To properly evaluate your Google Ads campaigns performance and path to profitability, knowing your numbers up and down the funnel is critical. A core benefit of running a Google Ads search campaign is that it provides a lot of data, all of which paints a clear picture on how effectively your campaign is working.
Each step -- from the budget you invest to clicks you convert to new inquiries -- contributes to the bottom line. And as the saying goes, you cannot manage what you don’t measure. Keeping a close eye on the funnel will help you identify areas that are meeting expectations and/or where the campaign may be underperforming and opportunities for improvement exist. What follows is the same process we use at my firm to evaluate campaign performance.
The bottom line: incremental improvement at any stage of the funnel will result in greater profitability.
New Client Value
Before breaking down the stages of the funnel, we need to know one important number: average client value (also known as ACV or LTV). What is a new client worth to the firm in new revenue (and profit after expenses)? There can be a range of course. But it is necessary to come up with an estimated average. And I recommend being conservative. Ultimately the value of a new client dictates how much you feasibly can spend to acquire that new client... profitably.
(Note: If you don’t know this number, stop here. Don’t pass go, or bother reading the rest of the article. Since the goal of this campaign is to make money, we need to know how much money each new client is going to be worth to your firm before we can go any further.)
With the average value of a new client in mind, let’s look at each stage of the campaign funnel, from top to bottom, and examine the key metrics that affect performance and new client acquisition. Each step along the way plays a role in contributing to your campaign objective of profitably generating new clients and sales revenue. And while running a successful Google Ads campaign at each of the stages covered can be complex (I wrote a detailed article on that here), the goal is to understand how to evaluate your funnel and which numbers deserve attention.
The first step at the top of the campaign funnel is the advertising budget. This is simply how much money is going to be spent over a specific timeframe.
Essentially, this is your financial investment in the campaign. And like any business investment, the goal is to generate a positive return on that investment (ROI). When all is said and done, we will subtract the budget spent from the income generated to determine the campaign’s profitability or ROI.
Additionally, the budget size will determine the amount of activity the campaign can generate within the market that you are targeting. The larger the ad budget, the more opportunities or impressions (the number of times your ad is viewed by a user) your campaign will have to reach your desired audience in your market.
Clicks and the Cost of Advertising
With any ad campaign, you need to understand the cost basis of your campaign. For Google Search Ads, the cost structure is straightforward. It works on a cost-per-click (CPC) model, also known as pay-per-click (PPC). (Note: there are a variety of different bidding models within Google Ads. But for the purposes of this article, we will use CPC.) For newcomers, this means that while your ads may show up in Google’s search results (impressions), you are not charged unless a user clicks the ad. Hence, cost, per click.
So how much does it cost when someone clicks on one of your ads? Well, this is one metric you need to acutely understand and monitor regularly. Cost per click can vary widely from one practice area and market to another. For less competitive practice areas in smaller markets, clicks can be under $10, while competitive practice areas (like personal injury) in large markets can be north of $200. Yes, per click.
But don’t let the average cost per click scare you. Even the extremely high ones. Not that the average cost per click isn’t an important metric. It is critical. However, the analysis that follows will help you understand whether other factors contribute to a profitable outcome, and ultimately if costs can be justified.
Even in very competitive markets with extremely high average CPC, there’s potentially money (even good money) to be made. But you need to track all of your funnel metrics to ensure profitability.
Whatever the average cost per click is for your practice area, make sure you know it, and how it stacks up in your market. Your average CPC, coupled with your budget, is going to determine how many clicks (or traffic) you will be able to buy and acquire the new clients you’re after.
While the goal is to generate new clients and sales revenue for your firm, at its core a Google Ads campaign is a lead generation effort. Every new lead produced is an opportunity to qualify and sign up a potential new client.
As we’ve examined so far, further up the funnel you are investing money to present your ads to your target audience and generate engagement (clicks). Having done that effectively, the question becomes: how many of the clicks you are paying for produce new leads or potential new client inquiries?
Conversion rate (expressed as a percentage) is a critical metric in your campaign funnel. The idea is simple: the more clicks that turn into prospective new client inquiries, the more opportunities you will have to sign up new clients.
Conversion rate is one of the most pivotal metrics in the entire campaign, and can be the difference between making and losing money. This is especially true in competitive, high CPC campaigns like personal injury. Keep an eye on this number, and make a great effort to ensure you have the highest conversion rate possible.
Pro tip: set yourself up for success and make sure you are using dedicated landing pages for all of your campaigns.
At this point in the funnel, not only do you want to track your conversion rate, but also calculate your average cost per lead. In other words, what is it costing to generate a new inquiry from the campaign? To calculate, take the total budget spent and divide it by the number of raw leads you’ve generated.
While a campaign may be effective at generating new leads, it is critical that the leads are actually good quality. Otherwise the campaign will not be successful. So it is important that you consistently evaluate this metric.
Calculate what percentage of the total new leads you receive are sales qualified prospects that fit the profile of a potential new client that you would like to acquire. And on average, what is it costing to generate a qualified lead?
What constitutes a good lead? Every practice area and firm will have different criteria to determine what qualifies as a good lead. But let me give you an example. Say you are a personal injury firm targeting car accident cases. A call from someone looking for a divorce lawyer isn’t just an unqualified lead; it is complete unrelated garbage (this should rarely, if ever, happen). An unqualified lead would be someone who was actually searching for a car accident lawyer, but was at-fault or not injured or uninsured; and ultimately does not represent a viable case.
Invariably every campaign is going to generate some amount of unqualified leads. That’s just the nature of advertising in Google. Just know what your number is and that too many unqualified leads can easily sink a campaign.
Sales & Acquisition
A steady flow of qualified leads brings us to the next stage of the funnel: sales and client acquisition. Like any other business, a law firm needs to be effective at selling its services to qualified prospects, and signing up new clients! All of the money and effort further up in the funnel come down to this step. The better a firm is at this, the higher the return on their advertising investment.
This is the final step in the campaign funnel. Any firm running a Google Ads campaign must have a highly effective system (intake, follow-up, nurturing, etc...) and a well-trained team to convert qualified opportunities into new clients. If your firm cannot consistently do this well, the ad campaign will be a waste of money, and probably not worth spending money on.
Smart, savvy firms understand that this is a critical point of the funnel that drives success and profitability, and are constantly evaluating and improving their intake processes and training their team.
Finally, calculate your cost per acquisition. On average what does it cost to generate a new client with the campaign? Based on the average value of a new client, you should have a good idea where this number needs to be in order to be profitable.
ROI and Profit
We’ve looked at each stage of the funnel from top (budget) to bottom (income), and the different factors and related metrics that contribute to a campaign’s performance. Lastly, but most importantly, let's put everything together to calculate the campaign's return on investment.
Pick a time frame (month, quarter, year, etc.). How much did you spend? How many clients did you acquire? And what is the average revenue (projected or actual) that each client is worth? From there you can calculate the difference between what you spent and what you earned, as a dollar amount and percentage to determine your gross profit.
As we said at the beginning, the campaign objective is to acquire new clients that will generate new revenue (and profit) for your firm. Make sure to regularly run this analysis and calculate your campaign’s ROI. But also take it a step further. Evaluate your funnel metrics to determine if there are opportunities for incremental improvement that will produce additional profitability.