Every answer you find to this question online is either "it depends" or a made-up figure. It does depend, but not on anything mysterious. It depends on four things you already know or can find out in an hour, and once you have them you can set a budget you can defend rather than a number that felt about right.
Start from what a customer is worth, not from what you can spare
The most common way to set an ad budget is to decide what you can afford to lose. It is understandable and it is backwards, because it tells you nothing about whether the spend can work.
Instead, work out four numbers.
1. What one customer is worth to you
Use profit, not revenue, and use the whole relationship rather than the first job. If a customer typically spends with you again, or refers someone, that belongs in the figure. Be honest but not optimistic.
2. How many enquiries it takes to win one customer
If you win roughly one in three of the enquiries you quote, then an enquiry is worth about a third of a customer. Most owners know this number roughly. If you do not, guess conservatively and correct it later.
3. What you can afford to pay for an enquiry
Multiply the value of a customer by your win rate, then decide what share of that you are willing to spend to get it. Some businesses are comfortable spending a fifth. Some, with high margins and spare capacity, will happily spend half. This is a business decision, not a marketing one.
4. How many enquiries you actually want
Capacity matters. There is no point buying twenty enquiries a month if you can only quote eight properly. Underserved enquiries cost you reputation as well as money.
Your budget is then simply the number of enquiries you want multiplied by what you can afford to pay for one. It will not be exactly right at first, but it is a figure with reasoning behind it, and you can adjust it as real numbers come in.
The awkward bit: you will pay to learn
For the first stretch, some of your spend buys data rather than customers. You are finding out which searches convert, which pages work, which times of day are worth being visible. That is a real cost and it is worth planning for rather than being surprised by.
This is also why very small budgets often disappoint. If clicks in your trade are expensive, a tiny monthly budget might only buy a handful of clicks a day, which is not enough to learn anything from before the month ends. In that situation you have three sensible options: narrow the targeting so the small budget goes further, focus on one service instead of five, or wait until you can fund a proper test.
Narrow beats thin
If your budget is modest, the temptation is to spread it across everything so you do not miss out. Resist it. A small budget concentrated on your highest-value service, in your best area, on the searches closest to buying intent, will nearly always outperform the same money spread across the whole business.
Concentration also makes the results readable. When one campaign has all the budget, you can tell whether it worked. When six campaigns each have a fraction, you learn nothing about any of them.
What to spend it on first
In rough order of usefulness for a local service business: searches for exactly what you do, plus your location. Then searches for the same thing without a location, if your area targeting is sound. Then your own brand name, which is cheap and stops others appearing above you. Broader discovery campaigns come much later, once you know what a good enquiry looks like and the account can recognise one.
Signs you should spend more
- Your ads are running out of budget well before the end of each day, on searches you know are good.
- Your cost per enquiry is comfortably below what you decided you could afford.
- You have capacity to take on more work, and you are turning down nothing.
- The pattern has held for more than a few weeks, not just one good fortnight.
Signs you should spend less, or stop
- You cannot yet tell which enquiries came from ads. Fix the tracking before you spend another month.
- Your cost per enquiry is above what a customer is worth, and you have already cleaned up the obvious waste.
- You are at capacity and quoting badly because you are stretched.
- The ads work but the website converts poorly. Money is better spent on the site first.
How to increase it without breaking things
Raise budgets gradually rather than doubling them overnight. Big jumps change how the platform behaves and make it hard to tell whether a change in results came from the extra money or from the disruption. Move in steps, keep an eye on cost per enquiry, and stop increasing when that number starts to climb. That is the point where you are buying weaker traffic.
A word on the "management fee" question
If you are paying someone to run the ads, count that in the total. The right question is never whether the fee is cheap, it is whether the total of spend plus fee is comfortably less than the value of the work it brings in. A cheaper manager who wastes budget costs more than an expensive one who does not.
The version to remember
Your Google Ads budget is the number of enquiries you want, multiplied by what an enquiry is genuinely worth to you, adjusted for the fact that early spend buys learning. Everything else, from bidding strategies to campaign types to clever automation, only matters once those numbers are written down.