How to Calculate Ad Spend for Your Trade Business: A Step-by-Step Guide
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Did you know that 76% of small businesses waste their Google advertising budget on ineffective campaigns?
Every dollar counts in trade businesses. A plumber, electrician, or carpenter can’t afford to throw money at advertising without a solid calculation strategy. The outcome would be similar to fixing a leak without proper tools – it simply won’t work.
Our team has helped hundreds of trade businesses calculate their ideal ad spend and maximise their return on investment. Success doesn’t come from spending more money – it comes from spending smarter.
This piece will show you our proven step-by-step process to calculate your perfect ad spend, track your results, and adjust your strategy to maximise returns. Ready to stop guessing and start growing? Let’s delve into the details!
Understanding Your Trade Business Customer Acquisition Costs
Your ideal ad spend must start with understanding how much it costs your business to acquire a customer. This baseline serves as our starting point to measure future success and helps you to optimise your marketing budget.
Industry benchmarks tell an interesting story. Trade businesses show varying customer acquisition costs (CAC). Construction businesses spend about AUD 324.15 to acquire customers organically and AUD 743.09 through paid advertising.
Your customer acquisition costs need your business to be tracking these key metrics:
- Monthly revenue
- Number of new customers acquired
- Advertising spend by channel
- Cost of resources to acquire customer
Your baseline ad spend calculation should factor in both direct costs and indirect expenses. This means looking beyond your Google Ads budget to marketing team’s salaries and creative production costs. Trade businesses typically invest 10-20% of their revenue in marketing and sales.
Calculating Your Google Ad Spend
After gaining an understanding on your customer acquisition costs, let’s calculate the effective ad spend for your trade business. To do this you’ll need to have your desired monthly revenue target, average job value, and your lead to converted job conversion rate.
1. Set Your Revenue Target
How much revenue do you want to generate each month?
Example: Assume a target revenue of $100,000.
2. Determine Your Average Job Value
What is the average revenue per job or project? You can work this out by determining what was the total revenue generated last month divided by the number of jobs completed.
Example: If the average job value is $2,000, this means:
Target Number of Jobs = Revenue Target/Average Job Value = 100,000/2,000 = 50
You’ll need 50 jobs to reach your revenue target.
3. Understand Your Sales Conversion Rate
What percentage of your leads become jobs?
Example: If your sales conversion rate is 20%, this means:
Required Leads = Target Number of Jobs/Conversion Rate = 50/0.50 = 100
You’ll need 250 leads to secure 50 jobs.
4. Website Conversion Rate
Determine how many visitors on your website turn into a customer enquiry.
In order to understand this metric you will need to have conversion tracking enabled on your website using Google Analytics and Google Tag Manager. Learn how to install and set up these here.
Example: An industry average for consumer services is 6.64%.
Our average trade clients are seeing an average conversion rate of 12%
Required Traffic = Target Number of Leads/Conversion Rate = 833.33
Using our client trade industry average you will need to attract 833.33 visitors to your website via Google Ads.
5. Calculating Your Required Ad Spend & Cost Per Lead.
In order to calculate the required adspend and your cost to acquire a customer enquiry we will need to know what searches your customers are making (keyword) and the expected cost per click (Average CPC) and click through rate (CTR) for that search.
In this instance we will use the keyword data from one of our client campaigns.
Calculate Required Ad Spend
How much should you spend on your Google Ads campaigns?
Example: If you require 833.33 visitors to your landing page and your CPC is $6.41 this means:
Required Monthly Google Ads Spend = Required Website Visitors/Cost Per Click = $5,341.67 per month
You will need to spend $5,341.67 which equates to a Google Ads daily budget of $178
Calculate Cost Per Lead (CPL)
How much does it cost to generate one lead through your Google advertising?
Example: If your Google Ad Spend is $5,341.67 and you need 100 leads this means:
Cost Per Lead = Ad Spend RequiredNumber of Leads Required = $53
Your target cost per acquiring a customer enquiry is $53
Optimising your Ad Spend to Drive Business Outcomes.
Trade businesses can avoid wasted budgets and create profitable advertising campaigns through smart ad spend calculations. A proper understanding of your customer acquisition costs combined with a strategy that focuses on improving campaign KPIs to attract your ideal customer helps build campaigns that deliver consistent returns.
Trade businesses’ results improve significantly with careful budget planning and regular performance analysis. Your campaign’s success relies on metric tracking, understanding seasonal patterns, and data-driven adjustments based on campaign data.
Note that optimal ad spend management requires ongoing attention rather than one-time calculations. Your journey starts with baseline metrics and optimal spend calculations using your business revenue targets. Regular measurement of results should become part of your business operations. This approach will steadily increase your advertising’s effectiveness over time.