Google Search Ads for Local Businesses: How Much Does it cost?

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Google Ads is a great way to boost lead generation, but while the service is well-known, many business owners and marketers still struggle to understand how to determine their budget.

This blog will help you understand the essential data needed to determine the cost of Google Ads for you. Let’s get started!

5 Things to Figure Out Before Your Google Ads Budget Forecast

Before getting into the nitty-gritty of your Google Ads budget, there are a few things that you need to be sure about — let’s take a look.

1. A well-defined target audience

Who and where is your target audience? It may seem obvious, but for Google Ads, this information is imperative in determining which keywords to target.

2. A documented sales pitch

How do you imagine your sales pitch when a prospect clicks a Google Ad? Consider the searcher’s intent and how you plan on addressing that intention. Think about what differentiates you from your competitors.

3. A clear understanding of the buying process

Do you have a short or long buying process? Google Ads lends an opportunity to convert leads — yes. But not without a clear and easy-to-navigate buying process.

For B2C companies with a short buying process, Google Ads can be an excellent lead source. However, a B2B company with a longer buying process will need to take a long view and consider its customer lifetime value.

4. Lead goal per month

How many leads would you like to see come in per month? Being able to articulate your expectations ahead of time will help you build the right strategy.

5. A minimum monthly budget of $500 for B2C and $2,000 for B2B

Are you prepared to allocate the appropriate budget? Before you determine the exact cost of Google Ads, it’s crucial to know that a sustained monthly spend is required to yield results.

Average CPC Per Industry

Another crucial element to understand going in is the average CPC per industry. It will help determine the financial success of your paid search campaigns and how much Google Ads will cost for you.

The average cost per click (CPC) in each industry depends entirely on the market and how valuable those keywords are for the business. For example, on average, clicks for keywords related to ‘local gyms in New York’ do not have the same value as ‘lawyers in New York’ because the competition is not as rigorous.

Generally, the price of keywords depends on supply and demand, or in other words, how popular the keywords are in a particular location.

According to Google, the average CPC benchmarks vary depending on the area of business. Below is a chart from Instapage that shows the average CPC by industry.

Google Ads industry benchmarks graph

Based on this chart, Law & Government is the most expensive with an average CPC of $6.35, while Dining & Nightlife is the least expensive with an average CPC of $1.30.

However, since the data did not segregate the different industries by location, the precise CPC will depend on the local competition, not just the national average.

Additionally, according to Wordstream, Google Ads accounts with scores of six or higher are granted a 16-50% decrease in CPC. Also, accounts with scores lower than four will see a 25-400% increase in CPC, which will heavily impact your ROI. Ergo individual account performances will also play a role in influencing the CPC.

How to Calculate the Budget Necessary to Reach Your Monthly Lead Generation Goals

Step 1 – Identify the search volume

The first step is to identify how much demand there is for your products or services by looking at the search volumes.

Step 2 – Identify average cost-per-click (CPC)

Once we know the search volume, we should look at the average CPC and decide on the desired number of leads you want per month.

Step 3 – Identify your industry and website conversion rates

The conversion rate depends on the quality of your ads, landing pages, and ad offers. There’s a ton of data out there that outline conversion rate benchmarks for each industry, however, these should not be applied without first looking at your own website performance and conversion rates.

Step 4 – Forecast your conversion rate

If your website is already converting at 10%, but the industry benchmark is at 5%, we recommend sticking around the middle at 7.5% or leaning heavily towards your website’s performance.

However, if your website is converting at 2% whereas the benchmark is 5%, we would recommend keeping a conversion rate expectation below 3.5% because the performance of your website outweighs the performance of the industry.

Step 5 – Consider average click-through rates (CTR)

The next step is to look at the average CTR benchmarks for your industry. In this case, we will use an example of 5% as the benchmark.

Here’s an example of how budgets should be calculated:

Search volume – 2,000

Avg. CPC – $10

Conversion rate industry – 5%

Website conversion rate – 10%

Forecast conversion rate – 7.5%

CTR – 5%

Based on these numbers, the number of clicks we can expect is around 100 clicks per month This means that to get 100 clicks per month, we need to have a budget of $1,000 per month because the Avg CPC is $10.

Since our research suggests that our conversion rate is around 7.5%, that means we should expect around 7-8 conversions per month for $125-$142.80 per conversion.

Based on the analysis, here is what we can expect from the campaign:

Budget – $1,000

Clicks – 100

CPC – $10

Conversions – 7-8

Cost per conversion – $125 – $142.80

If your product or service is worth less than $125 or $142.80, then Google Ads may not be right for you. If you are a Law firm, however, and your leads are worth $500 to $1,000, then getting 7 to 8 leads per month will make much more sense.

Another factor you should consider is your customer lifetime value. It’s easy to ignore the lifetime value of a customer when looking at Google Ads campaigns because you will not see the results immediately.

However, a single customer’s lifetime value could exceed the monthly budget in some cases. This depends on the products or services, but it is another factor that should not be overlooked.

While the forecast hinges on data that we have available, it does not mean that these numbers will be accurate across the board. There are variables, which we will go over in detail below.

Factors That Influence Your Ad Position

Many of our clients understand how Google Ads work, but most don’t know that there’s a say in where an ad ranks among other competing ads. Optimizing these factors will give you a leg up on competing campaigns and ultimately maximize the potential of your Google Ads campaign:

Click-through rate (CTR)

Your click-through rate (CTR) quantifies how many people are actually clicking your ad, and there are a bunch of different ways to optimize it. To name a few, you can use long-tail keywords, write strong meta descriptions, and simplify your title format.

Landing page experience

The landing page refers to the place people go when they click your ads. The aim of these pages should be conversions. With high-quality images, concise headlines, well-produced videos, and appealing calls to action, you will be able to increase your conversions and thus improve your CTR.

Relevancy of your ad to your target keywords

Ad relevancy, or keyword relevancy, refers to how closely your ad campaign matches your keywords. Be sure to have your target keyword in your ad headline, meta description, and on the corresponding landing page.

The bid

Think of Google Ads like an auction. The higher you are willing to pay for a single click on a given keyword, the higher your ad is likely to rank. While the bid does carry significant weight, it is not the end-all-be-all. A combination of everything listed above will put you in the best position.

Conclusion

Many variables go into determining the cost of Google Ads, but with careful research and understanding of your industry numbers, you’ll be able to nail down the cost and even predict the outcome of your campaign.

If you need assistance in tracking down the data needed to determine the cost of Google Ads for you, our team of experts can do a full audit on your behalf.

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