Does PPC Work For Small Businesses?

You hear a lot about PPC (Paid-Per-Click), perhaps even been contacted by Google about AdWords, for small business. So, it begs to question: “Does PPC Work For Small Business?“. If I’ve had a penny for ever time I’ve been asked this question I’d have, well, a lot of pennies. Truth of the matter is it really depends on your business. I had a client approach me a few weeks ago about setting up a low-budget PPC campaign for her e-commerce website. This client sells products with about a 30% margin and the average sale price is less than $20. I told her flat out that a PPC campaign wasn’t right for her small business. In this article I will explain some things to consider to help determine if PPC may be a good fit for your small business.

4. Things to Consider Before Starting a PPC Campaign

1. What Do You Sell?

Do you sell a product or do you sell a service? Is your business cyclical, repetitive or mostly one-time transactions?

I’ve found that the small businesses selling a repetitive service tend to get the most value out of a Paid-Per-Click Campaign. Not to say that companies selling a product or a one-time service transaction can’t have a successful campaign, they just tend to not reap as many benefits. Factors that can make these business types more successful with be discussed below.

2. Where is your Target Customer?

Is your potential clientele base local to your office or are they spread out across a state, region, country, etc.? If you’re selling a product, with an e-commerce store, it may not have as great of an effect as a company who sells a service.

Take for example another client of mine who is an artist that sells custom paintings and drawings; she has sold pieces of art work all over the country BUT most of her business is in the local community. Most of her business is local because clients wanting custom pieces of artwork want to meet with her to make sure they can properly portray a work they want her to create (some which have been portraits). Does your small business have similar characteristics? Perhaps you’re a consultant or staffing company that can assist clients from anywhere BUT do you tend to have more success with face-to-face meetings? If so, PPC can work but you should focus setting up campaigns only in your local marketplace.

3. How Much is Your Average Sale & Profit Margin?

Refer back to the first example I have in the blog post about a client with an e-commerce store looking to setup a low-budget PPC Campaign. What is the average transaction or sale price? What kind of profit margin are you making on a sale or transaction?

If your transaction is only $20 and you’re making $6 you probably will be disappointed running a PPC campaign. Unless, of course, your small business is very repetitive. Alternatively, if your business does high unit volumes making 30% it may also still be a fit. Using our example, if you typically sell a dozen units per transaction, making $6/piece, you may find PPC to be valuable.

The last thing you want to do in PPC if set yourself up to fail by paying out more than you make per sale. Do your research and see what the going average Cost-Per-Click (CPC) is for your targeted keywords. If you have to spend $2 per click and only make $6 you will not be able to convert enough clicks and will lose money, plan and simple!

4. What is your Budget Relative to Google’s Suggestion?

(For the purpose of this post I am using Google Adwords, but this applies to Microsoft Ads for Bing and Yahoo, as well.)

First, determine your budget available to spend on a PPC campaign. Next, do your research to see how much Google suggests you spend given your target keywords and location selection. Are you close to their suggestion? If not, do you have more in your budget or less? If you have less, I want you to consider how much variance you have. If, for example, you are looking to spend $20 a day and Google suggests that you should be spending $100 I would strong consider revising your keyword list, location selection, or how often you run the campaign in any given month.

What to do when your PPC budget is lower than Google suggests?

I don’t advise moving forward with a drastically lower daily budget suggestion than Google suggests without making run time modification. Yes, it’s true, you can run a PPC with as little of a budget as you want BUT it doesn’t mean you’ll be successful. Let’s use the example of $20 daily available budget versus a $100 suggestion; why shouldn’t you do this?

  • Conversion rates are typically around 5%
  • You automatically cut out 80% of the potential clicks

So, if you have an average $2 CPC (Cost-Per-Click) you potentially have 50 clicks in any given day (assuming Google’s $100 day suggestion) with 2.5 leading to a conversion. Now, lets take your $20 budget. Since you are only spending 20% of the suggestion you’re missing out on 40 of those potential clicks, drastically reducing your chances of receiving the click that converts. Do you like these odds? I personally wouldn’t count on my ad to always winning those 2.5 clicks is I only have 10 opportunities!

Don’t panic too much if you’re faced with this situation, read my article “What To Do When My PPC Budget Is Lower Than Google’s Suggestion?” for some detailed suggestions on how still run an effective campaign with a lower budget than your competition.

As always, I hope that this article has given you some points to consider. If you have any questions please feel free to Contact Me or leave a comment below.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *