How can you create a budget for SEM?

1 Define your goals

The first step to create a budget for SEM is to define your goals and how you will measure them. What do you want to achieve with your SEM campaigns? Do you want to increase traffic, leads, sales, or brand awareness? How will you track your performance and return on investment (ROI)? You need to have clear and specific goals that align with your business objectives and can be quantified with metrics such as impressions, clicks, conversions, cost per click (CPC), and cost per acquisition (CPA).

2 Analyze your competition

The next step to create a budget for SEM is to analyze your competition and how they are bidding on your target keywords. You can use tools like Google Ads Keyword Planner, Moz Keyword Explorer, or SEMrush to research the keywords that are relevant to your products or services, and see how much your competitors are paying for them. You can also check their ad copy, landing pages, and offers to see what makes them stand out or fall behind. By analyzing your competition, you can identify the gaps and opportunities in the market, and adjust your bidding strategy accordingly.

4 Optimize your ad quality

The fourth step to create a budget for SEM is to optimize your ad quality and relevance. Your ad quality affects your ad rank, which determines how often and where your ads appear on the search results pages. Your ad rank is calculated based on your bid, your quality score, and the expected impact of your ad extensions. Your quality score is based on your click-through rate (CTR), your landing page experience, and your ad relevance. To improve your ad quality, you need to write compelling and clear ad copy that matches your keywords and landing pages, use relevant and attractive ad extensions, and test and refine your ads regularly.

5 Estimate your conversion rate

The fifth step to create a budget for SEM is to estimate your conversion rate and how much you are willing to pay for each conversion. Your conversion rate is the percentage of visitors who take the desired action on your website, such as filling out a form, making a purchase, or subscribing to a newsletter. Your conversion rate depends on your offer, your landing page, and your target audience. You can use tools like Google Analytics, Unbounce, or Optimizely to track and optimize your conversion rate. To calculate how much you can afford to pay for each conversion, you need to know your average order value (AOV) and your profit margin. You can then use this formula:

CPA = AOV x Profit Margin x Conversion Rate

For example, if your AOV is $100, your profit margin is 20%, and your conversion rate is 5%, your CPA is $1. This means you can spend up to $1 to acquire a customer and still make a profit.

6 Calculate your budget

The final step to create a budget for SEM is to calculate your total budget based on your goals, your keywords, your ad quality, and your conversion rate. You can use this formula:

Budget = CPA x Desired Number of Conversions

For example, if your CPA is $1 and you want to get 100 conversions per month, your budget is $100. You can then divide your budget by the number of days in a month to get your daily budget, and adjust it as needed based on your performance and ROI. You can also use tools like Google Ads Budget Planner, Moz Budget Tool, or SEMrush Budget Tool to estimate your budget and forecast your results.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?