Google Ads budget for a small business: how to calculate it

How much should you budget for Google Ads when you run a small business? The answer is a calculation, not a range. The right budget depends on what you can pay to win a customer, not on a percentage of your revenue. Here’s the method I apply to an account before I touch any budget.

Why a percentage of revenue doesn’t work

The “5 to 10% of revenue” rule is everywhere. It has one flaw: it ignores your margin. Two businesses with the same revenue can have a 15% margin or a 60% margin. The same budget would be reasonable for the second and ruinous for the first.

It ignores your market too. In a sector where clicks are expensive, a modest budget only brings in a handful of sales a month. The percentage doesn’t tell you whether that volume is enough for the account to be readable.

So the starting point is a different figure: what you’re willing to pay to win a sale. The budget follows from it.

Step 1: work out what you can pay for a sale

Take the margin you make on a sale, after the cost of the product or service, delivery and payment fees. That’s your gross margin per sale. Everything you pay Google to win that sale has to stay below it.

Then set aside part of that margin to stay profitable. What’s left is your target acquisition cost. Example assumption: a sale leaves you €60 of margin and you want to keep €20, so your target acquisition cost is €40.

Two precautions matter here. If your customers buy again, you can reason on the margin of several orders, but only with figures you have actually measured. And if you sell a service on quotation, the “sale” is the signed contract, not the enquiry.

Step 2: from cost per sale to a monthly budget

Google needs data to optimise. For its Target CPA bid strategy, it recommends at least 15 conversions in the last 30 days for Shopping and Search campaigns, according to its help page on Target CPA. That’s a recommendation about history, not a threshold for success.

From it you get a floor budget: target acquisition cost multiplied by 15, over a month. The table below is a simulation based on acquisition cost assumptions. These are not observed results, nor market averages.

The formula is the same on your account: monthly budget = target acquisition cost × 15, then ÷ 30.4 for the daily budget. This simulation assumes you hit your target cost, which only your real data will confirm after a few weeks.

What Google really does with your daily budget

The budget you enter is an average daily budget. According to Google’s help page on the subject, a campaign can spend up to twice that amount on a given day. Over a month, the limit is 30.4 times the average daily budget.

In practice, a budget of €20 a day doesn’t mean €20 spent every day. Some days you pay less, others up to €40, and the monthly total stays capped at €608.

One point to keep in mind: the budget is a spending limit, never a promised volume of sales. It doesn’t tell you how many customers you’ll get. It only tells you what you’re willing to risk.

Before you launch, check that sales are being recorded in the account correctly, with no duplicates. Otherwise you’re setting a budget on a wrong figure. I go through this check in the article on setting up GA4 key events without duplicating Google Ads conversions.

What to do if your budget is too tight

If the calculation gives €1,200 a month and you only have €400, don’t spread the budget over everything. A small budget split across ten campaigns gives you no readable data anywhere.

You have three levers, to try in this order:

1. Narrow the scope. A single campaign, on the products or services that leave you the best margin.
2. Tighten the location and the ad schedule. Fewer off-target clicks, so a lower cost per sale.
3. Revisit the target acquisition cost. If your margin allows it, accept paying a little more per sale to reach a readable volume.

There’s a fourth route, which is not to launch Google Ads just yet. If your margin per sale is too low to absorb a realistic acquisition cost, the problem lies in the offer or the price, not in the advertising budget.

How to tell whether the budget is set right

Allow 6 to 8 weeks before a new account’s data becomes readable. In the meantime, avoid changing the budget every three days: you’d no longer know what the change in the figures is down to.

At the end of that period, look at three things:

• The real cost per sale, compared with your target acquisition cost.
• Impression share lost due to budget, which tells you whether Google could have spent more.
• The number of sales over 30 days, compared with the 15 recommended by Google.

If the real cost is below your target and the budget is limiting impressions, raise the budget. If the cost is above target, raising the budget makes the loss worse: fix the targeting or the tracking first. For Shopping accounts, the logic is close to the one described in the Performance Max guide.

My take

A Google Ads budget is set backwards: you start from the margin and arrive at the budget, never the other way round. Ready-made ranges are reassuring, but they make you spend a figure that has nothing to do with your economics.

My stance: start lower than your calculation, but on a narrow scope. Better 15 sales on one well-tracked campaign than 3 sales across five campaigns. Then you scale up, step by step, when the real figures allow it.

If you’d like to compare your situation with this reasoning before spending anything, get in touch: I’ll give you an order of magnitude, which you’ll then validate with your own data.

Frequently asked questions

What’s the minimum budget to start Google Ads?

There’s no universal minimum. The floor budget depends on your target acquisition cost: multiply it by 15, the number of conversions Google recommends over 30 days for Target CPA. If that figure is more than you can invest, narrow the scope before you cut the budget.

Should you set the budget per month or per day?

Google Ads is set per day. Divide your monthly budget by 30.4 to get the average daily budget. A single day can spend up to twice that amount, but the monthly limit stays at 30.4 times the daily budget. So keep some cash headroom for those swings.

How long before you judge the budget?

Allow 6 to 8 weeks for a new account. The first days are for collecting data, not for drawing conclusions. Changing the budget too often muddies the figures. Set a review date in advance and compare the real cost per sale with your target acquisition cost.

Can you overspend your monthly budget without meaning to?

Not beyond the limit of 30.4 times the average daily budget, according to Google’s help page. On a given day, however, spend can reach double the daily budget. If your cash flow is tight, set a daily budget you could still bear in that case.

Should you increase the budget when sales are going well?

Only if the real cost per sale stays below your target and the budget is limiting impressions. Raise it in steps and let a full conversion cycle pass before judging. If the cost per sale climbs after the increase, go back to the previous step.