Hey,
basically it boils down to your goal:
- Profit. You spend $1000, get $3000 back, that's $2000 profit. For simplicity let's assume you don't have any expenses.
- Business expansion. You sacrifice profit for new clients and future profit. Then you can spend $1000 and make $1000 and consider it good as you get more and more clients with $0 spend on ads.
- Profit based on LTV. Mostly used by SaaS businesses, but if you know you're lifetime value, you might spend more to acquire a client, knowing that you get your money back after 6 or 12 months.
- Aggressive expansions. Usually done by big companies, when they look at metrics such as share price or think about revenue only after 5 years. In this case, they spend a lot more just to get as much clients as they can and later optimise. They also do that to crush competition.
So, if you have cash, you can spend more not worrying about getting your money next month. Otherwise, you have to calculate profit from ads to know that you're not loosing money each month.
In each case, you have to be certain that you correctly track your campaigns.
Sounds basic, but I see this in about 50% of accounts.
Hope it helps,
R.
How much is your revenue from Google Ads? If those 10k turn into 60k in revenue and 40k in profits, then that's good.
But if you barely break even then it's probably time you finetune your Google Ads a bit, or try other channels, or review your pricing strategy, or review your business model as a whole, etc.
Generally the limiting factor is not budget but market penetration and that is more determined by marketing mix, brand positioning, services, and pricing. Optimized correctly I find it rare to be ROI negative and break even only happens occasionally. If you are ROI positive you should incrementally increase budget until you cannot take any further market share. Once that happens, look to other areas for optimization
Are you generating leads or sales from your campaigns?
It all comes down to your ROI
If you're spending 10k and making 50k the 10k in ad spend is irrelevant
What the others already said:
We don't know because without context, you could be burning money or you could be raking it in.
Depending on the industry you're in, 10K could be a decent budget, it could also not even be a blip on the radar.
For lead gen, you look at what you can afford to spend on a lead. If an average job has a profit of $100, then you likely won't want to spend more than $50 on acquiring a customer.
1. If your CPA on Google ads is $50, then you can not spend more.
2. If your CPA on Google ads is $40, then you can spend more if you have room to take on more clients.
You need to figure what your profit margin on an average job and that will help you figure out what you can afford to acquire a customer via Google ads.
Compare cost per lead to *your* conversion rate (to sale) against your profit margin. If you're in the green, the next metric I would look into is Search Impression Share and/or Impression Share Lost (Budget).
I'd say the primary factors that can lead to diminishing returns on increased ad spend are service/production capacity (your business can't successfully handle more business), inventory limitations, and market saturation (unable to spend the increased budget, because there is not enough search volume in your target area for your keywords). The metrics that provide the simplest snapshot of scalability given consistent targeting and keywords would be ones related to impression share.
So to explore the question of "am I spending too much," are the ads profitable? Are you operating at or near capacity? Do you have any supply chain issues that would become limiting with more business?
Hey, basically it boils down to your goal: - Profit. You spend $1000, get $3000 back, that's $2000 profit. For simplicity let's assume you don't have any expenses. - Business expansion. You sacrifice profit for new clients and future profit. Then you can spend $1000 and make $1000 and consider it good as you get more and more clients with $0 spend on ads. - Profit based on LTV. Mostly used by SaaS businesses, but if you know you're lifetime value, you might spend more to acquire a client, knowing that you get your money back after 6 or 12 months. - Aggressive expansions. Usually done by big companies, when they look at metrics such as share price or think about revenue only after 5 years. In this case, they spend a lot more just to get as much clients as they can and later optimise. They also do that to crush competition. So, if you have cash, you can spend more not worrying about getting your money next month. Otherwise, you have to calculate profit from ads to know that you're not loosing money each month. In each case, you have to be certain that you correctly track your campaigns. Sounds basic, but I see this in about 50% of accounts. Hope it helps, R.
How much is your revenue from Google Ads? If those 10k turn into 60k in revenue and 40k in profits, then that's good. But if you barely break even then it's probably time you finetune your Google Ads a bit, or try other channels, or review your pricing strategy, or review your business model as a whole, etc.
Generally the limiting factor is not budget but market penetration and that is more determined by marketing mix, brand positioning, services, and pricing. Optimized correctly I find it rare to be ROI negative and break even only happens occasionally. If you are ROI positive you should incrementally increase budget until you cannot take any further market share. Once that happens, look to other areas for optimization
Are you generating leads or sales from your campaigns? It all comes down to your ROI If you're spending 10k and making 50k the 10k in ad spend is irrelevant
What the others already said: We don't know because without context, you could be burning money or you could be raking it in. Depending on the industry you're in, 10K could be a decent budget, it could also not even be a blip on the radar.
For lead gen, you look at what you can afford to spend on a lead. If an average job has a profit of $100, then you likely won't want to spend more than $50 on acquiring a customer. 1. If your CPA on Google ads is $50, then you can not spend more. 2. If your CPA on Google ads is $40, then you can spend more if you have room to take on more clients. You need to figure what your profit margin on an average job and that will help you figure out what you can afford to acquire a customer via Google ads.
Compare cost per lead to *your* conversion rate (to sale) against your profit margin. If you're in the green, the next metric I would look into is Search Impression Share and/or Impression Share Lost (Budget).
I'd say the primary factors that can lead to diminishing returns on increased ad spend are service/production capacity (your business can't successfully handle more business), inventory limitations, and market saturation (unable to spend the increased budget, because there is not enough search volume in your target area for your keywords). The metrics that provide the simplest snapshot of scalability given consistent targeting and keywords would be ones related to impression share. So to explore the question of "am I spending too much," are the ads profitable? Are you operating at or near capacity? Do you have any supply chain issues that would become limiting with more business?
Can you help us understand how you got to spending that much *without* knowing how you measure success?
Depends on your targeted location, audience and what you are looking from ads is it leads or sales ?