How much should you pay for a click?
Every click is a small bet. Work out how many clicks it takes to win one job and what that job is worth in profit, and you know the most a click can cost before you lose money. Bid below that line and every job leaves you something. Bid above it and you pay to win work for nothing.
The usual way to start with ads is to pick a daily budget, switch them on and see what happens. A fortnight later there are some enquiries and a bill, and no clear idea whether it was worth it.
There is a better starting point. Before you set a budget, work out the most a single click can cost. Everything else follows from that one number.
Why the click price matters more than the budget
A budget only tells you how quickly you spend. The click price tells you whether you are making money while you do it. Two campaigns with the same budget can be wildly different: one wins jobs at a profit, the other burns the same money for a loss, purely because of what each click costs against what it earns.
A worked example
Say your average job is worth $600 at a 40% margin, so $240 profit. Out of every 100 clicks, 5 become enquiries, and you win 40% of enquiries. That is 2 jobs from every 100 clicks, or 50 clicks to win one job. You are happy to spend half the job's profit on winning it:
| Profit per job ($600 × 40%) | $240 |
| Clicks needed to win one job | 50 |
| Break-even cost per click ($240 ÷ 50) | $4.80 |
| Your maximum at half the profit | $2.40 |
| Profit left on each job at that price | $120 |
Pay $2.40 a click and each job costs $120 in ads, leaving $120. Pay $4.80 and you make nothing. Pay more and you are paying to win work at a loss, however busy the phone gets.
What to do with your number
- Bid under it, not at it. The break-even price is the limit, not the target. Leave room so a job actually leaves you something.
- Improve the rates, not just the bid. A faster reply to enquiries and a clearer page both raise the share of clicks that become jobs, which raises the price you can afford to pay.
- Replace your guesses with real numbers. After a few weeks you will know your real click and win rates. Put them in and the ceiling gets more accurate.
- Check it against the result. Once the campaign has run, use the Marketing ROI Calculator to see what it actually brought back.
Frequently asked questions
What is a good cost per click for a trade business?
How do I find my click-to-enquiry rate?
What if my cost per click is above the break-even price?
The takeaway
Set the ceiling before you set the budget. Know the most a click can cost, bid under it, and judge the campaign by what it earns rather than how busy it feels.