This article was originally published at HoodWebManagement.com in Nov 2012 and was migrated here in May 2013.

For a small business needing an immediate source of traffic and potential customers and leads, PPC is an essential tool. But like any tool, PPC is much more useful when you learn to use it correctly. Here are 8 basics we use with our small business PPC management clients that all small businesses should consider before getting started.

1 – Figuring Out Your Budget

Deciding how much to spend could be the hardest part for a beginner. You should start with a good handle on how much you’re willing to spend per month, while knowing in the back of your mind that you’ll make some mistakes upfront and “lose” some of the money you spend. So, in the beginning, don’t spend more than you can afford to comfortably lose. Once you know what you’re willing to spend on a monthly basis, divide that amount by 30 and that will be your daily budget for the campaign.

Gambling on PPC

2 – Figuring Out Your Cost Per Click (CPC)

So the next step is figuring out how much you’re willing to pay per click. This metric is called cost per click, or CPC for short. Early on this is going to be difficult, because there’s a number of variables in play that you’re not going to know yet. The rough formula that you’ll be optimizing over time is this one:

Figure our your average revenue per sale (e.g. $500)

Figure out your average cost of goods per sale (e.g. $300)

Which leaves you with your average profit per sale (e.g. $200)

From your profit per sale, figure out how much you’re willing to budget per sale (e.g. $180)

Figure out your conversion rate (e.g. 2.5%)

Multiply your budget per sale by your conversion rate to find out your maximum cost per click (CPC) (e.g. $4.50)

Let’s walk through that one more time:

You spend $300 on labor and materials to provide a service that sells for $500. For the sake of simplifying this example, let’s pretend that the $300 includes both fixed and variable costs. So your profit per sale is $200.

Your total profit per sale is also the most you should spend to get one sale. You wouldn’t spend $250 on advertising to get one sale worth $200 in profit, right?

So in this example, we want to spend less than $200 on PPC ads in order to produce one sale.  At this point you need to decide on a buffer. Are you comfortable spending $180 to get a $200 profit? Or would you be more comfortable spending $100 to get a $200 profit? Early on, this is going to depend on your personal comfort level. I’d suggest staying conservative and getting more aggressive with your numbers as you get more comfortable with PPC in general.

Our conversion rate going to be the hardest number to calculate for your first PPC campaign. Your conversion rate is the percentage of website visitors that will purchase our product or service. A conversion rate of 2.5% would mean that for every 40 visitors to our site, 1 of them converts to a sale. When we multiply our PPC budget per sale (let’s say we’re comfortable spending up to $180 per sale) by our conversion rate (let’s say it’s 2.5%), we now know that we can spend up to $4.50 per click ($180 x 2.5%) and still produce profitable sales. 

Note: Your maximum CPC is not necessarily the amount you’ll spend on every click. Many times your clicks will be cheaper. The maximum CPC is just like a bid in a silent auction where the highest bidder pays a price slightly above the second highest bidder.

Adwords Campaign Screenshot

3 – Figuring Out Your Keywords

There’s a temptation to list every service you offer and every keyword variation you can think of right off the bat. Don’t do it. Start with a single service line, and focus on the keywords that you think are most likely to convert into a sale. You can always add more keywords to test later – for now we want to focus on a small enough handful that you can manage them all comfortably. Also, don’t be afraid to get specific. If “bathroom remodels” produce more profit for your construction business than other types of remodels, start with that before you start targeting broader terms like “remodels”.

If you’re not sure what keywords someone might use to search for your business, start playing with the Google Adwords Keyword Tool. Enter a few terms and click search. You should get a variety of results – select the best options and focus on those.

Learn More: Read the Google Adwords Guide to Building Better Keyword Lists.

Adwords Keyword Tool for PPC

4 – Using Negative Keywords to Improve Conversion Rates

If you’re running a landscaping business, do you want to be buying clicks from people searching for “cheap landscaping companies” or people looking for “do it yourself landscaping“? Probably not, which is why we use negative keywords to remove certain types of searches we don’t want. Here’s some examples of types of negative keywords that may produce poor quality clicks for your business:

  • Price: cheap, free, bargain, inexpensive, overstock
  • Poor Quality: worst, scam, bad
  • Job Seekers: jobs, careers, hiring, internships
  • DIY & References: how to, diagram, examples, home made, diy, do it yourself
  • Education: classes, course, training, program, university

Learn More: Click here to find a much longer list of 200+ negative keywords to consider for B2B PPC.

Negative Keywords in a PPC Campaign

5 – Writing Your Ad Copy

There are entire books written about the copywriting you use for ad headlines and how to go about testing it, but here’s a few tips to start with:

  1. Include the keyword you’re targeting in the headline. Searchers will be on the lookout for that keyword phrase, and it shows up as bold if it’s in your headline.
  2. Try to include some sort of feature or benefit, such as ‘free consultation” or “expert” or “winter special”.
  3. Use proper capitalization, and test whether you capitalize the first word of the line or the entire line of text (Like this example OR Like This Example)
  4. Try starting with 3-6 version of your ad at first. Avoid the temptation to test 20 different versions – you won’t have any idea what to do with all of them.

Learn More: Take a look at PPC Hero’s PPC Ad Copy Writing for Beginners articles to learn more about writing better ad copy.

6 – What Page to Send Visitors To

Most of the time, you’ll want to send PPC visitors somewhere other than your homepage. A good start is to send them to your service page for that keyword. An even better solution is to set up a landing page, dedicated to that service, that encourages the visitor to do what you want them to do (typically call you on the phone, or fill out a contact form).

You can create the landing page on your own, hire someone to do it, or you can use paid services like Unbounce that help you create and optimize landing pages without having to edit your own site.

Learn More: To learn more about landing page basics, take a look at KISSMetrics infographic on the Anatomy of a Perfect Landing Page.

Elements of a Perfect Landing Page

7 – Make Sure You Have Google Analytics Installed

You’ll be able to track some data in Google Adwords, such as which ads generate more clicks, and how much clicks cost for different keywords. But, the data you really need to know is how many of those clicks get to your website and buy something or contact you for more information. You can’t do that unless you have Google Analytics installed. It’s free to use, and fairly easy to install if you’re comfortable editing your own site.

Once you’ve got Google Analytics installed, Google Adwords should be set by default to add tracking codes that Google Analytics can read and use to tell you what keyword site visitors used to find your page. You can also see how long they spent on the site, what pages they looked at, and more advanced data once you dive deeper.

I’d also recommend having an experienced Google Analytics user set up Goal tracking on your site. Goal tracking can be used to figure out which site visitors complete your contact form, purchase a product if you have a shopping cart, or even which customers call you if you opt for a paid phone tracking solution (contact us if you want to learn more about that).

Google Analytics Visits by Channel

8 – Use Geographic Targeting to Pick Your Best Clients

There are tons of approaches to targeting users geographically – by zip code, city, county, state, radius, and more. Pick the one that makes the most sense and covers the area your clients are most likely to come from, and focus there.

Geo-targeting PPC Traffic

More PPC Basic Resources:

Looking to dive deeper? Here’s a few of our favorite resources for beginners:

Photo credits: Poker Chips by yashima