Let’s say the goal for your online business is to generate $1,000 in cash every month. Given this goal, how much should you invest to market your site? Or do you just spend what you can and hope for the best? Unfortunately, too many people I talk to are not doing the marketing math to realize that hoping is not enough.

Let’s do some easy calculations to understand why.

First you need to answer a few questions:

• How much money do you make per order? Just multiply your profit margin by your average order size and this is how much you’ll make per order. For example, if you expect to make a 50% profit on every order and your average order is $100 then you’ll make $50 per order.

• What’s your website conversion rate? Don’t expect more than one out of every 100 visitors to place an order. An order could come from someone using your online shopping cart or seeing your phone number on the site and calling in their order. Either way, it means you have a “conversion rate” of 1% (1 order out of 100 visitors) which is pretty typical these days. And when you’re first starting up, your website conversion rate could be a lot less than 1%.

• How much are you paying for each website visitor? Whether you advertise using paid search or banners, you want prospects to “click” your ad and come to your website. To keep things simple, let’s assume you pay Google $2 for each of these clicks. This means your cost per website visitor is $2. (Generally speaking, you should expect to pay Google $2 to $4 per click)

Now we’re ready to do the math:

1. Cash goal: $1,000 (my example)
2. Profits per order: $50 (per our assumptions)
3. Orders needed: 20 (20 orders * $50 profit = $1,000 cash goal)
4. Conversion rate: 1% (1 out of 100 visitors will order)
5. Number of visitors required: 2,000 (20 orders / 1% conversion rate)
6. Cost per visitor: $2 (cost per click)
7. Marketing spend needed: $4,000 (2,000 visitors * $2 per visitor)

Once you’ve figured out the math you’ll come to an important conclusion: in my example, you have to spend $4,000 on marketing your website to generate $1,000 in cash. What’s the bottom line? You’ll actually lose $3,000 every month!

Or said another way, it’s almost impossible to make money paying Google to drive traffic to your website. Does this mean that all is lost and you’ll never make money with your online business? Of course not! There are a number of ways to more cost-effectively market your site than handing over every dollar to Google.

For example, search engine optimization can help you generate natural (free) search traffic to your website. You can also submit your site to online yellow pages and directories that make it easy for prospects to find your business. And when you make your first customers happy, they’ll become a “volunteer sales force” and tell everyone to come check out your site!

Your website’s up and you’re ready to begin marketing it. And what does everyone tell you? Advertise with Google. But be afraid… very afraid! Here’s a quick story to convince you why.

Someone I know set up a Google account to start advertising his new website. He put down his credit card for $1,000 and started the Google machine… figuring the money would last at least a month. The next day he gets an email saying he’s already used up the $1,000 and must approve more on his credit card to keep his ad up and running. And guess what? He didn’t even get one customer or prospect from the traffic Google sent. That’s right, $1,000 gone in a single day and no orders or leads generated. Welcome to Google advertising!

Now in all fairness, Google is a great advertising service that will cost-effectively generate lots of qualified visitors to your website… if you know what you’re doing!

Here are some things to keep in mind when considering advertising with Google:

• Google is for professionals only. Those able to compete against Fortune 1000 marketers and search engine consultants for the best ad pricing. It’s definitely not for newbies learning the ropes… unless your willing to pay way too much for each visitor to your website.

• Test your ads anywhere but Google. Google is a very expensive place to test your ads. Sure it’s “pay per click” but what you pay also takes into account how well your ad performs relative to comparable ads. Popular ads that generate lots of clicks will cost much less than unpopular ads. So test your ads using other search networks like Yahoo!, Microsoft, or LookSmart. And only bring your best performing ads to run on Google.

• Judge success by results not just clicks. Always remember, it’s about the orders, phone calls, and leads that result from the clicks. So even if Google is generating lots of clicks… you still need those visitors to turn into the results you care about. If they do then be happy with what you’re paying Google… otherwise, you’re paying too much!

• Limit your risk with spending caps. Use daily spending limit caps when you first start your advertising programs. A good place to start is a $50 daily cap. And as you get comfortable with how your ad is performing, you can then move to a monthly spending cap. This guarantees you’ll never be surprised by blowing your whole budget in a single day!

• Become an expert or hire a professional. Don’t kid yourself. You really only have those two choices. Otherwise, you’ll spend way too much and still be unhappy with the results. Not sure where to find a professional? Do a search for “search engine marketing” plus your location (e.g., San Francisco). You’ll get lots of choices in the search results. Just make sure and talk to at least three firms, tell them your budget and objectives, ask for pricing and references… and then check the references!