How Much Should I Spend On Google Ads (PPC)?

Three Simple Steps to Identify Your Optimum Google Ad Budget

Are you a small or medium-sized business owner struggling to determine your Google Ads budget? Do questions like "Is $50 enough?" or "Is $10,000 enough?" keep you up at night?

Running a digital marketing agency, the one question we are frequently asked is: How much should I spend on Google Ads (formerly known as Google AdWords, also referred to as PPC)?

Generally speaking, how much you should spend on Google Ads varies widely. You can spend as little as $50 per month or upwards of $10,000 or more. But what is the right amount?

Below, I outline three methods to help you determine your ideal Google Ads budget. 

Prefer to watch a video on this topic?

Cash Cow (Maintaining Sales, Not Growing)

Maintaining Current Sales ("Cash Cow"): If you're established and happy with your current sales, and your goals are to maximize the profit you take out of the company, then aim to spend around 5% or less of your revenue on advertising.

A modest budget for a small business is less than $1000 per month, which means your sales are approximately $20,000 or less per month.

Since Google Ads often provides one of the highest returns on investment (ROI), prioritize it within your modest budget (under $1,000/month for sales of $20,000 or less per month).

Growth Mode, Looking for Year-over-year or Month-over-Month Growth

Steady Growth Mode: Looking for consistent year-over-year sales or profit growth? At this stage, you’re investing between 5% and 15% of sales into advertising because you are trading short-term profits for longer-term investments that will pay dividends down the road.

At this stage, you should invest between 5% and 15% of your sales into advertising. For example, if your monthly sales are $50,000, your Google Ads budget could range from $2,500 to $7,500 per month.

Rocket Growth Mode, Looking for Year-over-year or Month-over-Month Aggressive Growth

Rocket-Growth Mode: Ready to take off? New businesses should invest more aggressively, around 20% or more of projected sales into advertising. Don't wait for sales to grow before investing in ads – be proactive from the start! If you're 

Now, if you’re a new business, basing your advertising spend as a percentage of sales doesn’t make sense since your sales are low, so base that off of your end-of-year projected monthly sales, as an example.

But for sure what you don’t want to do, is just wait until sales grow enough before investing in advertising. If you want to grow fast, you must invest in promoting your company through advertising, which is even more crucial when you’re a new business.

Let’s say you want to add $10,000 more in monthly sales. How much do you need to spend to achieve that growth?

Here's how to determine your ad spend based on a goal of adding $10k per month in sales.

What if you don't have this data?

Pull Google Ads Keyword Data

All you need to do is a bit of research. Using the Free Google Keyword Planner within Google Ads, look up the cost per click for search terms in your niche. 

Here’s an example for “medical weight loss” and related searches. The cost per click ranges from approximately $3 to $16.

Estimate Conversion Rates

Next, we need to estimate the conversion rate of Google Ads clicks to actual leads.If you’re unsure of what a reasonable conversion rate is for your website and you don’t have the data, go to an AI program like Gemini or ChatGPT and ask.

Here’s what Gemini came back with for our example:

So, my cost per click is approximately between $3 and 16.

Then, for our estimated conversion rate, let’s split the difference between the range Gemini gave us, which was between 2% - 10%, and say our conversion rate is 6%.

So, this means our cost per lead is roughly between $50 and $267 ($3/6% and $16/6%). 

With these numbers, I can figure out how to arrive at my optimal Google Ads spend based on my goals. 

So, let’s say your goal is to grow sales by $5,000 per month, and your average sale is $1,000; then, I need five new leads to hit my sales goal.

If leads cost between $50 and $267, I need to spend between $250 and $1,335 in Google Ads per month to achieve my sales goals.

Estimate Google Ads Budget from Your P&L

But suppose you just don’t know what it costs to acquire a new customer in your niche.

In that case, another way is to estimate based on the numbers from your P & L or income statement  - just divide your marketing or advertising monthly spend by the number of new customers per month over the last 12 months or so.

You get a rough estimate of the historical cost to acquire a new customer, then use that number to help you back into what you should spend per month to achieve your sales goal.

Now, this isn’t always easy since you must dig for these data. However, many of our clients base their Google Ads budgets on what others in the industry are spending, which we provide. 

My Recommendation - From One Business Owner to Another

Finally, here’s my advice with your Google Ads budget—never stop advertising your business. EVER. Out of sight, out of mind, is the old adage.

If you have to pull back and reduce your spend, then pull back on the ad spend. But do not stop if you want to grow.

Successful businesses always keep their brand visible, even during slower seasons.

So, there you have it - 3 different methods to determine exactly how much you should spend on Google Ads:

But remember, your return is DIRECTLY proportional to your investment. Larger ad spends mean more exposure, more traffic, and more sales.