How much should a small business spend on Google Ads?

It's the first question almost every business owner asks, and the honest answer is "it depends". But that's not very useful, so let's turn it into something you can actually calculate. The right budget is the one that lets you buy enough clicks to learn what works, at a cost per sale your margins can carry.

Start with what a customer is worth

Before you think about spend, work out two numbers: your average order value and your gross margin. If you sell a product for £100 and keep £40 after costs, you can afford to pay something less than £40 to win that sale and still make money. For businesses with repeat custom, use lifetime value instead - it changes the picture entirely.

Work backwards to a cost per sale

Decide what you're willing to pay for a sale - your target cost per acquisition. A common starting point is to spend no more than a third of your margin while you're learning, then tighten it. From there the maths is simple:

• If your target cost per sale is £20 and your landing page converts 1 in 20 visitors, you can afford about £1 a click.
• Multiply your target clicks per month by your expected cost per click to get a budget that can realistically produce sales.

Across UK accounts the average cost per click sits in the region of a few pounds, but it varies enormously by industry - a local trade keyword and a competitive finance term are worlds apart.

Give it enough to learn

The most common mistake we see is a budget too small to gather data. Google's bidding needs conversions to optimise against; if you only generate two or three a month, it never gets going. As a rough floor, aim for enough budget to produce around 15-30 conversions a month within a few weeks. If your numbers can't reach that on search, a tighter set of keywords or a different channel may be the smarter move.

A simple starting framework

• Set a target cost per sale from your margin.
• Estimate clicks needed from your conversion rate.
• Multiply by a realistic cost per click for your market.
• Round up so you can reach the data you need - then review in 4-6 weeks.

Plan for a learning phase

Don't judge the account in week one. New campaigns go through a learning period while the data builds and bidding settles. Set the budget, protect it from knee-jerk changes, and review against your target once there's enough volume to mean something. That patience is usually the difference between an account that works and one that gets switched off too soon.

If you'd like a second pair of eyes on the numbers before you commit a penny, that's exactly what our free audit is for.