What your Google Ads budget should be: maths, not industry averages

The most common answer to “how much should I spend on Google Ads?” — “the average in your sector is X” — is useless. Two companies in the same sector can have costs per click that differ threefold, because they bid on different terms, with different landing page quality and different conversion rates.

The right budget is not a number you find outside. It is a result derived from your own figures, in four steps.

If you would rather see the answer before reading the steps, our free budget calculator runs the same arithmetic. The sections below explain the reasoning behind it.

Step 1 — What a customer is worth

The budget conversation starts here, not with the ads. The number you need is the gross profit a customer brings over their lifetime.

For a one-off sale that is revenue minus cost of goods. For recurring business — subscriptions, maintenance contracts, repeat orders — multiply by the average number of purchases. For a dental clinic, the value of one implant patient includes the work that patient will have done over the following two years.

If you don’t know this number, it is too early to discuss ad budget: you have no threshold to compare against.

Step 2 — How many clicks make one customer

The chain works like this, and each link removes most of the volume:

1,000 clicks
  → 3% submit a form      =  30 enquiries
  → 40% are real          =  12 qualified conversations
  → 25% close             =   3 customers

In this example a customer costs 333 clicks. At $3 per click, your cost per customer is roughly $1,000.

Now compare that with step one. If a customer leaves more than $1,000 in gross profit, Google Ads works for you. If not, increasing the budget does not fix it — it only loses money faster.

The critical point: the cheapest improvement in this chain is usually not in the ads, it is in the second line. Lifting form conversion from 3% to 4.5% cuts cost per customer by a third and costs nothing in extra media spend.

Step 3 — The minimum budget for a real test

This is where most money burns. Starting with a tiny budget, then switching it off after a month because “it didn’t work,” is the most common Ads mistake we see.

The reason is statistical: to know whether a campaign works you need at least 30-50 conversions. Below that you are not reading performance, you are reading noise.

Which gives you a floor:

Minimum monthly budget ≈ 30 × (cost per conversion)

If your cost per conversion is $25, a meaningful test starts around $750 a month. If you cannot cover that number, the right move is not to spread the budget thinner but to narrow the scope: one city, one service, one language. Collecting 30 conversions in a narrow slice teaches you far more than 8 conversions across a wide one.

Step 4 — Where the budget goes

Once you have the total, the split looks like this:

Brand searches. People searching your company name. Very cheap, very high converting. Mandatory if competitors bid on your name, a small slice if they don’t.

High-intent service searches. “City + service,” “X price,” “X company.” The bulk of the budget lives here. It is expensive, and it is where purchase intent is clearest.

Broad / discovery searches. Informational queries. They don’t convert, they teach. Keep the share small — and serve those terms with content rather than ads. We set out that division of labour in SEO vs Google Ads.

Remarketing. People who visited and left. The cheapest conversions usually come from here, and in most accounts it is underfunded.

The thing to fix before the budget

When we take over an account, the first thing we look at is not campaign settings. It is whether conversions are measured correctly — because Google’s algorithm optimises toward whatever event you report to it.

If the event you report is “form submitted,” the algorithm gets very good at finding people who submit forms and never buy. Costs fall in the dashboard and nothing changes in the bank.

A correct setup writes the closed sale back to the ad platform. The technical side is covered step by step in the GA4 measurement guide; in regulated sectors such as healthcare, ad policies additionally constrain what you are allowed to measure.

Raising budget while measurement is wrong is weighing more goods on a broken scale.

Summary: derive your own number

1. Write down the gross profit of one customer.
2. Fill in the click-to-customer chain with your own data.
3. Find your cost per customer and compare it with step one.
4. Use the 30-conversion rule to get your monthly floor.
5. If you can’t cover it, don’t cut the budget — narrow the target.

One of the biggest drivers of budget efficiency is the page the ad leads to; see what is a landing page.

Once you have done those five, the answer to “how much should I spend” is already in front of you. If you’d like us to work through your current account together, our digital marketing service is the place to start.