"How much should I spend on Google Ads?" is one of the questions I'm asked most often. The honest answer isn't a number. It's a calculation based on your market, your margins, and what the platform actually needs to function properly. Getting this wrong in either direction creates problems: too little and the algorithm never learns, too much and you're scaling before you've proven what works.
A window company in Rhyl came to me last year wanting to start Google Ads with a £200 a month budget. In their sector, CPCs were running at £4 to £6. That budget would generate 33 to 50 clicks a month, about one or two a day, nowhere near enough for Smart Bidding to function or for patterns to emerge in the data. I told them to wait until they could commit to £600 a month, and we launched six weeks later with a budget that could actually work. Within the first two months they were getting 15 to 20 enquiries a month.
The temptation is to start small and scale up when it works. The problem is that a budget set too low often means it never works at all, and the business concludes Google Ads is the wrong channel when the real issue was the starting conditions.
Start with what clicks actually cost in your market
Before setting a budget, you need to know what you'll be paying per click for the keywords that matter to your business. Google's Keyword Planner (found in Tools > Planning in your Google Ads account) shows estimated cost-per-click ranges for any keyword. These are estimates, not guarantees, but they give you a realistic starting point.
CPCs vary enormously by sector and geography. Legal services and financial products typically have CPCs of £5 to £30 or more. Local trade services like plumbers or builders tend to be £2 to £8. E-commerce products with lower competition might be £0.50 to £2. The Keyword Planner will show you the range for your specific terms.
Once you know your approximate CPC, you can calculate a minimum viable daily budget. The general principle: you need enough clicks per day for the data to be meaningful. Ten to fifteen clicks per day is a reasonable minimum. Below that, you're accumulating data too slowly for Smart Bidding to function and for you to see patterns in what converts.
If your target keywords average £4 per click, a minimum meaningful budget is around £40 to £60 per day (£1,200 to £1,800 per month). That's what the maths points to, regardless of what you'd prefer to spend. If you're just starting out and wondering whether your business is ready for paid search at all, Should a New Business Run Google Ads Right Away? covers the conditions that need to be in place first.
Work backwards from your target CPA
A more precise approach starts with your business economics, not the platform. What is a lead or sale worth to you? What's the maximum you can profitably pay to acquire one?
If a new customer is worth £500 to your business and your average conversion rate on a well-structured campaign is 5%, then each of 20 clicks will produce one conversion. At a CPC of £3, those 20 clicks cost £60. Your CPA is £60. That's well within a viable margin on a £500 customer.
The same maths works against you if conversion rates are low or margins are tight. If your conversion rate is 1% and your average CPC is £4, you're paying £400 per conversion. If your product sells for £150, that doesn't work regardless of how well the ads are managed.
Run these numbers before you commit to a budget. If the maths doesn't work at a realistic CPA, the answer isn't to spend more. It's to address conversion rate, pricing, or targeting first.
Why the first 90 days need more budget, not less
Smart Bidding strategies such as Target CPA, Target ROAS, and Maximise Conversions require conversion data to function well. A campaign with 10 conversions in its history cannot optimise effectively. One with 50 to 100 conversions has a proper data foundation.
Building that foundation takes time and budget. The first 90 days of a new campaign are the learning phase: the algorithm is discovering which searches, times, devices, and audience segments produce conversions. Running on too tight a budget during this period means slower data accumulation, a longer learning period, and poorer early performance.
The practical implication: if your ongoing budget will be £1,000 per month, consider launching at £1,500 for the first two to three months to accelerate learning. Once conversion data is sufficient and the algorithm has found its footing, you can reduce to the planned ongoing level, and the campaign will perform better for having had the stronger start.
What "underspending" actually does
A budget that runs out before the end of the day isn't just a missed opportunity. It actively disrupts campaign performance. Google's algorithm uses consistent daily data to calibrate bidding. A campaign that runs out of budget at 11am every day gives the algorithm a partial picture: it learns morning patterns but misses afternoon and evening behaviour. Over time, this degrades the quality of its decisions even when the budget is available.
If your campaign is consistently hitting its daily limit, that's a signal worth paying attention to. It might mean the budget needs increasing. More often, it means the targeting is too broad. The fix is better keyword match types, more negative keywords, and tighter geographic targeting, which reduces wasted spend and makes the budget go further without increasing it. For a detailed walkthrough of that situation, read What To Do When Your Google Ads Campaign Is Limited By Budget.
When to increase and when to hold
Budget increases make sense when: your campaign is converting consistently at a CPA within your target range, it's hitting its daily budget limit, and you have capacity to handle more leads or sales. In those circumstances, increasing budget is the right call. You're scaling something that works.
Budget increases don't make sense when: conversion tracking isn't confirmed accurate, campaigns are converting sporadically, or CPA is above your viable threshold. Spending more on a campaign with a structural problem accelerates the loss, not the return.
Final thoughts
Setting a Google Ads budget is less about picking a number and more about understanding what you need to spend for the platform to function properly, and checking whether the maths of your market supports advertising at all. Use the Keyword Planner to understand real CPC ranges, work backwards from your target CPA, budget more generously in the learning phase, and resist the temptation to underspend and expect results. For small businesses in North Wales, working out a realistic minimum budget before you start is one of the most useful conversations to have. It prevents the common pattern of spending too little, seeing weak results, and concluding that Google Ads doesn't work.
Google Ads management in North Wales. If you'd like help working out what a viable budget looks like for your business, get in touch for a free assessment.
