How Much Should a Small Business Spend on Google Ads?

There isn't one right Google Ads budget. What's sensible for a florist is wrong for a software company. But you can work out a good starting figure with a bit of arithmetic, and avoid the usual mistake of spending too little to learn anything or too much too soon.

Start with what a customer is worth

Work out the average value of a new customer to you. Not the first sale, the whole relationship. If a client typically spends £4,000 with you, that's your starting point.

Then decide how much you'd happily pay to win one. If you'd pay up to a quarter of the value, that's £1,000 per customer.

Work back to what a lead can cost

Not every enquiry becomes a customer. Say one in five does. Then each lead can cost up to £200 and you'd still hit your target. That's your ceiling.

Write down three numbers: what a customer is worth, what you'll pay to win one, and how many leads it takes. Everything else follows from them.

Estimate the clicks you need

Google's Keyword Planner shows rough cost per click for the terms you want. Typical costs vary hugely by market, so check yours rather than trusting a rule of thumb.

If a lead costs you £200 and a click costs £4, you can afford about 50 clicks per lead. If only 1 in 25 visitors enquires, you'd need around 25 clicks per lead, which is well inside your limit. If it's 1 in 100, you're over it and the page needs work before you spend more.

Pick a test budget

You need enough clicks to learn something. A common approach is to budget for a few hundred clicks across the first month, then see what a lead costs. For many small businesses that works out to a few hundred to a couple of thousand pounds a month, depending on how expensive your keywords are.

Spending less than that makes it hard to tell what's working, because the numbers are too small to trust.

Where the money should go first

• Search ads on your most specific terms. People searching for exactly what you sell are most likely to buy.
• Brand terms. It's cheap to make sure you show up when someone searches your name.
• One good page per service. Don't send ads to a homepage that tries to say everything. See our landing page checklist.

Don't change everything every day

Google's system needs time to learn. Give each change a couple of weeks unless something is clearly broken.

When to spend more

Raise the budget when a lead costs less than your ceiling, you can handle more enquiries, and results stay steady for a few weeks. Raise it gradually, rather than doubling overnight.

When to stop

If costs per lead stay well above your ceiling after the page, targeting and offer have been improved, stop and rethink. The problem is usually the offer or the website, not the budget. A website that doesn't convert wastes any budget you give it.

A worked example

Take a small London studio that sells projects worth £6,000 on average, and wins about one in four of the proposals it sends.

• A customer is worth £6,000. They're happy to pay up to £1,200 to win one (20%).
• One in four proposals wins, so each proposal can cost up to £300.
• Say one in three enquiries becomes a proposal. Then each enquiry can cost up to £100.
• If one in 30 website visitors enquires, and a click costs £3, an enquiry costs £90 in clicks. That's inside the ceiling, with a little room.

Now see what happens if the page is weak. If only one visitor in 90 enquires, each enquiry costs £270 in clicks, well over £100. The budget isn't the problem, the page is. Improving the page from 1 in 90 to 1 in 30 cuts the cost per enquiry by two thirds without changing the budget at all.

That's why you should check the page before raising spend.

Types of campaign and what they cost to run

Search campaigns are where most small businesses should begin. You're bidding on words people type, so spend goes toward people already looking.

Performance Max and Display can reach more people but give you less control over where ads appear. They suit shops with good product feeds and some tracking history. They're usually a poor first step for a service business.

Brand search (people searching for your name) is cheap and protects you if a competitor bids on it.

Retargeting shows ads to people who've already visited. It's usually small in budget but can be efficient.

Costs beyond the ad spend

Ad budget isn't the whole cost. Allow for:

• Building and improving landing pages
• Setting up tracking
• Writing and updating ads
• Someone's time to review results each week, or an agency fee

If you ignore these, an account that looks cheap on paper can cost far more in hours.

How to avoid wasting money

• Add negative keywords. Exclude searches that are clearly wrong, such as "free", "jobs" or "course" if you don't sell those.
• Check the search terms report. It shows what people actually typed before clicking. You'll often find waste you can cut.
• Set location and schedule. Don't pay for clicks from places you don't serve or times when nobody can answer.
• Use call and form tracking. Know which keywords produce enquiries, not just visits.
• Be wary of automatic recommendations. Google's suggestions often push you to spend more. Treat them as ideas, not instructions.

Frequently asked questions

What's a minimum budget for Google Ads?

There's no official minimum, but very small budgets give very slow learning. Treat the first few months as paying to find out what works.

Should I use an agency?

If your monthly spend is small, learning the basics yourself can be worth it. Once spend grows, mistakes get expensive and an agency often pays for itself. Get in touch and we'll tell you honestly.

How do I know it's working?

Track enquiries, not clicks. Our guide on measuring marketing ROI shows how.