How much do Google Ads cost?

The price of Google Ads is exactly what you allow Google to bill you. You choose the amount you are willing to pay per day, and Google will spend that exact amount. Google may spend both more or less than your daily budget, but on a monthly basis the budget will match the amount you…

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Yes, yes, I knew that—but how much should I actually spend on Google Ads?

This question is as old as Google Ads itself, and unfortunately the answer is quite nuanced.

BUT!!

I am going to do what no one has done before: I am going to create a formula that allows you to calculate how much you should invest in Google Ads based on the output you want. Because that is the purpose of Google Ads—to realise potential.

The logic, or the quicker answer

There is a longer rationale behind my formula, based on my experience running a Google Ads agency. So if you are not interested in a factual answer to the question “how much do Google Ads cost?”, but would rather have a quick number based on a general observation, I would say that you should invest at least DKK 15,000 per month, incl. any fees for consultants.

If, on the other hand, you would like to calculate what Google Ads investment would give you the output you dream of achieving, then please read on—you won’t be disappointed.

”Hvad skal du investere i Google Ads”-beregneren

Nedenfor kan du indsætte nogle variabler, og så fortæller beregneren dig hvad du bør være villig til at investere, baseret på nogle tommelfingerregler og mellemregninger.

Disclaimer for the calculator

Before I do my calculation, I will make two assumptions up front:

By “Google Ads”, I assume this refers to Google’s most popular advertising option: search ads.
And since you are asking about the price of Google Ads, I assume you do not have in-depth knowledge of Google Ads. Therefore, I will assume that your Google Ads efforts are purchased externally (through agencies or consultants).

Google Ads is a sales-driving marketing activity, and therefore I will calculate what you should spend on Google Ads based on the output you can expect to receive in lead value.

Download the formula if you want

I have chosen to prepare the calculation so you can also find it in Excel, which you can download via the link below—completely free of charge. I do not require your email, your cookie, or your firstborn. 😉

In this sheet, you can enter your values/numbers where I have marked in green, and then you will get the answer to what you should invest in Google Ads. Note that the formula is designed for lead generation and not e-commerce.

The following sections explain the logic behind the sheet, as well as how you should use it.

Download the calculation sheet here

First, calculate what your leads are worth

First, you need to answer the questions below. Then we can calculate your Google Ads cost.

Answer the questions

What is an average customer worth to you? (just over 1 year)
How many leads does it take before you have a customer (conversion rate from enquiry to customer)?
How many website visitors does it take to get one lead (conversion rate from visitor to lead)?

Calculate the value of clicks and leads

In the calculation below, I use an example where:

An average customer is worth DKK 150,000 in year 1
30% of all leads become customers
1.5% of visitors become leads

DKK 150,000 in value in year 1 X 0.3 = in this example, a lead is worth DKK 45,000

DKK 150,000 in value in year 1 X 0.3 X 0.015 = a click is worth DKK 675. (therefore click prices can be high if they generate relevant traffic)

Calculation of what you should be willing to pay

Now we know the value of a lead, so we can calculate what you should invest, and for that we need two rules of thumb:

The relationship between the budget for the consultant fee vs. ad spend should, ROUGHLY speaking, be about 33% for management and 66% for spend.
Your Google Ads costs (incl. consultant fees) should amount to 35% of the lead value.

DKK 45,000 in lead value X 0.35 in rule of thumb no. 2 = DKK 15,750 per lead.

The split between ad spend and fees should be as follows in this example:

DKK 5,197.5 in fees per lead on average
DKK 10,552 in ad spend per lead on average

Conclusion to the question—“How much money do you need to spend on Google Ads?”

In the example presented, you should be prepared to pay DKK 15,750 per qualified lead from your Google Ads efforts, incl. consultant fees.

Now you literally need to decide how many leads you think you can afford to “buy” each month. You then multiply this number of leads by the cost per lead—which, in the running example, we have set at DKK 15,750 each. This will give you the figure for what your monthly Google Ads investment should be.

There you have it; the answer to how much Google Ads cost.

Calculation: “I would like 2 customers per month.”

Using the same example as earlier, the logic dictates that with a 30% conversion rate on leads, we need 7 leads to achieve 2 customers = in this example, you should invest DKK 110,250 per month in Google Ads.

It may sound high, but remember that you get DKK 150,000 in value per new customer (year 1). That means that with 2 customers per month, it will give you an ROI of 2.7.

If you have a high customer lifetime value (CLV), that should only make you even more willing to invest in acquiring customers in year 1.