Google Ads Budget: How Much Should Your Business Spend?

Wondering how much you should budget for your Google Ads campaigns?

Your Google Ads budget can dictate your success. Spend too little and your ads may never generate any clicks or impressions. However, on the flip side, many advertisers are concerned with overspending on campaigns.

In this article, we’ll go over the ins and outs of Google Ads budgeting and how to forecast your budget.

How Budgeting Works in Google Ads

In Google Ads, you cannot set a maximum spend for the month. How much you spend is determined by your average daily budget, which can be changed at any time.

If you are not looking at your account closely, you can easily go over your predetermined budget and Google can end up spending up to 2X your daily budget on any particular day. This also means you won’t be spending the exact same amount every day.

It’s important to have some wiggle room in your budget and to not “set it and forget it” when it comes to your ads campaign. You’ll need to have a proper budget pacing strategy to make sure you make up for days where there isn’t as much demand vs days where there’s lots of it. It’s all a balancing act when it comes to budget pacing.

Big Picture Answer: Spend Enough to Collect Data

Since Google Ads is an auction-based platform, the cost will depend on the keywords you plan to bid on. This can ultimately be impacted by industry, trends, and how well your ads are structured.

Remember, you need to spend enough to gather data and get eyeballs on your campaign.

Penny-pinching and being too conservative can result in slow data collection and slow results. This does not mean your campaigns are doomed, but it will just take a long time to get to your destination because you are limiting your ad budget. Don’t waste your time on ads unless you can supply a sufficient monthly ad budget to test and learn.

A general rule of thumb for a local business targeting at least 10-15 miles radius around its location, expect to budget no less than $2,000 per month.

Some businesses may be able to get away with a smaller budget due to less competition, but that will depend on your average cost per click which is mostly determined by competition. 

Consider the Industry and Location You Are In

The cost-per-click (CPC) for keywords will vary by industry. Some industries will be more competitive than others. For example, keywords related to bankruptcy law are highly competitive and come with a high CPC. A few other industries with high CPC (range of $20+ per click) are:

• Insurance
• Home improvement
• Medical spas and aesthetics
• Financial services

Research industry benchmarks and average conversion rates to gain a better understanding of what to expect, so you can set realistic budget expectations.

In addition to industry, your location has a huge impact on CPC. Many metropolitan areas often have higher CPC than rural areas which typically have less competition. What a dentist will spend on Google Ads in Los Angeles is going to look a lot different than a dentist in rural Iowa.

Using CPC to Figure Out How Much to Do for Daily Budget

This is a great starting point if you are brand new to Google Ads or need to revise your budget plans.

Look at the estimated CPC for the keywords you want to target. How much is the average CPC?

Let’s say your average CPC for the geography you want to target is $10 per click. You should aim for at least 5-10 clicks per day (at the minimum) to collect enough data to make lead generation worthwhile.

• Low-end estimate: If you spend $50 per day x 30 days so that would be a total of $1,500 ad budget per month.
• High-end estimate: If you spend $100 per day x 30 days so that would be a total of $3,000 per month.

To see 5-10 clicks per day and gather enough data, you need to budget $1,500 to $3,000 per month in ad spend.

Budget Maintenance for Established Campaigns

Are your campaigns running and performing at a high level but you are unsure of what to do next?

Established campaigns need a flexible budget. You still want to allocate 70-80% of your budget to your campaigns and strategies that have consistently generated results. Think of these campaigns as your “cash cows”.

The rest of the budget should be used to test new keywords, opportunities, and strategies that expand your reach and help you stay ahead of the competition. Again, consider the CPC and bid prices when you start experimenting so you can set the appropriate daily budget.

Does Google Ads Make Sense for Your Business?

If you are new to Google Ads, you should consider investing right out of the gate instead of slowly increasing a small budget.

Many small businesses will start with a few hundred dollars and if the campaign does well, they will invest more.

However, this approach essentially shoots you in the foot because you aren’t spending enough to be competitive and to collect data to make the best decisions about your business. Think of this like driving a car on a nearly empty tank thinking that if it can take you far enough, you will be able to refill. You won’t be able to go far on an empty tank.

However, if you cannot even consider a $2,000 monthly ad spend, then Google Ads is not the right channel to invest in.

You also need to factor in your customer lifetime value (CLV). Low CLV results in a return-on-investment loss.

A Final Word on Google Ads Budgets

Your Google Ads budget will depend on your targeted keywords, competition, and geographic area. But you need to spend enough to collect data and account for the fluctuations in daily spend. This means starting with a budget of around $2,000 and being flexible with that number.