Let me tell you something most Google Ads "gurus" won't: setting a proper budget isn't complicated.
The real problem? Most advice you'll find online is wrapped in so much fluff and jargon that it makes a simple process feel like you need a PhD in computer science to figure it out.
And that's where business owners—and even some agencies who should know better—get it wrong.
I first started with Google Ads back in 2019, and for the last couple of years, I've been managing in-house campaigns here at Websites That Sell and consulting with new clients.
Through trial, error, I've developed a framework that removes the confusion and helps businesses arrive at a realistic budget that aligns with what they're actually trying to accomplish.
The best part? It takes less than 10 minutes.
I call it the "Five-Factor Smart Google Ads Budget Method," and I'm about to show you exactly how it works and how to apply it to your business right now.
How The 5-Factor Smart Google Ads Budget Method Works
Look, at its core, calculating your Google Ads budget is fairly straightforward. You only need to understand five basic drivers:
Business goals - your revenue targets and what you're actually trying to achieve
Average job value - On average how much is one customer worth on the first sale? ($500, $1,000, $5,000)
Close Rate - Out of all the leads you get, how many actually become paying customers? (e.g. 1 in 3 leads = 33%)
Average cost per click - what traffic costs in your market
Conversion rate - on average how many of those clicks turn into leads and sales
Once you've got real data for these five factors (and yes, I'll show you exactly where to find them), you simply plug them into a straightforward calculation.
When you start budgeting this way, three things happen fast:
You see exactly how much budget you really need to hit your revenue goals.
You know whether your current spend is realistic or not for your industry's CPCs.
You can plan campaigns with confidence, instead of guessing and hoping for results.
How To Calculate Your Google Ads Budget Using the Five-Factor Smart Budget Method
Factor #1: Set Your Goals
Here's a mistake I see constantly: businesses running Google Ads with no clear goal.
Without a goal, every dollar you spend is just a very expensive guess.
Zig Ziglar nailed it when he said: "If you aim at nothing, you will hit it every time."
When I first talk to clients, they tell me they want "more."
So I ask: "More of what, exactly?"
Do you want:
- More leads? (calls, enquiries, bookings)
- More sales? (transactions, service packages)
- A specific revenue target?
I prefer working backward from a revenue target because it forces us to be specific about the number of leads or sales you need to hit that goal.
Example:
Your revenue goal is $20,000/month
Now we can work backwards to figure out what you need to make that happen.
Factor #2: Know Your Average Job Value
On average, how much is one customer worth on the first sale?
This is critical because it determines how many sales you need to hit your revenue goal.
Example:
Average job value: $800
Revenue goal: $20,000/month
Sales needed: 25 jobs
Simple math, but most people skip this step.
Factor #3: Understand Your Close Rate
Out of all the leads you get, how many actually become paying customers?
If you close 1 in 2 leads, that's a 50% close rate. If you close 1 in 3, that's 33%.
Example:
Sales needed: 25
Close rate: 50% (1 in 2 leads becomes a customer)
Leads needed: 50 leads
Now you know exactly how many leads you need to generate.
Factor #4: Check Your Keywords Cost
Once you know how many leads you need, the next step is straightforward: find out what your keywords actually cost.
We're not talking about keyword research here—I'm assuming you've done that already. What you need are realistic CPC ranges for the main keywords you're targeting.
Example (Sydney plumber keywords):
Take the mid-point of each range and calculate an average CPC for your budget calculation. In this example, you're looking at about $35 per click on average.
Knowing what each click costs is only half the equation. You also need to know how many clicks it takes to get a lead.
Factor #5: Estimate Your Conversion Rate
Click costs only tell half the story. What really matters is how many of those clicks turn into leads or sales.
Here are the benchmarks I see in the real world:
Service businesses: Most service businesses including tradies convert between 5–25%. The higher end is usually reserved for ultra-qualified leads—think emergency plumbing or after-hours callouts where someone has water gushing through their ceiling.
E-commerce: Typically 1–3% in Australia, with top performers pushing 3–4% when their products, websites, and offers are properly set up.
These are benchmarks, not guarantees. Your actual conversion rate is influenced by your the competitiveness of your industry, your offer, and whether your landing page looks like it was built in 2003 or yesterday.
A good Google Ads expert should be able to give you an educated guess on what your conversion rate may look like based on the types of businesses they've worked with in the past.
Track your own numbers religiously. Improving conversion rate is one of the fastest ways to stretch your budget further without spending another dollar on ads.
The Budget Calculation Formula
Now that you've defined your revenue goal, your expected cost-per-click, and your approximate conversion rate, it's time to tie everything together into a monthly budget that makes sense.
Here's the chain of logic you need to follow:
- You have a revenue goal (what you want to achieve)
- Each sale has an average value (so you know how many sales you need)
- Some leads turn into sales (close rate)
- Some clicks turn into leads (conversion rate)
- Clicks cost money (CPC)
By combining these factors, you can work backwards from revenue to budget.
The Formula:
Real Example:
Revenue target: $20,000/month
Average job value: $800
Average close rate: 50% (1 in 2 leads becomes a customer)
Sales needed: 25
Leads needed (at 50% close rate): 50
Conversion rate: 20% (1 in 5 clicks becomes a lead)
Clicks required: 250
Average CPC: $15
Budget needed: $3,750/month
This formula gives you a clear, data-driven starting point. Instead of guessing, you're connecting CPC, conversion rate, close rate, and sale value directly to your revenue goal.
Improve any one of those levers and your required budget drops—or better yet, the profitability of your ads increases. Together, they give you a realistic picture of what you need to spend to hit your target.
Now, here's the disclaimer: there's no one-size-fits-all approach. And there are some common mistakes business owners make with this calculation—especially if you have repeat customers (more on that later in this article).
Setting Up Your Budget in Google Ads (The Actual Mechanics)
You've done the math. Now here's how to actually set the budget inside Google Ads.
You’ve got two options
- Go to your campaign settings and edit in there.
- Clicking the edit pencil in the budget column of your campaign.
Why Your Budget Matters (More Than You Think)
Mistake #1: Copying Generic Advice
In Australia, clicks’ cost vary from industry to industry (learn how Google ads costs are calculated here). A personal injury lawyer in Sydney might pay $200+ per click. If you follow generic advice to "start with $10/day," you're getting less than one click every two days—nowhere near enough to start seeing results.
Even for more typical industries where clicks cost $15-30, that $10/day gets you maybe 5-7 clicks per week.
Mistake #2: Guessing Instead of Calculating
Saying "we can afford $1,000/month" isn't a strategy. You need to know: how many clicks that buys, how many of those clicks become leads, and how many leads turn into paying customers.
If you don't work backwards from the math, you're just throwing stuff at the wall and seeing what sticks.
Mistake #3: Starting With Your Full Budget on Day One
This is where most people blow their money.
They calculate they need $5,000/month to hit their revenue goal, so they set their budget to $165/day and turn on the taps.
Two weeks later, they've spent $2,500 with terrible results because the algorithm never had a chance to learn properly.
Here's what happens: Google's Smart Bidding needs conversion volume to optimise. If your budget is too high relative to your conversion rate, you're spending money faster than the algorithm can learn from the data.
Your first goal isn't revenue. It's 30 conversions in 30 days.
Work backwards from that number. Launch there. Get consistent, profitable conversions. Then scale gradually—20-30% increases every couple of weeks—while keeping your CPA in check.
This is the difference between controlled growth and budget blowouts.
Mistake #4: Ignoring the Learning Phase
Google's Smart Bidding algorithms need conversion volume to optimise—ideally 30+ conversions in 30 days. If your budget can't support that threshold, your campaigns stay stuck in learning mode longer.
That means slower optimisation and inconsistent results while competitors who hit that volume threshold scale profitably.
Mistake #5: Forgetting Seasonality
Budgets should move with demand. Tax accountants in June, electricians after summer storms, and retailers before Christmas all need bigger budgets during peak season.
Spend the same amount all year and you'll waste money in quiet months while missing opportunities during surges.
Mistake #6: Blindly Following Google's "Recommended Budget"
Google's suggestions are based on impression share, not your ROI. Following them without question is like letting a car salesman tell you what car to buy even if it doesn’t fit your needs.
You need to set your budget based on profitability and your own numbers, not Google's appetite for more ad spend.
Mistake #7: Ignoring Customer Lifetime Value (LTV)
For repeat-purchase businesses—dentists, gyms, SaaS, some tradies—the first sale is only part of the picture.
If a $200 first-visit patient is worth $1,500 over 12 months, you may be able afford to pay more per lead than you think. Ignoring LTV leads to underfunding campaigns that could profitably scale.
How Google Actually Spends Your Money
You set a daily budget, but Google doesn't spend exactly that amount every single day. It can spend up to twice your daily budget on busy days, but your monthly total won't exceed your daily amount × 30.4.
Example: $50 daily budget = maximum $1,520 monthly spend.
Google might spend $90 on Tuesday and $25 on Thursday. It averages out over the month.
Small Budget Tips (When You're Starting Lean)
For some small businesses, starting with $500–$1,000 a month can work—but it really depends on your industry and average cost per click. If you're in a competitive space where clicks cost $20–$80, that budget might be too limited to generate consistent results.
That said, if your CPCs are lower and you run a tight, focused strategy, a small budget can still drive leads. Here's how:
1. Target Exact Match Keywords Only
Avoid broad match keywords when first starting out. Stick to search terms with clear, obvious intent to keep your spend efficient. Once you've got your cost per lead where it needs to be, you can begin testing different match types.
2. Focus on One Geographic Area
Don't spread yourself too thin. Start by dominating one suburb, region, or city before scaling out.
3. Run Ads Only During Business Hours
If you can't answer the phone or respond to enquiries after hours, don't pay for clicks you can't convert. That's just burning money for the fun of it.
4. Use Plenty of Negative Keywords
Constantly filter out irrelevant searches so your budget goes to the right traffic, not tire-kickers and time-wasters.
5. Optimise Your Landing Page for Conversions
With a small budget, every click counts. A page that is not optimised for conversions will waste precious spend.
When to Get Help
Running Google Ads yourself can work early on, especially if you're testing whether it's viable for your business. But there comes a point where doing it yourself costs you more than hiring someone who knows what they're doing.
Here's when you've hit that point:
You've tried but can't get it to work. You've set up campaigns, followed tutorials, maybe even taken a course—but the leads aren't coming in, or they're costing way too much. Sometimes you just need someone who's done it before to look under the hood.
You're spending more but getting worse results. Your cost per lead keeps climbing and you can't figure out why. You're changing things but nothing seems to help.
You're stuck in perpetual learning mode. Your campaigns never hit 30 conversions per month, so Smart Bidding stays stuck and never optimises properly. You're burning a budget without progress.
Your competitors are running circles around you. They're always showing above you. They're testing ad formats and audiences you don't have time to explore. You're falling behind.
You don't have time to manage it properly. Google Ads isn't "set and forget." If you're not in the account daily making adjustments, opportunities slip through your fingers and money gets wasted.
You're ready to scale but don't know how. You've proven it works at $2,000/month and want to scale to $10,000/month, but you need someone who can manage that growth without blowing your profitability.
If any of these sound familiar, it's probably time to talk to someone who does this full-time.
FAQs
Why is Google charging more than my budget?
Google can spend up to 2x your daily budget on any single day, but your monthly total stays within limits. If you're seeing higher charges, check if you changed budgets mid-month.
Should I run one campaign or multiple?
It depends on your budget and goals. If you're working with a smaller budget ($500–$1,500 per month), one well-structured campaign is often smarter. It keeps your spend concentrated and helps Google optimise faster. Once your budget is larger, running multiple campaigns for different services, locations, or goals gives you tighter control and clearer insights.
Is $20/day enough?
For very local, low-competition services? Maybe. For most businesses in competitive areas? You need $50–$100/day minimum to get meaningful results.
Shared budgets vs individual budgets?
Use shared budgets when you have similar campaigns that can share resources. Use individual budgets when campaigns have different goals or performance levels.
"Pat, This Is Great... But I Need Help"
Look, I get it. You understand the formula, but you'd rather have someone who lives and breathes this stuff handle it for you.
Fair enough.
I do work with a limited number of clients each month—not to sound exclusive, but because I actually do the work myself and refuse to spread thin.
I only work with serious business owners who are ready to invest in growth.
If that's you, reach out. We'll have a chat about your business, your goals, and whether it makes sense to work together.
Fair warning: I'll ask tough questions about your margins and capacity to handle more leads and sales. If you can't answer them, you're not ready yet.
But if you are? Let's talk about turning Google Ads into a predictable growth engine for your business.