How Much Should You Spend on Google Ads? A Practical Budget Guide
How to set a Google Ads budget from your target cost per lead, conversion rate and sales goals — with a simple formula and examples.
Short answer: Work backwards from your goal. Monthly budget = target customers ÷ lead-to-customer rate × cost per lead. If you need 20 new customers, close 25% of leads and pay $50 per lead, you need about 80 leads and a $4,000/month budget.
Step 1: Know your numbers
- Customer value: average first sale and lifetime value.
- Close rate: what share of leads become customers.
- Affordable cost per lead: the most you can pay per lead and still be profitable.
Step 2: Estimate cost per click
Use Google Keyword Planner to see top-of-page bid ranges for your keywords and locations. Competitive industries such as legal, insurance and some medical treatments cost far more per click than retail or local trades.
Step 3: Estimate conversion rate
A well-built landing page typically converts somewhere between 3% and 10% of paid search visitors into leads, depending on the offer and industry. Cost per lead = cost per click ÷ conversion rate.
Step 4: Give the campaign enough to learn
Smart Bidding needs data. As a rule of thumb, budget for at least 30 conversions per month per campaign, or keep campaigns tightly focused until you reach that volume.
Example
- Target: 20 new patients a month
- Close rate: 25% → 80 leads needed
- Average CPC $4 and conversion rate 8% → cost per lead $50
- Budget: 80 × $50 = $4,000/month
Common budget mistakes
- Spreading a small budget across too many keywords and locations.
- Judging results in the first two weeks, before bidding has learned.
- Increasing budget on campaigns that aren’t tracked properly.
- Ignoring the landing page — improving conversion rate is the cheapest way to lower cost per lead.
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