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Do the math to figure out your profit on your average sale and how many visitors it takes to close a sale, on average. Once you know those, you can figure out how much you can afford to bid for traffic and still turn a profit.
The task of identifying relevant search phrases to bid on is worth careful research. You'll likely be adding to your list for weeks as you think of new searches.
Try to find niches that people may be looking for that are not heavily advertised to extend the usefulness of your budget. Also make sure that your site is user friendly so that potential clients can order easily. Good luck.
We use AdWords extensively and it pays for itself over and over.
I've seen sites that can't spend more than 1k a month because thats all the relative searches for that product, if they spent more, it'd be wasted money.
If you can make money spending 5k a month, then you can still make money spending $500, just a bit less. Your conversion rate doesn't change by how much you spend, it changes on the bid KW and your site's ability to convert.
Open the Adwords account and see how much you need to bid to have your ad on the first page for the appropriate brand name and related terms.
This will give a useful benchmark, but don't let the desire to be on the front page seduce you into bidding too much. Overbidding can drain your wallet in a hurry.
What matters most is to keep your bids within the limit that will turn a profit for you. Set your bids accordingly, and let your ads deliver whatever they can deliver. If that puts you on the front page, great, but if not, take what you can get and leave it at that.
It's possible to get more mileage from your Adwords campaigns without spending more money, if you learn what tweaks will improve your overall clickthrough rates. CTR matters because Adwords gives better exposure to ads with better CTR, sometimes even to the point of ranking your ad ahead of a competitor who is bidding more. You don't always have to outspend your competitor to get ahead of her!
This is a dynamic process. Once it's running, you'll need to use your results to tweak your keywords, then your ads, then your landing pages. and so one. You have to keep doing this because in many cases it's the bizarre little things you stumble across that work.
That's the overview of the steps you need to follow. Each step is huge in itself, but you may still be able to do OK as an independent playing around after hours. This is definitely an advertising arena that allows you to put some work into it yourself and see results.