4w

0:00 Intro

0:38 What Budget Is Too Small for Google Ads?

5:50 Finding the minimum budget

8:22 Work with the best Google Ads agency in the world

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Gap:

I often get asked What budget is too small when you're just

Gap:getting started with Google Ads?

Gap:So I thought I would answer that question today.

Gap:The answer is a little bit nuance.

Gap:The examples that I have pulled up are with accounts that got

Gap:started with budgets under 5k.

Gap:This isn't enough budget.

Gap:It's either going to.

Gap:Um, A very, very, very long time for the algorithm to optimize, or

Gap:we might find that it never will.

Gap:They spent 4,500 in their first month and they were able to get 17 conversions.

Gap:So this is right on the brim.

Gap:Hey everyone, it's Regina Solutions eight.

Gap:I often get asked What budget is too small when you're just

Gap:getting started with Google Ads?

Gap:So I thought I would answer that question today.

Gap:The answer is a little bit nuanced.

Gap:There's some logic, I have some examples pulled for you.

Gap:And so I'm gonna get through all of that.

Gap:The examples that I have pulled up are with accounts

Gap:that got started with budget.

Gap:Under 5k.

Gap:Now I know at Solutions eight we work with budgets that are larger

Gap:than 5k, but we created this sister agency that we call Starter ppc.

Gap:And I'll put the link to it in the description below.

Gap:And basically that agency is the same team as Solutions eight, but.

Gap:We have a limited service , and uh, we also work with smaller budgets.

Gap:We have a 5K max , for that ad service.

Gap:So that's why I have all of these examples of accounts that got started

Gap:with budgets that are under $5,000 and I'm gonna run through them in a second.

Gap:So the answer to the question, what budget is too small when you're

Gap:just getting started with Google?

Gap:Varies from business to business and industry to industry.

Gap:And I'll explain why.

Gap:So the algorithm uses data points conversion data to identify

Gap:patterns in the users that are interacting with the ads and then

Gap:optimize the ads based on that data.

Gap:So you.

Gap:For example, let's say in your first month you get 30 conversions.

Gap:That's an average of like a conversion every single day in the month.

Gap:Well, the algorithm has a significant body of data to identify patterns,

Gap:see who is buying, and in the next month it's going to probably be

Gap:through its learning phase already.

Gap:And you're gonna be able to start to either grow or make small

Gap:optimizations and then grow.

Gap:And so If you get started and in the first month you only have four conversions,

Gap:well, let's hope that those were high quality conversions, first of all so

Gap:that the data is high quality, but even if it is, that's only four data points.

Gap:So the algorithm doesn't really have enough to know what to do yet.

Gap:So it's been a month and the algorithm doesn't know what to do.

Gap:The problem with four data points a month is this data gets old.

Gap:So let's say it now is gonna take you six months to build up a body of data

Gap:points that the algorithm can look at and know how to best optimize , the bidding.

Gap:Well six months from now, this data from month one is gonna be, Really old, right?

Gap:The seasonality happened, the weather changed, the new

Gap:competitors entered, the market.

Gap:Things shifted.

Gap:That entire user base has already bought and disappeared from the data pool.

Gap:So it just becomes old, it becomes harder for the algorithm to rely on that data.

Gap:So sometimes the budget can be so small that the learning

Gap:phase just never quite happens.

Gap:So.

Gap:It's oftentimes a guessing game , to figure out what that

Gap:point is and when it's too low.

Gap:But once you kind of understand how the algorithm thinks, you can

Gap:at least make an educated guess on what your minimum budget will be.

Gap:So think about it this way.

Gap:Let's say you're selling furniture and, your average sale is $800.

Gap:And so you wanna.

Gap:Three times your money.

Gap:I'll just use round numbers.

Gap:So that's a three x return.

Gap:let's say you're gonna spend a few hundred dollars on every single conversion.

Gap:Well, if you start out with a $500 budget, you're only get like

Gap:two conversions a month, right?

Gap:Maybe one.

Gap:So That's just not a big enough budget.

Gap:Uh, If you're selling a product that costs $800 and you know that because

Gap:of the cost per acquisition that you're expecting to pay if you're

Gap:selling clothing and you know, your average order value is like 70 or $80.

Gap:that's different.

Gap:Now, if you're spending $500, you probably will get at

Gap:least 30 conversions in a month.

Gap:So that's probably enough for the algorithm to identify

Gap:patterns and optimize.

Gap:So if it's.

Gap:Too low either.

Gap:Sometimes it just takes a very, very long time, three or four months

Gap:to get through the learning phase.

Gap:And in the meantime, your business has overhead costs so that could be an issue.

Gap:And if it's too, too low, then the algorithm sometimes will never optimize

Gap:because by the time it starts to gather patterns, the data is too old.

Gap:So the higher the budget is, the faster it's gonna get going, and

Gap:finding that minimum is going to.

Gap:A judgment call.

Gap:If your account has some conversion history in it already from when

Gap:you did ads, and if that conversion history is fairly recent, right, like

Gap:maybe you paused the ads a month or two ago, then you're way better off.

Gap:I'm gonna show you in my examples what I'm talking about.

Gap:Let's take a look.

Gap:So I pulled.

Gap:A bunch of different client accounts.

Gap:Here the first one is clothing.

Gap:So you can see I have the first 30 days pulled up here that we managed

Gap:their accounts, their account for them, they spent 2,700 in that

Gap:first 30 days, and there were 115 conversions now for a clothing brand.

Gap:That's to be expected.

Gap:2,700 is plenty to get started and for the algorithm to get through

Gap:the learning phase pretty quickly because it's getting 115 conversions.

Gap:So we're golden.

Gap:Let's move on.

Gap:So this account is jewelry.

Gap:They sell jewelry to a niche market actually, and they spent 3,500

Gap:the first month they got 101.

Gap:So again, this one is good.

Gap:So because their average order value is low, they're getting

Gap:many, many conversions a month.

Gap:They're also spending $3,500 in, uh, spend.

Gap:So they're golden.

Gap:Now let's move on to the hard ones.

Gap:We've got a wealth management firm.

Gap:They got started with 2,800 and the first 30 days, there were only four conversions.

Gap:Now because, this is a lead generation account.

Gap:Not all of these conversions are high quality.

Gap:In fact, when you're just getting a new lead generation account going,

Gap:you're trying to hone the keywords, you're trying to get the algorithm

Gap:pointed in the right direction.

Gap:And I know for a fact that actually three out of these four conversions

Gap:were low quality spam leads.

Gap:So we had some trouble getting this account going.

Gap:The algorithm now has three bad data points and one good data point in

Gap:its first study days to work off of.

Gap:This is way too little.

Gap:So this is actually a fairly new account with us.

Gap:Now that we are in our second or third month and we were able to get the

Gap:quality going, we're going to ping the client and say, Hey we don't think the

Gap:algorithm's ever gonna have enough to optimize with at $2,800 every 30 days.

Gap:So you need to probably double your spend at least to 500.

Gap:This is not a glitch.

Gap:I'm interrupting because I need to remind you that I'm always looking

Gap:for people to join our team.

Gap:So if you're passionate about Google Ads and you wanna work with the best

Gap:Google Ads agency on the planet, please go to so late.com/apply.

Gap:Speaking of working with the best Google Ads agency on the planet, if you're having

Gap:trouble with Google Ads and you want professional help, that's what we do.

Gap:You can go to so late.com, that's s o l eight.com to apply for your

Gap:free, no obligation action plan.

Gap:And if I've.

Gap:Any level of value at all, maybe think about giving me a thumbs

Gap:up and subscribe your channel.

Gap:That's how we juice the YouTube algorithm so they actually know

Gap:that I know what I'm talking about.

Gap:If you have questions, comments, concerns, or confessions, hit me

Gap:below in the comments, and now back to your regularly scheduled program.

Gap:Wealth management firm.

Gap:This one is furniture.

Gap:So the next three examples I have for you guys, these are all

Gap:drop shipping furniture brands.

Gap:So , this account, in their first 30 days, they spent $3,800 and they

Gap:were able to get 20 conversions.

Gap:So this is pretty good.

Gap:And the reason why this happened is because this account had quite a bit

Gap:of conversion history, so the algorithm was already nice and optimized.

Gap:I cannot speak to how much they spent in their first 30 days in the account.

Gap:But I wanted to give this example because a lot of times clients come to us with

Gap:conversion history and they're asking.

Gap:What their minimum spend should be.

Gap:And the answer is even more nuanced than just knowing your average order value and

Gap:making a basic math equation , to figure out how many conversions you might get.

Gap:, it's an unknown because the algorithm, if it has conversion data and if that

Gap:conversion data is old and if it was accurate, there's just so many factors

Gap:in our estimates of whether or not.

Gap:3,800 would be enough.

Gap:If I had looked at this account and, and you had told me they were gonna

Gap:start with $3,800 and, and their job shipping furniture, I would've thought,

Gap:okay, you're, you're gonna get way less than 20 in your first month.

Gap:But because of the conversion history they got 20 and I think

Gap:it's perfectly fine to get 20

Gap:I think, 15 would be my minimum personally 15 conversions in a month.

Gap:If I think I'm gonna get less than that, I would not get started with

Gap:a budget that was smaller than that.

Gap:So this is another furniture brand, and they got started with 2,200.

Gap:And as you can see, in their first 30 days, they only got.

Gap:Four is not enough.

Gap:This isn't enough budget.

Gap:It's either going to take a very, very, very long time for

Gap:the algorithm to optimize or we might find that it never will.

Gap:So we're gonna probably ping the client asking them to double their spend soon

Gap:if they wanna be sure that the algorithm is not going to have issues optimizing.

Gap:There's really no way of telling and I don't wanna waste all that time.

Gap:Running it at 2,200 not knowing if it'll ever get more than.

Gap:And then the last one is a furniture brand as well.

Gap:They spent 4,500 in their first month and they were able to get 17 conversions.

Gap:So this is right on the brim.

Gap:This is what I would expect from a furniture brand.

Gap:The other two were kind of, kind of unusual.

Gap:I think this one did have a little bit of conversion history though when they came.

Gap:Yeah, I had no idea whether that conversion history was good quality.

Gap:Right?

Gap:Like, was the tracking set up correctly?

Gap:Were massive changes done to the amount of products or the, the, the

Gap:products that are being offered?

Gap:Was there an entire re overhaul done on the website between then and now?

Gap:I have no idea.

Gap:So a lot of times the, the conversion history is just unknown, where we

Gap:think the algorithm's gonna be able to.

Gap:And then it can't, or we think it won't be able to use it and then it can, so it's

Gap:just sometimes very difficult to tell.

Gap:So that, hopefully gives you guys a better idea of how to guess what

Gap:your minimum spend should be and answer that question for you guys.

Gap:If you wanna work with Starter ppc check out the link in the description.

Gap:I'm the director of Starter PPC and we are hacking Performance Max currently

Gap:to get it to work for small budgets.

Gap:So that is a.

Gap:Focus that that we're working on over there at Starter ppc and yeah.

Gap:Thanks for watching.

Gap:I hope to see you guys there.