How can you know for certain if your Google Ads campaign is really profitable? Let’s look at an example company, Minty Dental, and figure it out together.
We’ll start at the beginning, with the investment amount. Let’s say Minty Dentistry set their monthly Google ads budget at $3,000 per month. That is their total monthly investment. Great, that was easy!
Let’s assume a $10 cost per click, given the dental industry. A $3,000 budget would yield 300 clicks per month. That’s 300 highly targeted clicks from people searching for a dentist in their area. Nice.
3. Conversion Rate
Let’s assume a standard 5% conversion rate. That means that 5% of their site visitors will take the next step (filling out a contact form for instance). With a 5% conversion rate, that means 15 people will convert per month on average. Not too shabby.
4. Close Rate
Not every conversion necessarily equates to a new client. In a perfect world, everyone who calls or fills out a contact form would become a customer but that just isn’t the case. Let’s assume that for our dentist, 1/3rd of the people who convert (call the office, fill out a form, book an appointment, etc.) actually become clients. That leaves us with 5 new clients per month. Seem kinda low? Let’s take a look at the next step.
5. Lifetime Value of a New Client
Years of data makes this step easier, but if you have experience in your industry you can probably estimate it pretty well too. Lifetime value assesses the total value brought to your business for each new customer or client. First let’s determine the average value of 1 appointment. Orthopedic surgeries will bring in a lot more revenue than simple cleanings. Let’s say the average revenue of an appointment is $800. Now some dental clients will book only 1 appointment and some will become loyal lifetime clients. Let’s say for Minty Dental, the average client will book 5 appointments over the course of their relationship. That makes the average lifetime value of a client $4,000 (5*$800).
6. Untracked Extra Revenue
Some things you just can’t track, like a google ads client recommending your office to a friend, a google ads client bringing in their family of 5 or a searcher seeing your ad and coming back to your website later. All of these hidden interactions bring value to your business that won’t show up on a Google Ads report.
7. Final Calculation
For our final calculation, let’s look at only the data we CAN track. If this dentist is bringing in 5 new clients per month, and the lifetime value of a new client is $4k, then they are essentially spending $3k to make $20k. That’s an ROI of greater than 500%.
Any business can be profitable on Google Ads. The key is ensuring that those 300 clicks are highly targeted and converting at a high rate. Spending the extra bit on an experienced Google Ads manager can help you achieve a better ROI on your account.
Interested in learning more? Schedule a chat with me!
Matt Kalustian is a Google Ads guru & the founder of Kalu PPC