"How much should I spend on Google Ads?" has no single answer, because the right budget depends on your market and your numbers. But you can get to a sensible figure with a few simple steps. This article walks through a method you can use before you spend your first dollar or when deciding whether to raise your budget.
All numbers below are examples to show the math, not predictions for your business.
Step 1: Know what a customer is worth
Start with the value of a new customer. For a one-time job, that might be the average job revenue. For repeat business, include the revenue over time. Then subtract your costs to get the profit.
Example: an average job brings $1,500 in revenue and leaves $600 in profit.
Step 2: Decide what you can afford to pay
You will not make money if you spend more to win a customer than you earn. Decide the most you can pay for a new customer while keeping a healthy profit. This is your target cost per customer.
Example: from a $600 profit, you decide you can spend up to $300 to win a customer.
Step 3: Work back to cost per lead
Not every lead becomes a customer. Estimate the share that do, based on your close rate.
Example: if one in four leads becomes a customer, a target of $300 per customer means you can spend about $75 per lead.
Step 4: Estimate the clicks needed
Clicks become leads at a conversion rate. A common range for local service websites varies widely, so use your own number if you have one, or start with a cautious guess and refine.
Example: if about one in ten clicks becomes a lead and each click costs about $7.50, then a lead costs about $75. That matches your target.
If the cost per click in your market is much higher than that, the numbers may not work unless you can improve conversion or raise your price.
Step 5: Set the monthly budget
Decide how many customers you want and work back.
Example: you want 8 new customers per month. At a $300 target cost, that suggests roughly $2,400 per month in ad spend.
You can also work forward from capacity: how many jobs can your team handle?
Step 6: Start with a test, then scale
You do not have to commit the full figure on day one. A common approach is to begin with a test budget big enough to gather real data for a few weeks, check your actual cost per lead and cost per customer, then adjust. Raise the budget gradually if the numbers hold. Our free ROAS Calculator includes budget scaling scenarios that show what might happen to your return if you spend more.
Things that affect your budget
- Competition and keyword costs. Some categories cost more per click.
- Your service area. A larger area can mean more volume but also more waste if not targeted well.
- Seasonality. Many trades have peak seasons. You may want to spend more when demand is high.
- Your website. Better conversion lowers your cost per lead.
- Your phone response. Missed calls waste spend.
- Ad quality and relevance. Good campaigns and landing pages can lower costs.
Do not forget these costs
Your budget includes ad spend, and may also include management fees, call tracking, and landing page work. Keep them separate so you can see the real cost per customer.
Avoid these budget mistakes
- Starting too small to learn anything
- Spreading money across too many campaigns
- Changing the budget every few days
- Judging by clicks instead of customers
- Cutting the budget right when the account has begun to learn
Frequently asked questions
It depends on your market. A very low budget may not generate enough data. A good provider will tell you what is realistic.
Often yes, if you have capacity and the numbers work.
Look at conversion rate, close rate, pricing, and targeting. Sometimes small fixes change the math. Other times Google is not the best channel for you.
What to do next
If you would like help building a budget around your own numbers, book a free strategy call. We will go through your customer value, close rate, and market. You can also read about our PPC advertising approach.
