How much should a business spend on Google Ads? (free calculator)

Whether you’re a brand new or established business, you’re likely wondering what marketing channels will generate the best results.

Google Ads will likely be one of your considerations.

But where do you start and how much should you spend?

There isn’t one specific number that you should start from with Google Ads, it all comes down to your business and what good results translate to for you. Even for businesses in the same industry, that number can be different.

One business might be spending £2,000 a month on Ads and seeing a healthy return, while another spending the same amount is losing money.

The difference could be campaign performance, but it could also be profit margins, customer value, and how much each business can afford to spend to get new leads.

Budgeting for Ads should consider several factors and figures to give you a realistic foundation to start with and build on over time as your business grows.

Start with your profit margins and what you can afford to spend

Many businesses that are new to Google Ads fall into the trap of just throwing as much money at it as possible because they believe the more they spend, the more they’ll get back.

Ads can be a really successful channel when managed properly, but to start with, you need to know your numbers and what’s reasonable for your business.

A business might generate £10,000 in sales from Google Ads, but that doesn’t mean they can afford to spend £10,000, or even £2,000 to generate those sales.

Revenue and profit aren’t the same, the high numbers you get from Ads might look great. But if most of that revenue is covering the costs of delivering your products or services, there might not be enough left to sustain your advertising spend long term.

Businesses with lower margins will need to be more careful about how much they spend to generate each sale. Your overheads, operating expenses, and retainable profit should all be considered when planning how much you’re going to spend on advertising.

If you intend to run multiple campaigns around different products or services, that’s another factor to account for, especially if they have different margins.

One might perform better and generate more profit than the other, so it makes sense to put more budget towards promoting the better performing product or service.

How much should you pay to acquire a customer?

Knowing how much you can afford to spend acquiring a customer is your starting point. From there it’s about working out what you can afford to pay for each conversion.

The performance of Google Ads involves measuring two important numbers, the cost of generating an enquiry and the cost of turning that enquiry into a paying customer.

If you’ve done paid ad campaigns before and had them managed by an agency or PPC specialist, you might have had reports saying that the campaign is generating leads at a low cost. That’s great, but are you seeing the profit in your bank to show for it?

Your CPL (cost per lead) tells you how much you spend generating an enquiry through your advertising, whether that’s filling in a contact form or making a phone call.

Your CPA (cost per acquisition) is how much you spend acquiring a paying customer through your advertising.

Imagine your business spends £1,000 a month on Google Ads and it generates 20 enquiries. Your cost per lead would be £50 based on your spend being divided by the number of enquiries.

But if only 5 of those enquiries turn into paying customers, your cost per acquisition would be £200, based on your spend being divided by the number of customers.

So, even though you’re generating enquiries for £50, you’re actually spending £200 to win each new customer. That’s why knowing your CPA is just as important as CPL. Looking at lead costs alone can paint a misleading picture of campaign performance and lead you down an expensive path for your business.

But even a well-optimised campaign can struggle to deliver profitable results if the landing page it links to doesn’t give visitors a clear reason to enquire or buy.

Having a website designed for conversion is just as important as getting your Ad spend right, or you could end up wasting budget and opportunities to make more sales.

Check if your acquisition cost is too high

If you’re running ads and think you might be spending too much for the customer acquisition you’re getting, establish the maximum amount you can afford to spend to get a customer using your profit margins and commercial objectives.

Then you can work backwards, using your lead to customer conversion rate to determine what a comfortable CPL looks like for your business.

For example, if you can afford to spend £200 acquiring a customer and then you convert 25% of your enquiries into sales, your maximum affordable CPL would be £50.

Maximum CPL = £200 x 25% = £50

This gives you a much more specific and relevant target, instead of basing your spend off industry averages or comparing yourself to other businesses, which may have very different costs and margins. You’re better basing your spend off your data and the parameters of your business.

The goal with Google Ads is to acquire the right customers at a cost that allows your business to stay profitable.

Understanding your LTV:CAC ratio

The next part of the journey is calculating how much revenue and profit an acquired customer generates throughout their relationship with your business.

CPL and CPA are important when getting them in the door, but CAC (customer acquisition cost) and LTV (lifetime value) help you know whether what you’re spending to win new customers is worth it for the value they bring to your business.

For example, if your business spends an average of £300 acquiring a customer and over the course of the relationship that customer generates £1,200 in gross profit, your LTV:CAC ratio would be 4:1.

Essentially this means for every £1 you spend acquiring a customer you’re making £4 in gross profit.

You may have seen 3:1 floating around as a general benchmark for healthy acquisition, but this isn’t a universal target. There are too many specific factors involved to apply this to every business.

A business with recurring monthly revenue might be comfortable with a higher initial acquisition cost because their customers can generate value over several years.

Whereas a business selling one-off products might need to recover its acquisition costs much sooner.

Having a clear and accurate insight into the long-term value of the customers you’re acquiring, as well as how much it costs to win them, can give you a better foundation to decide on your Google Ads budget, and when there’s room to increase it.

A real world example from our portfolio

Vista Square, a first-time student accommodation provider in Liverpool, shows how much customer value changes the picture. Each tenancy is worth £9,680 (£220 a week over a 44-week term), so the business can afford to pay much more to win a customer than one selling a £50 product.

Between October 2025 and August 2026, its Google Ads campaign generated 320 bookings and 160 signed tenancies, worth over £1.5 million in rent. That’s a return on ad spend (ROAS) of roughly 39x: every £1 spent on ads brought back around £39 in tenancy revenue. Even at a few hundred pounds per signed tenancy, the cost of winning each customer was a small fraction of what they were worth.

Read the full case study.

Work backwards to calculate your budget

You’ve got all the figures and ratios, but now you need to know how they all connect to give you a realistic spend for your Google Ads.

The easiest and clearest way to demonstrate this is through an example.

For the sake of this example you’re a service-based business that wants to generate 10 new customers a month through Ads. Based on your profit margins and customer LTV, you know that you can afford to spend up to £200 on new customer acquisition.

Here’s what you do next to work out your budget.

Establish how many enquiries you need

This is where your sales process is relevant because you need to know how effective your business is at converting enquiries into customers.

If 25% of your enquiries turn into sales, you’ll need 40 leads to acquire 10 new customers.

Calculate your maximum cost per lead

You can afford to spend £200 on acquiring each customer. If 1 in 4 enquiries converts you can work out how much you can afford to pay for each lead, in this case £50.

Work out your monthly budget

So, you need 40 enquiries and you can afford to pay up to £50 for each one.

Monthly budget = 40 x £50 = £2,000

Based on these figures a reasonable spend would be £2,000, but naturally there are no guarantees that Google Ads will generate 40 enquiries at £50 each.

Exact costs will depend on campaign performance and management with keyword competition, average cost per click, and product or service demand also playing a part.

Want to work out your own numbers? Enter your figures below to see how many enquiries you need, what you can afford to pay per lead, and a starting monthly budget.

Set a budget that makes commercial sense

Starting with a realistic budget that’s based on relevant business data is a strong foundation for your Google Ads campaign, especially as a small business where every penny counts.

Careful management and monitoring is the best way to create a successful momentum with Google Ads and make sure that your spend is turning into paying, profitable customers.

Everything you invest in PPC should be used strategically to generate the returns you need to support your business.

If you’re not sure where to start with Google Ads, or whether your current campaigns are delivering valuable results, we can help.

Our PPC specialists at RedCore can give you insight into what’s working well, where opportunities are being missed, and provide a clear plan for how your business can get the most out of Google Ads.