If you’ve been looking for a PPC Budget Calculator, you might have noticed that a lot of them show you things like the number of leads, cost per lead, or expected return on investment (ROI), but they typically require that you already know the values of your marketing budget and CPC.
They don’t actually tell you how much you should budget and how much you can expect each click will cost.
We created a calculator to help you come up with an advertising budget and estimated CPC based on how many deals you’d like to close in a given month, and the amount you’re willing to spend on search ads to acquire one new customer (also known as target CAC or your allowable cost per closed deal).
In addition, our calculator will let you plug in known values to find other important metrics of a PPC campaign such as:
- The number of website visitors you’ll need per month (number of clicks)
- The number of leads you’ll need per month
- Your cost-per-lead
- Your return on ad spend (ROAS)
This article will explain how to use the calculator, and provide a breakdown of each input and output calculation to see how they fit into your pay per click campaign.
Note: Our PPC Budget Calculator is easy to use and there are instructions inside explaining how to use it. To get started, click this link, make a copy of the calculator, and paste it into another spreadsheet to start plugging in your metrics.
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Calculating Total Budget, CPL, and CPC (Using Target CAC and Closed Deals Per Month)
Calculating Total Budget
Target CAC (Customer Acquisition Cost) is how much you are willing to spend to close a potential customer. For example, if you sell a $500 item, you might be willing to pay $200 to acquire that customer. Based on your margins and customer lifetime value, you can enter your target CAC.
The other aspect of determining your budget requires you to come up with a target for how many deals you want to close per month. For example, if you have decided you want 2 new customers every month, you’d enter 2.
Our calculator uses these inputs to make the following calculation:
Target CAC x Target Closed Deals per Month = Monthly Ad Budget
So in this case, your total ad budget needed will be 2 x $200 = $400.
From here, you can begin to input other known metrics to calculate your expected cost-per-lead.
Calculating Cost-Per-Lead
Having calculated your monthly budget, you can work backwards to figure out the upper limit of what you should be willing to spend to acquire one new lead.
The calculation for CPL is:
CPL = Total Ad Budget / Leads per Month Needed
At this point, you know your total ad budget, but before you can figure out your CPL, you need to figure out how many leads per month you’ll need to meet your goal within your budget.
The calculation for leads per month needed is:
Leads per Month Needed =
Target Closed Deals per Month / Lead to Closed Deal %
So if your close rate is about 10%, your calculation would be:
$400 / 10% = 20 Leads per Month Needed
Now you’d have the metrics you need to calculate your CPL, which would look like:
$400 / 20 = $20 CPL
This follows that you should pay no more than $20/lead to maximize your budget. Our calculator will also allow you to calculate your average cost-per-click.
Calculating Cost-Per-Click
The calculation to find your cost-per-click is:
CPC = Total Ad Budget / Visitors Needed (Clicks)
To find this, you’d still need to figure out the number of visitors or clicks you need. The calculation for this is:
Visitors Needed (Click Estimates) =
Leads Per Month Needed / Visitor to Lead Conversion Rate
In your last calculation, you found your leads per month needed, and the remaining metric you’d need to enter is your visitor to lead conversion rate. Similar to calculating click-through rate (CTR), this is the percentage of people that not only come to your website but also qualify themselves as leads (by downloading an ebook on a landing page, signing up for an email list, etc).
So if 10% of your website visitors typically become leads, your calculation would be:
20 / 10% = 200 Visitors Needed (Clicks)
Now you’d have the metrics you need to calculate your CPC, which would look like
400 / 200 = $2 CPC
So to maximize the use of your budget, you should aim to pay no more than $2/click.
Calculating ROI
The calculation to find your ROI on ad spend is:
ROI on Ad Spend = Known Value of a Closed Deal / Target CAC
In plain English, this is how much you earn from a sale divided by how much you are willing to spend to get the sale.
Continuing with our example from above, if you know your value of a closed deal is $500, and you are willing to spend $200 to acquire a customer, your ROI is:
$500 / $200 = 2.5
Calculating Closed Deals Needed Per Month (Using Known Monthly Ad Budget and CPC)
In addition to our first calculator that helps you to calculate your monthly ad budget and CPC when they’re unknown, we’ve also included a calculator (similar to the others we’ve seen) that helps you determine how many deals you’re likely to close per month when your budget and CPC are known.
Now that we’ve walked you through how to use the first calculator, you can play around with the second calculator as you’d like to. It works the same way, indicating where you input your known metrics and automatically giving you calculations for the unknown ones.
Conclusion
We know how challenging it can be to set accurate expectations with your clients. Hopefully, our PPC Budget Calculator will make calculating the key metrics of your PPC advertising campaigns easier and allow you to better estimate your target goals for your marketing strategy.
Ready to move your marketing team’s client processes into one, central place? Sign up and try our end-to-end marketing agency management software—free for 7 days.
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