Predicting Google Ads ROI for your business

Let's start with one thing, it can be difficult to accurately predict Google Ads results before ever spending anything on the account. That being said, you can at least get a conservative estimate of what things will look like.

Here's what you'll need to know to get a good estimate:

-Avg CPC

-Conversion Rate (CVR)

-Cost/Conversion

-Close Rate

-Profit Margin

-Avg Ticket Price

-Monthly Ad Budget

Average CPC (cost per click) is one of the crucial elements to estimate ROI. This is because your avg cpc, along with your CVR, will determine the stat that truly matters, which is the cost/conversion.

Knowing your avg cpc is one of those things that your better off running ads for a couple days to get a better look at what it will be. It's just sometimes hard to know this before you've ever ran an ad.

If you have already tried running ads before, you can go look at what your avg cpc was during the duration of that time.

If you've never ran ads before, you can use Google Keyword Planner to give you a low bid and high bid estimate. It's very important that when you do this, you also type in the location (city or town) that your ads will be targeted.

From there make an average of those two values to get an idea of what the avg cpc is according to Google.

Ex. low bid: 5$, high bid: 15$

Avg of those two values is 10$, you can estimate that you avg cpc will be 10$

Now I will say, this is a rough estimate. Google Keyword Planner estimates are really hit and miss in terms of accuracy in my experience. It's a good place to start when you have no other data though. Like I said earlier, your better off just running ads for a couple days and allow the system to get a couple clicks to get a better prediction.

One tool you can also use is Semrush Keyword Magic Tool. This is basically the same as Google Keyword Planner but often has more accurate CPC estimates. The downside to this tool is that the location targetting is weak, you can't target estimates from a specific city, only for specific countries. It's also a paid tool, but you can use a free account to do a couple searches per day.

Conversion Rate is the next thing you'll need to know. This is basically how many clicks does it take to get a lead. This will change depending on how well your landing page is setup and optimized. You can get a better or worse conversion rate, but 10% is not a bad place to start your estimates. For contractors, we typically get a better CVR than this, but it's good to be conservative when estimating. It does depend of the industry your in as well. This would mean every 10 clicks turns into 1 lead. You can also look online for your industry's average conversion rate for landing pages.

Now that you have both your Avg CPC & Conv Rate, you can get figure out what actually matters here, the Cost/Conversion, also named Cost/Lead.

The cost/conv is just a combination of avg CPC & conv rate. If you have a 10% conv rate and a 5$ CPC, then your cost/conv is 50$. It costs you 50$/lead.

Next up is your Close Rate. This is something you should know before you even run any ads. Looking at past inquiries, quotes, and clients you've booked, figure out how many people on avg need to contact you before you close one. For contractors, this is often somewhere around 20%. This means about 1 in 5 people that contact you for a quote, end up getting closed and paying you. This is important to know as you'll need to know how many leads you need to actually close a job.

Next is your Profit Margin. This is also something you most likely know before you start running ads. If you don't, please figure this out before you run any ads. This is a basic and important metric to know for every single business. For contractors, profit margins are often around 25%.

Ok next is your Avg Ticket Price. This is how much on avg your charging your client per service. If your services are a fixed price this easier to determine. If you're a contractor and your services really depend on the size of the job, figure out an average. You could add up everything all the seperate charges in the last couple months/weeks and divide that number by the total number of jobs.

Finally is your Monthly Ad Budget. This is how much you're willing to spend on ads every month. You can play around with this value to see what might be worth it or not. For this example, we'll use a monthly ad budget of 3000$, or about 100$/day.

To estimate this, get your cost/conversion using your avg cpc and conv rate. We'll stick with the same example as above and say your cost/conv is 50$. Now divide 100 by your close rate value.. If your close rate is 25%, then 100/25 = 1 in 4 leads turn to customers.

Take your cost/conv and multiply it by this value. 50$ cost/conv x 4 = 200$ cost/close.

Multiply your profit margin by your avg ticket price to figure out how much you're making net per close. If your profit margin is 25% and your avg ticket price is 5000$, then you're making 1250$ profit on avg for every job.

Now let's take our monthly ad budget. In our case we're using 3000$ as an example.

Divide this value by your cost/close to figure out how many closed customers you can get with this budget. 3000$ / 200$ = 15 closed customers per month.

Multiply your closed customers by your profit/close.

15 customers x 1250$ = 18 750$ profit/mo.

With all this we can determine your ROI.

Take your profits and divide it by your monthly ad budget. Then multiply by 100 to get a percentage.

18 750$ / 3000$ = 6.25 x 100 = 625%

Your net ROI in this example would be 625%. That means for every ad dollar you spend, you get 6.25$ back.

If you want to avoid doing all these calculations yourself, feel free to get our free Google Ads ROI Planner. With this interactive spreadsheet, you can just type in your business' values into the table, and it will automatically calculate your forecasted ROI.

Click below to download the free ROI planner tool.