How Much Should a Small Business Spend on Google Ads?

Most UK small businesses starting with Google Ads land somewhere between £500 and £1,500 a month in ad spend, with plenty running well at £300 and plenty more running at £5,000 and above. If you want a single number to begin with, £750 a month is a sensible starting point for a local service business and £1,000 to £1,500 for anything competitive or nationwide. That is the ad spend paid to Google, separate from any management fee.

But the honest answer is that the right budget is not a number you pick, it is a number you calculate. It comes from three things: what a customer is worth to you, how many clicks it takes to get one, and what those clicks cost in your industry. Get those three figures and the budget falls out of the maths. This guide walks through that calculation, gives realistic ranges by business type, and explains the point at which a budget is simply too small to work.

The short answer, by business type

These are realistic starting ranges we see for UK small businesses. They are ad spend only, per month, and they assume a focused campaign rather than a scattergun one.

Business type	Typical starting ad spend	Why
Local trade (plumber, electrician, roofer)	£400 to £900	Tight geographic area limits search volume, so a modest budget can cover the whole market
Local professional service (accountant, dentist, garage)	£600 to £1,200	Higher competition on commercial keywords, higher click costs
Regional B2B services	£1,000 to £2,500	Longer sales cycles and expensive clicks mean you need volume to learn anything
Small ecommerce shop	£500 to £1,500	Shopping campaigns can start small but need enough data to optimise feeds and bids
High value or highly competitive niches (legal, insurance, finance)	£2,000 upwards	Click costs in these sectors are among the highest in the UK

Treat those as orientation, not gospel. A roofer covering one town might do very well on £350. A national ecommerce brand might burn £1,500 in a fortnight and learn very little. The rest of this article is about finding your number rather than borrowing someone else's.

Work backwards from a customer, not forwards from a budget

Almost every small business owner approaches this the wrong way round. They ask "what can I afford to spend?" The better question is "what is a new customer worth to me, and what am I willing to pay to get one?"

Start with these four numbers. You almost certainly know or can estimate all of them.

1. Average order value or job value. What does a typical customer pay you the first time?
2. Gross margin. What percentage of that is left after the direct costs of delivering the work or the product?
3. Lifetime value, if relevant. Do customers come back? A boiler service customer might be worth several jobs over five years.
4. Your close rate on enquiries. Of ten enquiries, how many become paying customers?

From there you can set a target cost per acquisition, which is simply the maximum you are happy to pay Google to win one customer.

A worked example

Say you are a domestic electrician. An average job is worth £400 and your gross margin is 50 per cent, so £200 of that is profit before overheads. You would be pleased to pay £60 to win a job, because that leaves £140 towards overheads and profit, and because half your customers call you again within two years.

Now the funnel. Of every ten people who phone or fill in your form, you win four jobs. So your target cost per enquiry is £60 divided by 0.4, which is £24 per enquiry.

Next, conversion rate on the website. Suppose one in twenty people who click your ad make contact. That means twenty clicks per enquiry. At £24 per enquiry, you need clicks at around £1.20 to break even on your target.

If clicks in your area actually cost £3.50, one of three things has to change: you accept a higher cost per job, you improve the landing page so more clicks become calls, or you tighten targeting so you are only paying for the searches most likely to convert. Usually it is a mix of all three, and that is the real work of managing an account.

Turning that into a monthly budget

Once you know your cost per click and your conversion rate, monthly budget is arithmetic. If you want ten jobs a month, at four enquiries needed per... let us do it properly:

• Ten jobs a month, at a 40 per cent close rate, means twenty five enquiries.
• Twenty five enquiries, at one enquiry per twenty clicks, means five hundred clicks.
• Five hundred clicks at £3.50 is £1,750 a month.

Now you have a real conversation to have with yourself. Can you afford £1,750? If not, scale the goal down. Five jobs a month is roughly £875. Three jobs is roughly £525. The maths scales cleanly, which is exactly why this approach is more useful than picking a round number and hoping.

What clicks actually cost

Cost per click is set by auction, so nobody can quote you a fixed figure. What we can say is how the variables move.

The fastest way to find your own figure is Google's Keyword Planner, which gives estimated bid ranges for your keywords in your location. Take the top of the range rather than the bottom when planning, because early campaigns rarely get the cheapest clicks.

How small is too small?

There is a floor below which Google Ads struggles to work, and it is worth being blunt about it. If your keywords cost £5 a click and you spend £150 a month, you buy thirty clicks. Thirty clicks is not a campaign, it is a sample too small to tell you anything. You cannot judge whether an ad works, a keyword converts or a landing page is doing its job.

As a rough rule, you want enough budget to buy at least 200 to 300 clicks a month, or enough to generate around fifteen to thirty conversions a month once things are working. Below that, decisions become guesswork and Google's own automated bidding has too little data to learn from.

If your maths says you cannot afford that, you have better options than running an underpowered campaign:

• Narrow the geography. One town instead of a county. Fewer clicks needed, same budget goes further.
• Narrow the service. Advertise only your highest margin service rather than everything you do.
• Narrow the hours. If you cannot answer the phone at 9pm, do not pay for 9pm clicks.
• Run in bursts. Three months of proper spend teaches you more than twelve months of trickle spend.
• Fix the free stuff first. Google Business Profile, reviews and a fast site that converts will make every future pound of ad spend work harder.

Our guide to Google Ads for local businesses goes into the geographic and service narrowing in more detail, and it is the route we recommend most often for a first campaign on a tight budget.

Ad spend versus management fees

These are two different pots of money and confusing them causes a lot of frustration. Ad spend goes to Google on your own billing account. A management fee pays for someone to build, monitor and improve the account.

At DPOM, Google Ads management starts from £145 a month as a fixed transparent fee. It does not scale as a percentage of your spend, which means you are never in the odd position of your agency earning more by spending more of your money. You can see the full breakdown on our Google Ads pricing page.

Total monthly commitment	Sensible ad spend	What is realistic
Around £500	Roughly £350 to £400	One tight campaign, one location, top intent keywords only
Around £900	Roughly £750	Search plus remarketing, room to test two or three landing pages
Around £1,700	Roughly £1,500	Multiple services or product groups, meaningful data for optimisation
£3,000 and above	£2,800 and above	Broader coverage, Shopping or Performance Max alongside Search, faster learning

Notice how the management fee becomes proportionally smaller as spend grows. That is the argument for a fixed fee rather than a percentage model. If you want the wider comparison, we have written separately on how much PPC management costs in the UK.

How to split the budget across campaign types

Once you have a figure, do not spread it evenly. Weight it towards intent.

Search campaigns

For most small service businesses, this is where the majority of the budget should sit, often 70 to 80 per cent at the start. Someone typing "emergency locksmith Leeds" is the closest thing to a customer walking through the door.

Remarketing

Cheap per click and useful for reminding people who visited but did not enquire. A small slice, perhaps 10 per cent, is usually enough. Do not let it eat the budget just because the cost per click looks attractive.

Shopping and Performance Max

For retailers, Shopping usually deserves the largest share, because product listings match buying intent directly and the feed does much of the heavy lifting. Feed quality matters more than budget here, and a poorly structured feed will waste money at any spend level. Our Google Shopping management page covers how we approach feed structure and campaign splits for small shops.

Display and video

Generally the last place a small budget should go. Display clicks are cheap and plentiful, which makes reports look busy while enquiries stay flat. Use it only when Search is already producing and you have a reason to build awareness.

Signs you are spending the wrong amount

Budgets should be reviewed monthly, not set once. Here are the signals worth watching.

Signs you should spend more

• Your search impression share is low. If you are showing for only a small fraction of relevant searches and the reason given is "lost to budget", you are turning away business you have already qualified.
• Your cost per enquiry is comfortably below target. If you set £24 and you are getting enquiries at £14, more spend is likely to be profitable.
• Your ads stop running in the afternoon. A daily budget that exhausts by lunchtime means you are only competing with half the day's searchers.
• You can handle the extra work. This one gets forgotten. Do not scale spend if your diary is already full for six weeks.

Signs you should spend less or restructure

• Cost per enquiry is well above your target and has not improved over three months.
• The enquiries are the wrong kind. Volume without quality usually means your keywords or match types are too broad, not that your budget is wrong.
• You have no conversion tracking. Spending more without tracking is just spending more. Fix the measurement before you touch the budget.
• Search terms show mostly research queries. If people are searching "how to" and "DIY", you are funding education rather than sales.

Common ways small budgets get wasted

When we look at accounts that have been running without proper attention, the same handful of problems come up repeatedly. Each one quietly consumes budget that should be buying enquiries.

• No negative keywords. Words like "free", "jobs", "salary", "DIY" and "training" appear in almost every account we review. Each one is paying for a click from someone who will never buy.
• Broad match without supervision. Broad match can work, but on a small budget it needs a firm negative list and weekly attention to search terms.
• Sending all traffic to the homepage. If someone searches for a specific service, send them to a page about that service. Homepage traffic converts poorly and inflates your cost per enquiry.
• Location settings left on the default. Google's default can include people merely showing interest in your area. Set it to presence only if you serve a defined patch.
• Running ads outside trading hours with no call handling. A missed call is a paid click thrown away. This is one reason small businesses look at AI call answering, which starts from £20 a month, so out of hours enquiries at least get captured.
• No conversion tracking, or tracking that counts page views as conversions. If everything is a conversion, nothing is.
• Auto applied recommendations left switched on. These can quietly widen your targeting and increase spend in ways you did not choose.

If you want to check your own account, our walkthrough on how to audit your Google Ads account in under an hour covers each of these in order.

How long before you know if it is working?

Give it three months of consistent spend. The first month is largely learning: the algorithm gathers data, you find negative keywords, and you discover which searches actually produce enquiries. Month two is where you start cutting waste. Month three is usually the first fair read on cost per enquiry.

Turning campaigns on and off weekly is one of the most expensive habits in small business advertising. Every restart resets the learning, and you pay for that education twice.

Budget for the trial properly. If your maths says £750 a month, plan for £2,250 over a quarter and treat that as the cost of finding out. If you genuinely cannot commit to three months, it is usually better to wait until you can than to spend six weeks and conclude that "Google Ads does not work".

Seasonality and flexing the number

Very few small businesses should spend the same amount every month. A gardener, a heating engineer and a wedding photographer all have obvious peaks. Two practical approaches:

1. Annual budget, monthly flex. Decide a yearly figure and weight it towards your busy months. A boiler engineer might spend double in October and November and very little in June.
2. Fixed monthly, seasonal targeting. Keep spend steady but change what you advertise. The same engineer might promote servicing in summer and emergency repairs in winter.

Google's daily budget can overspend on individual days and balance out over the month, so judge by monthly totals rather than panicking at a single day's figure.

Frequently asked budget questions

Can I start with £100 a month?

You can, but expect it to teach you very little. If £100 is genuinely the ceiling, put it towards your Google Business Profile, reviews and website content instead, and come back to paid ads when you can commit to a fuller test.

Does a bigger budget mean higher positions?

Not directly. Ad position is decided by bid, ad quality and expected impact, not by your monthly budget. Budget controls how often you can afford to show, not where you appear when you do. Nobody can promise you a fixed position, and any agency that does is guessing.

Should I pay a percentage of spend or a fixed fee?

For small budgets, percentage models often come with a minimum fee that works out expensive anyway, and they create an incentive to grow your spend rather than your profit. A fixed monthly fee keeps the incentives simple, and the UK pricing guide linked above covers the trade offs in more detail.

What if my competitor is spending far more?

You do not have to outspend them, you have to out focus them. Narrower geography, sharper keywords, better landing pages and faster response to enquiries all let a smaller budget compete on the searches that matter most to you.

Should the budget include VAT?

Google Ads charges in the UK attract VAT, so factor that into your cash flow planning even if you reclaim it. When you set a monthly figure, be clear with yourself whether it is inclusive or exclusive.

How do I know if my current spend is being used well?

Look at your search terms report, your conversion tracking and your impression share. If those three look healthy, spend is probably being used sensibly. If you would rather someone else looked, a free Google Ads audit will tell you where the waste is before you change the number.