How to Set a Realistic PPC Budget

At Lillian Purge, we specialise in Local SEO Services and provide practical advice on How to set a realistic PPC budget for your business, helping you allocate spend effectively and achieve sustainable growth.

Pay-per-click (PPC) advertising can be one of the most effective ways to attract customers quickly, but success depends on how you allocate your budget. Spending too little may limit results, while overspending without a clear plan can reduce profitability. Setting a realistic PPC budget requires balancing your marketing goals, competition, and expected returns. With the right approach, you can ensure every pound you spend delivers measurable results.

Understand Your Goals

Before setting a PPC budget, identify what you want to achieve. Clear objectives help define how much to spend and where to allocate funds. Your goals might include:

• Increasing website traffic

• Generating qualified leads

• Boosting local visibility

• Driving ecommerce sales

• Promoting a specific service or product

Each objective may require a different level of investment. For example, a brand awareness campaign generally costs less per click than a competitive sales campaign focused on high-intent keywords.

Research Your Industry and Competition

Every industry has different PPC costs. Sectors like finance, legal services, and healthcare tend to have higher average cost-per-click (CPC) rates because of intense competition, while others may be more affordable.

Use tools like Google Keyword Planner or Semrush to research keyword costs in your niche. Look at the average CPC for your target terms and multiply that by the estimated number of clicks needed to achieve your goals.

For example, if your target keyword costs £2 per click and you expect to attract 500 clicks per month, your initial budget should be around £1,000. Adjust this figure depending on your competition level and conversion rate.

Start with a Test Budget

If you’re new to PPC, start small to gather data before committing a larger budget. A 30 to 60-day test campaign helps you understand your audience, refine keywords, and evaluate which ads generate the best results.

During this phase, monitor metrics such as:

• Click-through rate (CTR)

• Conversion rate (CVR)

• Cost per lead (CPL) or cost per sale (CPS)

• Return on ad spend (ROAS)

Once you know which campaigns are performing well, you can increase spending gradually to scale results without unnecessary risk.

Calculate Your Break-Even Point

To ensure your budget is realistic, you need to understand how much you can afford to pay for each lead or sale. This involves calculating your break-even point:

Break-even CPC = (Average sale value × Profit margin) × Conversion rate

For example, if your average sale is £200, your profit margin is 30%, and your conversion rate is 5%, your break-even CPC is £3. This means you can afford to pay up to £3 per click before your campaign becomes unprofitable.

Knowing this figure helps you set bids that maintain profitability while staying competitive in the ad auction.

Factor in Conversion Rates

Your conversion rate plays a major role in determining your ideal PPC budget. If your website converts visitors efficiently, you can spend more per click and still maintain a healthy ROI.

For example, if 10% of visitors make a purchase, you only need 10 clicks to generate one sale. However, if your conversion rate is 2%, you’ll need 50 clicks for a sale, increasing your required budget.

Improving your landing pages, ad relevance, and user experience can reduce costs over time by increasing conversion efficiency.

Consider Campaign Type and Platform

Different platforms and campaign types have varying costs. Google Ads typically deliver faster conversions but come at a higher CPC, while Meta or LinkedIn Ads may provide cheaper traffic for brand awareness.

Decide where your target audience spends time online and align your budget accordingly. For example:

• Local service providers often benefit from Google Local Services Ads.

• B2B companies see strong results from LinkedIn Ads.

• Retail brands perform well with Meta or Google Shopping campaigns.

Testing multiple platforms can reveal where your advertising budget generates the best return.

Use the 70-20-10 Rule

A simple budgeting model for PPC is the 70-20-10 rule:

• 70% of your budget goes to proven campaigns that consistently perform well.

• 20% is used to test new keywords, ad formats, or audiences.

• 10% is reserved for experimental opportunities or seasonal promotions.

This strategy ensures stability while allowing flexibility to explore new growth areas.

Track and Adjust Regularly

A realistic PPC budget is never static. Regular monitoring helps identify where your money is working hardest. Review campaign performance weekly or bi-weekly to evaluate spend and ROI.

If certain keywords or campaigns underperform, reallocate budget to those delivering higher returns. Using automated bidding strategies can also help control costs by optimising bids for maximum conversions.

Key metrics to review include:

• CPC (Cost per Click)

• CPA (Cost per Acquisition)

• CTR (Click-through Rate)

• ROAS (Return on Ad Spend)

Consistent tracking ensures your budget remains efficient and aligned with your goals.

Don’t Forget Hidden Costs

When planning your PPC budget, account for hidden costs beyond ad spend. These may include:

• Agency or management fees if outsourcing campaigns

• Landing page design or development costs

• Tracking and reporting tools

• Copywriting or creative asset creation

Factoring these expenses upfront prevents overspending and helps measure total campaign profitability more accurately.

Use Geographic and Demographic Targeting

To make your budget more effective, narrow your targeting to specific regions, demographics, or customer types. For local businesses, using location targeting ensures your ads appear only to users within your service area, reducing wasted clicks.

Similarly, demographic targeting allows you to focus on age groups, job titles, or interests that match your ideal customers. Smaller, highly targeted campaigns often deliver better ROI than broad, unfocused ones.

Allocate Budget Based on Customer Lifetime Value

If your business benefits from repeat customers, factor customer lifetime value (CLV) into your PPC budgeting decisions. Even if acquiring a customer costs more initially, their long-term value can justify a higher cost per acquisition.

For example, if a customer spends £100 monthly and stays loyal for a year, their CLV is £1,200. You can afford to invest more in advertising to win that customer initially.

Final Thoughts

Setting a realistic PPC budget requires balancing your financial capacity with your marketing goals. By analysing keyword costs, conversion rates, and profit margins, you can build a budget that maximises returns without overspending.

Start small, test thoroughly, and scale your best-performing campaigns. With consistent tracking, refinement, and data-driven decisions, your PPC budget can become one of your business’s most efficient and profitable marketing investments.

We have also written in depth articles on How Pay Per Click advertising supports Local SEO and The difference between PPC and SEO: when to use each as well as our Pay Per Click Advertising Hub to give you further guidance.