How Much Should a Small Business Spend on Google Ads?
The single most common question we get from small business owners is some version of: how much should I be spending on Google Ads? The honest answer is that it depends on what a customer is worth to you and how competitive your industry is - but you don't need a spreadsheet to get started. Here are the budget tiers we see actually work for small businesses, and what to expect from each.
$500 per month: the testing budget
At $500/mo you are not running a marketing campaign - you are running an experiment. Expect 50 to 150 clicks per month depending on your industry. That is enough to figure out which keywords convert, which landing page version wins, and what your real cost per lead looks like. It is not enough to predictably fill a calendar.
Use this tier when you are brand new to ads, when you are validating whether Google Ads will work for your business at all, or when you sell something with a high lifetime value (one new client pays for six months of ads).
$1,500 per month: the sweet spot for most local businesses
This is where most of our small business clients land. At $1,500/mo you can run two or three tightly scoped campaigns - usually one branded search campaign, one high-intent service campaign, and a small local map campaign. You'll generate enough lead volume (typically 15 to 40 per month for service businesses) to see patterns and optimize.
Plumbers, electricians, lawyers, dentists, junk removal, cleaners, roofers - all of these typically see strong ROI in this range. If your average customer is worth $300+, this tier almost always pencils out.
$3,000+ per month: scaling what already works
Only spend at this tier after you have proven that $1,500/mo is profitable. At $3,000+ you can layer in retargeting, broaden your keyword set, run YouTube or Display, and start competing in adjacent service areas. This is where you go from steady leads to predictable growth.
How to actually pick your number
- →Take your average customer value (revenue, not profit) and divide by 5 - that's a reasonable monthly ad budget to start.
- →Plumber averages $400/job? Start at ~$1,500/mo with room to grow.
- →Lawyer averages $3,000/case? You can comfortably test at $2,000-3,000/mo.
- →Pizza shop averages $25/order? Google Ads is probably not your best channel - try Meta Ads or local SEO first.
What about the agency fee?
Most agencies charge a flat retainer ($1,000-3,000/mo) on top of your ad spend, which is brutal at the testing tier - you'd spend more on the agency than on the ads. At Cedar our management fee scales with your spend, so a $500/mo budget doesn't get crushed by a $2,000 retainer. Always ask up front.
Bottom line
Start at the smallest budget that gets you 50-100 clicks per month in your industry. Run it for at least 60 days before judging. Scale up when cost per lead drops below your customer value divided by ten. Pull back when it doesn't. There's no magic number - just disciplined testing.