It’s one of the first questions almost every business owner asks before starting with Google Ads, and it’s also one of the hardest to answer honestly, because “it depends” is true but not very helpful. We get asked this at least once a week, usually by someone who’s been quoted wildly different figures by different agencies, or who has a number in mind that’s really just a guess based on what a competitor might be spending. There is a proper way to work out a Google Ads budget, and it starts with your own numbers rather than a rule of thumb.
Why there isn’t one right answer
A trades business in Gloucester quoting on jobs worth several thousand pounds can justify a very different budget to a shop selling a £20 product, even if both are in the “local business” category. What matters isn’t your turnover or your industry in isolation, it’s what a new customer is actually worth to you, how many of them you need, and how much competition there is for the searches you want to appear for. Two businesses on the same high street can have completely different sensible budgets, and neither of them is wrong.
That’s why we’re always a bit wary of agencies that quote a budget before they’ve asked a single question about the business. A number plucked out of the air isn’t a strategy, it’s a guess dressed up as one.
Start with what a customer is worth to you
Before thinking about clicks or impressions, work out two things: your average order or job value, and roughly what percentage of enquiries turn into paying customers. If a typical job is worth £800 and around a quarter of enquiries convert, you know that four enquiries are worth £800 to you on average, which means you can afford to spend up to £200 to win a customer and still come out ahead — more if you also value repeat business or referrals, which most local trades and services get plenty of.
This is the number that should actually drive your budget, not a fixed percentage of turnover pulled from a marketing textbook. A business with a high customer lifetime value can justify a much higher cost per enquiry than one selling a single low-margin product, and that’s fine — it just means the budget needs to reflect it.
Cost per click varies hugely by industry
Once you know what you can afford to pay for an enquiry, the next piece of the puzzle is how much clicks actually cost in your market. This varies enormously. Some home services and legal-adjacent searches can cost several pounds per click because the competition is fierce and the value of a customer is high. Other, more niche or local searches might cost well under a pound. There’s no shortcut here beyond looking at your own account data (or, if you’re just starting out, Google’s own keyword planning tools) to get a realistic sense of what you’d actually be paying, rather than assuming figures you’ve seen quoted for a completely different industry apply to you.
This is one of the most common mistakes we see: a business sets a budget based on what they’ve read online, without checking whether their own market’s cost per click makes that budget realistic. £300 a month sounds sensible until you discover clicks in your industry average £4 each, at which point it buys you roughly two enquiries a day at best — not enough for Google’s own algorithms to learn effectively, let alone deliver a steady stream of business.
A simple way to sanity-check a budget
A useful back-of-envelope calculation: take your average cost per click, estimate the conversion rate you’d expect from your website (2–5% is a reasonable starting range for most local service businesses, though it varies), and work out how many clicks you’d need for one enquiry. If clicks average £2 and your conversion rate is 3%, you need roughly 33 clicks for one enquiry, which is around £66 per enquiry before you’ve even looked at whether that enquiry becomes a paying customer. Multiply that by however many enquiries you want per month, and you’ve got a realistic starting budget rather than a guess.
It’s worth doing this calculation before committing to any number, because it very quickly shows whether a budget is workable or whether it needs adjusting — either upward, or by tightening the targeting so the same money reaches fewer, more relevant searches.
What happens when the budget is too tight
A budget that’s genuinely too small for the market causes a specific, recognisable problem: the campaign never gets out of a slow, stop-start pattern. Google’s bidding systems need a reasonable volume of data to learn which searches, times of day and audiences actually convert, and an account that’s throttled by budget every day rarely gathers enough of it. The result often looks like “Google Ads doesn’t work for us”, when the real issue is that the budget was never large enough to let the campaign learn properly in the first place.
If that sounds familiar, it’s usually better to either narrow the targeting so the budget goes further on the searches most likely to convert, or accept that a slightly higher budget for a shorter, sharper campaign will outperform a low daily spend stretched out indefinitely.
When it’s worth spending more
Increasing a Google Ads budget makes sense once you can see, from your own data, that extra spend is bringing in more of the enquiries or sales you actually want — not simply more traffic. This is where tracking what happens after the click matters as much as the click itself; we’ve written before about how to know which marketing is actually bringing you enquiries, and it’s worth getting that in place before scaling spend, so you’re increasing budget because the numbers support it rather than on instinct.
Getting the setup right matters as much as the number
A well-structured account with tight, relevant targeting will often outperform a much bigger budget spent carelessly across broad, loosely related searches. Before assuming you need to spend more, it’s worth checking the account itself is set up properly — the right match types, sensible location and device settings, and a landing page that actually supports the offer. Our Google Ads setup service exists largely because we see accounts every month where the budget was never really the problem, the structure was.
A sensible starting point
If you’re setting a Google Ads budget for the first time, work backwards from what a customer is worth to you, check what clicks actually cost in your market, and use that to set a realistic monthly figure rather than a round number that feels comfortable. It’s also worth reviewing it every few months rather than setting it once and forgetting about it, since costs and competition shift over time.
If you’d like a second opinion on whether your current budget is realistic for your market, or you’re setting one up for the first time and want it done properly, our free Google Ads audit is a good place to start, or you can get in touch and we’ll talk it through. More on ongoing management is on our Google Ads management page if you want to see how we approach it day to day.
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