Google Ads Formula Calculator
A free video tutorial from Isaac Rudansky
Certified Google AdWords Pro |Co-founder of AdVenture Media
4.7 instructor rating • 4 courses • 214,214 students
Learn more from the full courseUltimate Google Ads Training 2021: Profit with Pay Per Click
Google Ads 2021: How our clients have transformed their sales using Google Ads & get your Google Ads certification!
24:39:07 of on-demand video • Updated October 2021
- Drive Consistent, Round-The-Clock Traffic To Your Website or Landing Page
- Use Conversion Tracking To Determine The Value Of Your Ad Campaigns
- Create, Develop and Optimize Your Own Profitable Google AdWords Campaigns
- Remarket to Your Previous Website Visitors To Get Them Coming Back To Your Site
- Advertise Your Products And Services Online Effectively
- Monetize The More Than 6 Billion Daily Searches On Google
- Boost Traffic and Increase Sales to Your Website
English [Auto] How do Google ads fans and welcome back. I was going to jump in right away and start talking about Google ads, what it is where ads show up some of the basic fundamentals. But I want to first actually start by giving you my free AdWords formula calculator or Google Apps for Formula Calculator. I think it's a really helpful tool and it's something that you'll be able to reference as you go through the course. Have you ever asked yourself or has a client ever asked you, what's the most I can pay for a form submission based on my results, based on the amount of money I make in the client, based on my conversion rate and AdWords, how much can I pay for a conversion? And that's a pretty complicated question, because even if you make a thousand dollars per sale, let's say doesn't mean you could pay a thousand dollars per form submission. Right. Because not every form submission turns into a sale. So you need some way of being able to quickly answer your client that that that question or answer that question for your client. How much money do I make when someone clicks my ad? Another good question and a very, very popular question and a question that all of you should be able to answer for your own business or for your client's business in your sleep. What's the minimum, our OAS as return on ad spend? I need to break even. At what point am I losing money? At one point am I making money in the campaigns? And before I show you my my formulas calculator, which you're going to have, and you'll be able to duplicate the tagline or the motto of our business adventure media is salesmanship in pixels. And the reason? Well, it's sort of a long story. It goes back to Albert Lasker, who is the father of modern advertising back. He lived in the he was sort of popular in the nineteen twenty nineteen thirties. He died in the late 40s. He related to advertising a salesmanship in print. And that was something which really struck a chord with him because he understood that what we're trying to do with advertising is just salesmanship magnified in print to thousands of people. And salesmanship back then meant basically door to door canvassers selling things at a profit and all the tools and all the techniques that a door to door sales person had to evaluate what's the most profitable route, how much money to sell these items for, what are my expenses? What type of psychological technique is going to work the best here, but fundamentally it came down to, again, salesmanship, which at its core was selling profitably. And in order to be successful at an advertising campaign, in order before you ever say that your AdWords campaign or you Google ads campaign was a success, you need to be able to show that you're profitable. And in order to get to the point where you're profitable and being able to show that you're profitable, you need to know your metrics. You need to know return on investment. You need to know your profit margin for your products, whether it's your own or your clients. And this formulas calculator is going to help you calculate some very key important metrics as you're assessing the health and the performance of your campaign. Let me just jump in here. I'm going to give you access to this sheet and you need to duplicate it. I literally get like I've gotten over ten thousand requests for access to this sheet. Don't request access to the sheet, because if I if I give you access to this base sheet, then if you modify something, it's going to modify it for everybody else. So this is a locked sheet, but you can make a copy of it for yourself and make as many copies as you like and play around with it as much as you'd like. But just don't request access because I'm not going I'm going to unfortunately deny it just for the sake of everybody else having a good experience. So in this sheet, we have a few different key formulas. And I'm going to add to this sheet as time goes on. And if you guys have any specific requests for a useful formula, please ask me because I could do it really quickly. I'm happy if you guys have a specific formula or a specific metric you'd like to have a calculation for, please just let me know and I'll be happy to add it to this to the sheet. So the first one up here is determine your Maxxie bit, right? So that's an important thing I'm going to do. And we're going to have more lectures that really go into detail how three or four different formulas for getting to what your Maxxie bid should be. But we could go at it in different ways. So if you know your revenue per click and your desired return on outspend, which you'll need to get from different formulas, you could get your break, even Maxxie click. So let's say my revenue per click is ten dollars. Every time I get a click, I earn ten dollars of revenue. That's the that's what the data shows me. My ads account. I need a three hundred fifty percent ROIC then two dollars and eighty six cents then looks like a pay per click. Right. Perfect. It's beautiful. It's scientific. Now how would you know your revenue per click. OK, so down here I have a formula for determining your revenue per click. So total conversion value and again you need to have conversion tracking set up in your account in order to know your total conversion value. So say over the course of thirty days I generate a twelve thousand dollars in revenue total conversion value from my campaigns and I look into my Google ads account and I pull my total amount of clicks and I'm going to show you at the campaign level the ad level and the keyword level, how to find how many clicks you've got. But say, for example, I got seven hundred and sixty five clicks for that twelve thousand dollars in conversion value. So my revenue per click is fifty dollars and sixty nine cents every single time somebody clicks every every single time. In the last thirty days somebody clicked an ad. I generated an average of fifteen dollars and sixty nine cents of conversion of course of revenue of course some of clicks, some clicks didn't turn into a conversion so that was zero. But on average every click accounted for fifty dollars and sixty nine cents. That way I can go back up here and say oh my revenue per click is fifteen sixty nine so I might break even CPC is for forty eight. I cannot spend more than four forty eight on a click determining break even. Yes. This is a big one. You need to know your profit margin in order to know what your return on investment has to be. You need to know what your average profit margin is. So if I have a ten percent profit margin for every ten dollars in sales, I only earn a dollar. I need a thousand percent. RASM means I need a 10x return on that spend. Let's say my average profit margin is twenty five cents. Twenty five percent rather. So I need a four hundred percent. If I'm earning 90 percent profit margins on my products, I'm only I only have an expensive 10 percent. You're operating a really, really high profit margin business. Then you only need to have it one hundred and eleven point one percent return on assets. You have a lot more wiggle room in your campaigns. In that case, moving down to true cost per conversion. Four forms. This is one of my favorite favorite formulas. So I look at my cost per conversion and AdWords, so say my my cost per conversion and AdWords every single time. And let's say my, my. The conversion action that I was tracking was a form submission. OK, I have I'm a legion business. I'm a service, I'm a service business. This is sort of like what type of business we are as an agency. But let's say you're a plumber or let's say you're a school. Right. Or any any any business where the conversion action on the website is submitting a form or even a phone call. Salzgeber, anything other than e-commerce, let's say so. My per conversion and AdWords. And again, we're assuming that my conversion tracking is set up properly. So I spent ninety eight dollars to get a form submission on average or whatever historical time frame I'm looking at, whether it be 30 days, 60 days, 90 days. I like to look for these types of things. I'd like to look at least 90 days with accurate data. So I'd say my cost per conversion was ninety dollars. But what was my sales team conversion rate? Right. So let's say my sales team only converted one out of ten leads, so ten percent. So my true cost per conversion, my true cost per deal, my true cost per customer was nine hundred dollars say they they converted sixty eight percent. Leads, then it drastically drops down my true cost, but conversion was only one hundred and forty four dollars. Still more than ninety eight dollars. So this assumes, again, all of these formulas assume you have to have some good data somewhere. You can't have a good output without any good input. So you need to know you're for this formula. You need to know what your cost of conversion and AdWords was. You also need to know your sales team conversion rate is. And those are two relatively easy things to track. If you're if you're worth your weight as a business person or if you're working at a business or you're doing your own business or this is for your clients, you should know the sales team conversion rate and you should know your cost per conversion. And AdWords, another one of my all time favorite is break even CPA for forms. What's the most I can pay for a form of mission. Right, so what's my break? Even CPA four forms. So I need to know my average profit per conversion rate. That's something that I need to know. So how much money do I make? And when I say conversion, I mean when I close a lead. So let's say let's say I'm a personal injury attorney and yeah, it ranges between five hundred or ten. Ten thousand dollars. Of course it can go much more or not a person return to a regular attorney, traffic attorney so I can make between 5000 and 10000. So I know my average profit conversion is somewhere seventy five hundred dollars let's say. OK, now every time I get a lead on my website for my, for my traffic, my traffic attorney website, you know, there these leads are submitting them to all different types of attorneys and it's very hard to close a deal. And my sale seems not perfect and I'm not perfect. My website is not perfect. So I only close, let's say five percent. Right, is point. It's five percent. So that means my break even cost per conversion is three hundred and seventy five dollars. OK, I'm able to pay no more than three hundred and seventy five dollars to get a conversion if my average profit per deal is seventy five hundred dollars. Now if my if, if I was in a business where my average profit Baddiel was fifty grand. Right. That I could pay twenty five hundred dollars assuming that five percent rate if if my average profit conversion, if my average profit per conversion per deal was thirty five thousand fifty dollars and my sales team conversion rate was forty percent. Right. I'm sorry if my sales team conversion rate was forty percent then I can pay one hundred and forty dollars per performance in AdWords. Right. That's my breakeven. So if I'm, if I'm in essence in simple English in this scenario, if I'm spending less than one hundred and forty dollars on forms missions, I'm making money. If I'm spending more than one hundred and forty dollars, I'm losing money. And now you're starting to get scientific. Now you can get on the phone with a client and actually sound intelligent. Now you're able to actually go to your boss and sound intelligent and show him real numbers. Now you're able to look at your own business and know am I making money, am I losing money? How much can I pay to get these forms machines? How much can I pay to get these phone calls in Google ads from Google ads, campaigns? And then you have getting your CPC from from cost per thousand impressions and click the rate. It's just another formula for getting what your Mac CPC should be. CPM refers to cost per thousand impressions. Again, you'd have to get this data from your Google ads account. What you can so say your click rate was five percent cost per thousand persons was ten dollars. That would give you a CPC of twenty dollars. It's just another way of finding your actual CPC. So here's four or five different formulas that you could use. And over here to show you a quick brief Arawa and R.E calculation, the difference between our line are we asked and to get into that in more detail. But I just want to walk you through some of these formulas. This is probably for a lot of you, this is more advanced than what you need to get right now, because you might not and you might not have ever created a Google account in your life. Right. But I want you to know that you're going to have this formula sheet by your side. It's going to be an invaluable resource for you as you progressed to this course. It's for you. I want you to enjoy it. I want you to build out more formulas in your own version of the sheet. And if, again, if you do have any formulas that you'd like me to build in there for you, I have a ton of formulas that we use. I'm happy to build in some additional ones and it doesn't take much time and it doesn't take much time for me to do it. I'm happy to help out. So use it, keep it as a reference. And I think it's going to be very, very helpful. Even if you use one of these formulas the next time you're on the phone with a client, I think you'll already be in a much better position because you'll start realizing to talk the point here, start talking and relating to your advertising from profitability. Let's just be honest, right? Hopefully our lives are more multidimensional. And this I have a beautiful wife. I have a beautiful son. I have lots of different things I like doing. I love skiing. I that's my favorite time of year. This is it's it's it's October now and ski season is right around the corner. I can't wait to go skiing. I play music, but let's just call a spade a spade. Business is about making money. Your advertising campaigns are they need to make money. They need to be profitable. That's what everyone expects. That's what this is about. Your business is I sort of view it as a little bit of a machine where there's money in and you need to have more money coming on the other side, right? Yeah. You could invest in this and that, but OK. And if you look at the long term horizon, there should be money in and more money on the other side and these formulas and starting to even think about it in that way and understanding that there's no other end goal but that getting good at Google ads, watching this course, listening to me talk for this amount of time, which obviously is going to be painful to anybody. Just ask my my. Family members and my makeup, my team and employees, it it's just so you could make more money from advertising than you're spending on the advertising, that's the whole point of perceiving these formulas in that context. Understanding now going back into your Google account and your other advertising efforts and maybe reassessing a little bit from that perspective. Evaluating success, there's nothing there's no gray there's really no gray area in advertising, it's it's and it's not about winning awards for creativity. It's not about how cool a landing page looks. It's about how well it converts. How much money does it make. Right. So there's either failure and there's success. There's nothing in between. In my mind, when it comes to advertising, either you're making money, you're making more money in sales and you're spending your positive ROIC. You're successful. It's as successful as it possibly can be. Yeah. And if it makes more money, more money, greater, if you're making less money from your ad campaigns over the course of a lifetime. Now, I don't mean linnear necessarily because, of course, a customer could be a customer, could could earn you one hundred dollars today. But over the course of three years, that customer could earn you nine hundred dollars. So you need to look at the full lifetime value LTV of a client. But if overall, if over the lifetime of whatever your you're evaluating, you're spending more on your marketing and advertising than you are making, then your campaigns are failing. It's not OK. It's not. Try harder next time. They're failing. And if you if they're making more money, they're succeeding and these funds will help you start evaluating your whole advertising ecosystem in that context, and I hope you find it incredibly useful. I know that when we train new people in, they use these formulas all the time. I know that my clients enjoy talking about these formulas when you're able to talk about them in actual plain English. It's a really important thing. So that's that. Enjoy the sheet. I will see you guys very soon in the very next lecture when we talk about what in the world Google ads even is 10 years from now.