"How much should I spend on Google Ads?"
Ask five agencies and you will get five different numbers. Most of them pulled from thin air. The honest answer is: your budget depends on your cost per click, your conversion rate, your margins and what you need each lead to cost to make money. Not on some generic "starter package" number.
This guide gives you a simple formula, a step by step walkthrough and free tools that do the maths for you. Try our Google Ads budget estimator for a quick estimate or read on to understand the method first. In about 10 minutes, you will have a defensible budget range, not a guess.
The 60 Second Budget Maths (The Only Formula You Need)
Before you open any tool, you need to understand five lines of maths. These are the same formulas we explain in our Google Ads cost guide for Melbourne businesses and they work anywhere in Australia.
Quick example with round numbers: you spend $3,000 per month. Average CPC is $10. That is 300 clicks. If 5% of clicks convert to leads, you get 15 leads. Your cost per lead is $200. If 30% of leads become customers, that is about 4 to 5 sales at a cost per acquisition of roughly $667.
That is it. Multiplication and division. The hard part is not the maths. It is getting honest inputs.
Step 1: Pull a CPC Estimate Using Google Keyword Planner
Your entire budget calculation hinges on cost per click. Get this wrong and everything downstream is fiction.
How to find your CPC estimate
Go to Google Keyword Planner (you will need a Google Ads account, but you do not need to run any ads).
Click "Discover new keywords" and enter your core service terms (e.g. "emergency plumber," "physiotherapy near me," "custom furniture Melbourne").
Set the location to your actual service area. This matters. National averages are useless if you only service one city or region.
Look at the "Top of page bid (high range)" column. This is the upper end of what advertisers are paying for top positions.
Take the midpoint between the low and high range as your starting estimate. If the range is $5 to $18, start with $10 to $12 as your planning CPC.
If the CPC range is massive (say, $4 to $45), that usually means there is a mix of high intent and low intent keywords in your list. Segment them. Emergency keywords will always cost more than informational ones.
Step 2: Choose Realistic Conversion Assumptions
This is where most people lie to themselves. They assume a 10% conversion rate because it sounds nice.
Scenario | Conversion Rate | Close Rate | Best For |
Conservative | 3 to 4% | 20% | Never run ads before, new landing page |
Moderate | 5 to 7% | 25 to 30% | Some ad history, decent landing page |
Optimistic | 8 to 12% | 30 to 40% | Proven campaign, strong landing page |
If you have never run Google Ads before, start with the conservative numbers. Running your budget model on optimistic assumptions does not give you a plan. It gives you a fantasy.
You also need to know what a customer is actually worth to you. Our customer lifetime value calculator can help you work that out. If you know the lifetime value, you can work backwards to an acceptable cost per lead and therefore a realistic budget.
For most service businesses, the close rate (percentage of leads that become paying customers) sits between 20 to 40%. Ecommerce is different because the "lead" and the "sale" are often the same event.
Step 3: Turn Your Budget Into Predicted Outcomes
Plug in your inputs from Steps 1 and 2 and model the predicted outcomes. Here is what goes in and what comes out.
Inputs you will enter
Monthly ad budget (how much you are considering spending with Google)
Average CPC (from Step 1)
Conversion rate (from Step 2)
Lead to sale rate / close rate
Average sale value
Gross margin (percentage of revenue that is actual profit before overheads)
Management fee (percentage of spend, fixed monthly or none if DIY)
Outputs you will get
Estimated clicks, leads and sales per month
Cost per lead (CPL) and cost per acquisition (CPA)
Estimated revenue and gross profit from ads
Net profit after ad spend and management fees
ROAS (return on ad spend) and MER (marketing efficiency ratio, which includes fees). Use our ROAS calculator to model the return separately.
The sanity check (most important part)
The calculator also includes break even figures. Break even CPA is the maximum you can pay to acquire a customer and still make gross profit. If your CPA from the calculator is above this number, the maths does not work at those assumptions. Something needs to change: your CPC needs to come down, your conversion rate needs to go up or your margins need to improve.
Break even CPC is the maximum CPC you can afford given your conversion rate and margins. If the Keyword Planner CPC is above this, you either need a better landing page (to lift conversion rate) or to accept that this niche is too expensive at your current margins.
If the break even numbers look tight, run the model at multiple budget levels to see where the inflection point is.
"What Should I Spend Per Month?" (Decision Rules)
There is no universal answer, but here are three practical rules that apply to most Australian small businesses. If you are trying to decide how much of your total marketing budget should go to Google Ads vs other channels, our marketing budget allocator can help you divide the spend.
Rule 1: Your budget needs to buy enough clicks to learn. Google's algorithms need roughly 15 to 30 conversions per month to optimise effectively. Work backwards from your conversion rate. If your CVR is 5%, you need 300 to 600 clicks per month. At $10 CPC, that is $3,000 to $6,000. If your budget cannot produce at least 15 conversions per month, you will be guessing for a long time.
Rule 2: If you cannot track conversions, you are budgeting blind. This is not optional. Without conversion tracking (form submissions, phone calls, purchases), Google cannot optimise, you cannot calculate real CPA and the calculator outputs are just theory. Set up tracking before you spend.
Rule 3: Start with a test budget, then scale what works. Do not commit your entire annual marketing budget on month one. Spend enough to get statistically meaningful data (usually 4 to 8 weeks at a reasonable volume), then double down on what is converting and cut what is not.
The ACCC's guidance on advertising claims is worth noting here too. If you are making specific ROI or results claims on your landing pages, they need to be truthful and substantiated. Do not promise outcomes your ads cannot deliver.
Quick Wins: 10 Minute Budget Sense Check
Already spending on Google Ads? Run through these checks before your next budget decision. Use our waste estimator alongside this check to see how much of your current budget might be going to irrelevant traffic.
Plug your actual CPC into the model. Google Ads, then Campaigns, then add the "Avg. CPC" column. Use your real number, not a benchmark.
Plug your actual conversion rate in. Google Ads, then Campaigns, then add the "Conv. rate" column. If it says 0%, your tracking is broken.
Compare your actual CPA to the break even CPA. If actual is higher, you are losing money on every customer acquired through ads.
Check whether you are including management fees. Many businesses calculate ROAS on ad spend alone, ignoring the $1,500 per month they pay an agency. MER gives you the real picture.
Run the model at different budget levels. See what happens if you increase budget by 20% or if conversion rate improves by 1 to 2 percentage points. Small changes can flip a campaign from loss making to profitable.
What We Recommend at Elev8d
Run the budget model before any budget conversation. Whether you are talking to us, another agency or deciding to go DIY, you should know your own numbers first. An agency that cannot explain how your budget connects to predicted leads, CPA and profit probably is not managing your campaigns properly. Our Google Ads management approach starts with honest maths, not arbitrary spend levels.
If the break even maths does not work on paper, do not force it with hope. Sometimes the right move is to invest in a better website and landing pages first, so your conversion rate makes ad spend worthwhile. Other times, our organic search service is a better first step while you build the budget runway for paid ads.
And if you want us to sanity check your numbers, get in touch. No pitch, just honest maths.
FAQs
Is $500 per month enough for Google Ads?
Rarely. At $500 per month you are looking at roughly $16 per day. If your average CPC is $8, that is 2 clicks per day or about 60 per month. At a 5% conversion rate, that is 3 leads. Google's algorithms cannot optimise on 3 conversions. For most industries, $1,000 is a minimum to learn from and $2,000 to $3,000 is where results become meaningful.
What is a "good" CPC or CPL?
A CPC is "good" if it produces leads at a CPA you can afford. A $40 click that converts 10% of the time ($400 CPA) might be profitable for a lawyer but disastrous for a cleaner. Do not benchmark CPC in isolation. Always tie it back to what a customer is worth to your business.
How long until I know my real CPL?
After 2 to 4 weeks of running ads with proper conversion tracking, you will have enough data to replace your planning estimates with real numbers. Some high volume campaigns get reliable data faster. Low volume campaigns (less than 100 clicks per week) take longer. Do not make big budget decisions in the first 7 days.
Why do my costs jump week to week?
Common causes: a competitor increased their bids, seasonal demand shifted (EOFY for accountants, summer for aircon), Google made auction or algorithm changes or your Quality Score dropped because a landing page went down. Check your auction insights and search terms reports first. Week to week fluctuations of 10 to 20% are normal. Sustained jumps of 30%+ mean something changed.
Should I count agency fees in my budget?
Yes. Your real cost to acquire a customer is ad spend plus management fees. The calculator includes a management fee field for exactly this reason. ROAS (return on ad spend) does not include fees. MER (marketing efficiency ratio) does. MER is the number that tells you whether your total marketing investment is profitable.
A Note on Tracking and Privacy
Good budget planning requires good conversion tracking. That means collecting some data about what visitors do on your site. If you are using remarketing pixels, form submissions or call tracking, you are handling personal information under the Australian Privacy Principles. The basics: have a privacy policy, only collect what you need and be transparent about what you are doing with data.
If your landing pages collect customer details, basic security hygiene matters too. The Australian Cyber Security Centre's small business guide covers the essentials: SSL certificates, keeping software updated and controlling who has access to your ad accounts and analytics.
Next Steps: Pick Your Path
Path 1: DIY
Use the budget estimator tool, pull your CPC estimates from Keyword Planner, plug in your numbers and set a test budget based on what the maths tells you. Revisit after 4 weeks with real data.
Path 2: Get a sanity check
Send us your industry, location and rough margins. We will run the numbers and tell you whether your planned budget makes sense or needs adjusting.
Path 3: Hand it to a pro
If you would rather skip the spreadsheet and have someone build the campaigns properly from day one, book a quick call with our team.
Sources and Further Reading
Google Keyword Planner: ads.google.com. Free tool for CPC estimates by keyword and location.
ACCC: Advertising and Selling Guide: accc.gov.au. Guidance on truthful advertising claims.
OAIC: Australian Privacy Principles: oaic.gov.au. Basics on handling personal information.
Australian Cyber Security Centre: Small Business Guide: cyber.gov.au. Security essentials for sites collecting customer data.
Google Ads Help: About Ad Rank: support.google.com. How Google determines ad position and actual CPC.
General information only. Rules vary by situation, particularly around advertising claims, privacy, reviews and consumer law. If you are unsure about compliance, get professional advice.
