Setting an Effective Google Ads Budget: A Practical Guide for Small Business DIYers

If you’re a small business owner eager to try your hand at Google Ads, you’re not alone! Many are attracted to its pay-per-click model, which means you only spend money when people click on your ad. But where to start with budgeting? Here’s a practical guide that takes the guesswork out of setting an effective Google Ads budget.

Start with a Goal in Mind

Before diving into any numbers, it’s crucial to be clear on your primary objectives. This way you will be clear on what you’re hoping to achieve through Google Ads. Are you looking to gain immediate sales, boost brand awareness, or generate leads for follow-up? Defining these goals early helps guide budget size and ad setup. Here are some useful questions to help define your budget needs:

• How many customers or leads do you want to acquire per month?
• How much do you currently spend to acquire a customer?
• How soon will sales cover ad spend?
• What is your profit margin on sales from ads?
• Are you aiming for high-quality leads or high volume?

Setting clear goals keeps your budget realistic and focused. For example, if you want to acquire 40 new clients each month, you can work backwards from your conversion rates to estimate the cost needed to reach that target.

Recommended Starting Budget

When starting, aim for a budget that allows for at least 10-15 clicks per day. This frequency gives both you and Google the data needed to assess and optimise your ads. Here’s a quick guide based on business size:

• Small businesses: £1,000 per month
• Mid-sized businesses: £5,000 per month
• Enterprise-level: £20,000+ per month

You can go lower. Smaller budgets aren’t necessarily a disadvantage, but they require a bit of finesse to ensure every click counts.

Use Google’s Keyword Planner to Estimate CPC and Budget

Google’s Keyword Planner is an invaluable (and free!) tool for small business owners and DIY advertisers looking to set up a Google Ads budget. It’s straightforward to use and gives you a ballpark figure of how much you might spend on each click, depending on your chosen keywords. Let’s break down how you can make the most of this tool when setting up your initial budget.

1. Start with Your Core Keyword

Begin by entering the most basic term that describes your product or service. For example, if you run a gardening company, you might just type in “gardening services”. The goal is to start simple so you can get a baseline estimate for how much each click will cost.

Understanding Bid Ranges

Once you’ve entered your keyword, Google will show you two primary cost ranges:

• Top-of-the-page-bid (low range). This is the lower end of what advertisers are paying to show up at the top of the search results.
• Top-of-the-page bid (high range). This is the higher end of the bid range. Where advertisers are often willing to spend more for a top position.

Let’s say you find that for “gardening services” the low range is £0.55, and the high range is £1.90. These numbers give you a good foundation for what to expect in terms of cost per click.

Calculating Your Daily Budget

Once you’ve got that high-range bid, you can estimate a daily budget based on your goals. Here’s a quick way to start:

1. Multiply the high bid by 10.
   This will give you a rough estimate of what it would cost to get about 10 clicks per day on that keyword. In our gardening services example, multiplying £1.90 by 10 would give you £19.00
2. Round to the nearest whole number.
   For simplicity, you might want to round to the nearest whole number as your target daily spend. This ensures you get a minimum of 10 clicks daily, providing enough data to learn from your campaign’s performance.
3. Multiply by 30.5 for your monthly spend
   To calculate your monthly Google Ads budget, simply take your daily budget and multiply it by 30.5 (the average number of days in a month). For example, if you’ve set a daily budget of £19, multiplying by 30.5 gives you a monthly budget of around £579.50. This helps you plan for a consistent monthly spend. Making it easier to track and manage your ad expenses over time.

Why 10 Clicks per Day?

The logic behind aiming for at least 10 clicks per day is to gather sufficient data to make informed adjustments to your campaign. If you’re only getting 1 or 2 clicks each day, it will take much longer to determine what’s working and what isn’t. By starting with around 10 clicks, you’ll quickly get a sense of your ad’s effectiveness and have enough data for Google’s algorithm to optimize your campaign over time.

Remember: It’s Just a Starting Point

This calculation is a good starting point, especially for newer advertisers. As your campaign runs and you gather more data, you can refine your budget based on what’s working best for your business. Starting simple helps you focus on learning and adjusting, so you make the most of every pound you spend.

Industry Averages

A click in Google Ads doesn’t cost the same for every business. High-competition industries like legal and Real Estate can have higher average Cost Per Click (CPC). Here’s a quick look at average CPCs by industry:

Find more Industry Benchmarks at – WordStream

Understanding Cost Per Acquisition (CPA) & Conversion Rates

Understanding your Cost Per Acquisition (CPA) and conversion rates is a key part of setting a Google Ads budget that brings results. CPA tells you how much it costs to acquire a new customer through your ad campaign. To calculate it, start by looking at your Cost Per Click (CPC) and estimating how many clicks you need to generate a lead. For example, let’s say you’re getting a lead for every 10 clicks on your ad, and each click costs £2. If your sales team closes 20% of leads, this means you’d need to spend around £100 to acquire one new customer (10 clicks x £2 CPC = £20 per lead; £20 x 5 leads = £100 per sale).

Once you’ve had a few clicks—and, most importantly, a few conversions—you can start to look at your CPA. To help determine if your campaign is profitable. If your CPA is too high, it may be time to adjust your targeting, keywords, or ad copy to reduce costs. A profitable CPA shows that you’re on the right track, giving you the confidence to scale up your campaign and bring in more customers.

If you’re a service-based business, consider how many of your leads typically convert into paying customers (your conversion rate). For example, if 30% of people who fill out a form on your website become clients, you’ll have a good sense of how much each lead is worth and how much you should be willing to spend to acquire them.

For eCommerce businesses, conversion rates work similarly but are often tied to direct online sales. You should calculate the average revenue each customer brings in from their purchase. This helps you know how much you can afford to spend per acquisition while staying profitable. The better you understand your CPA and conversion rates, the easier it will be to adjust your budget. Allowing you to maximise the return on every pound spent on Google Ads.

Maximising Your Quality Score and Profit Margins

Maximising your Quality Score is one of the best ways to make your Google Ads budget work harder. Quality Score is Google’s measure of how relevant and useful your ads are to users. Based on factors like click-through rate, ad relevance, and landing page experience. The higher your Quality Score, the less you’ll pay per click (CPC) for better ad positions, helping each pound go further. If you’re in a high-CPC industry, like legal services or real estate, every improvement to your Quality Score can make a significant difference. For more on how Quality Score works and ways to improve it, check out our in-depth blog here.

Strategies for Effective Budget Management

Focus on One Product or Service at First

When starting out with Google Ads, it’s best to focus on one key product or service. Spreading your budget across too many offerings will limit the data you get for each, making it difficult to identify what’s working. By concentrating on a single product or service, you can gather meaningful insights, optimise faster, and build a strong foundation before expanding.

Start with Your Best-Selling Product

Putting your best-seller front and centre helps you avoid guessing whether it’s the product or the ad that’s underperforming. Since you already know the product has strong demand, you can focus solely on optimising the ad performance. Once your best-seller campaign is running smoothly, you’ll have a blueprint for testing other products.

Reinvest Profits to Scale Up

As your campaign generates sales, reinvesting some of the profit allows you to gradually increase your Google ads budget without risking too much upfront. This approach helps you scale effectively, as each reinvestment is backed by proven success. Over time, these incremental increases add up, giving you more clicks, conversions, and data to further optimise your campaigns.

Include Prices in Your Ad Copy

Don’t be afraid to include prices in your ad copy! Listing your prices will help filter out users who aren’t ready to spend, saving your budget from unnecessary clicks. Pricing in your ads also helps attract more qualified leads, as the people clicking through are likely to be interested and able to purchase.

Be Specific in Your Ad Copy

A highly specific ad copy helps ensure you’re attracting the right audience and discouraging clicks from users who don’t match your offer. Clear, detailed language in your ad copy will help set expectations. Improving the quality of traffic coming through, meaning you’re spending your budget on people genuinely interested in your product or service.

Make Your Offer Clear

It’s crucial to communicate why a customer should choose you over a competitor. Make your unique selling points (USPs) clear and compelling in the ad copy. However, avoid unsupported superlatives like “best” or “cheapest” unless you have proof to back them up. Focus on genuine reasons why your product or service stands out to build trust and attract high-quality leads.