PPC Budget Planning: The Arithmetic (UK Guide)

Most PPC budgets are set by gut feel — "let's try £500 a month" — and then judged as failures when the maths never had a chance. A PPC budget isn't a guess; it's arithmetic. Four numbers determine whether your budget can work: what clicks cost, how many convert, what a customer is worth, and how many you need. This guide walks the calculation with a worked example, so you can set a budget that has a fighting chance.

The four inputs (get these before spending anything)

1. Average CPC — what a click costs in your market. Google's Keyword Planner gives ranges; assume the middle-to-high end for planning. A Manchester solicitor might see £8–£15; a local café £0.50–£1.50.
2. Conversion rate — what share of clicks becomes enquiries. A decent service-page converts 3–8% of ad clicks; a poor one under 1%. Be honest about your website — beginners should plan on 2–3% until proven otherwise.
3. Customer value — what a converted lead is actually worth. Not revenue: margin, adjusted for close rate. If 1 in 4 enquiries becomes a £2,000 job at 40% margin, each enquiry is worth £200.
4. Target volume — how many customers you need per month. Ten extra jobs? Fifty?

The worked example

A fictional Leeds boiler company wants 20 extra installations a month. Each installation is worth £400 margin. Research suggests £3 average CPC and a 5% conversion rate.

• Enquiries needed: 20 jobs ÷ 25% close rate = 80 enquiries
• Clicks needed: 80 ÷ 5% conversion = 1,600 clicks
• Budget needed: 1,600 × £3 = £4,800/month
• Return: 20 × £400 = £8,000 margin on £4,800 spend = 1.67x ROAS

Now the honest part: if £4,800/month makes you flinch, the answer isn't to spend £800 and hope. At £800 you'd buy ~267 clicks, ~13 enquiries, ~3 jobs — and conclude "PPC doesn't work". The budget was wrong, not the channel. Either fund the maths or pick a narrower target (fewer services, tighter geography, higher-intent keywords) until the maths fits.

Reverse-engineering from targets

Work backwards from what you need. Want 30 enquiries at a £60 cost per enquiry? That's an £1,800 budget — then check whether your market's CPCs and conversion rates can actually deliver £60 enquiries. If the maths says £120, you have three levers: improve the website's conversion rate (usually the cheapest lever), narrow targeting to higher-intent searches, or accept the higher CPA because the customer lifetime value justifies it.

Setting the test budget

Never launch at full scale. Run a test budget for 6–8 weeks: enough for at least 100–200 clicks per core keyword group (below that, you're reading noise), capped at an amount you can afford to treat as market research. Judge the test on learnings — real CPCs, real conversion rates, real search terms — then set the real budget on evidence instead of estimates.

Scaling rules (and when not to)

• Scale winners, not spend. Increase budgets 15–20% at a time on campaigns hitting target CPA. Doubling overnight resets Google's learning and usually tanks performance for weeks.
• Expand sideways before upwards. New keyword themes, new geographies, new ad formats — growth comes from new profitable pockets, not from bidding more on the same ones.
• Watch impression share. If you're capturing 90%+ of available impressions at target CPA, the market is saturated — further budget just inflates CPCs. Time to expand the market, not the budget.
• Seasonality gets its own budget. If December does 3x November, plan for it in October — including the landing pages and offers, not just the spend.

Lifetime value changes everything

The worked example used first-job margin — but many businesses earn far more over the customer relationship. A boiler installer who also services the boiler annually for a decade; a solicitor whose conveyancing client returns for wills and probate; a B2B supplier with repeat orders. If your average customer is worth £400 on job one but £1,500 over three years, your allowable CPA roughly triples — and suddenly campaigns that looked "unprofitable" are your best investment.

Calculate a simple version: average margin per customer × average number of purchases × average retention in years. Use that number (or a conservative fraction of it, say 50%, if cash flow is tight) as your CPA ceiling. Businesses that budget on lifetime value can profitably outbid competitors who budget on first-sale margin — which is exactly why the big players seem to "overpay" for clicks. They aren't overpaying; they're playing a longer game.

Budget guardrails (so spend can't run away)

• Daily caps with headroom. Google can overspend a daily budget by up to 2x on high-traffic days (it balances over the month). Set daily budgets ~15% below your true daily ceiling if the monthly number is a hard limit.
• Shared budgets carefully. Shared budgets across campaigns let Google shift spend to the best performer — efficient, but a strong campaign can starve a strategically important one. Use them for similar-intent campaigns, not across prospecting and brand.
• Alert thresholds. Set up billing alerts and a weekly spend check. Automated rules can pause campaigns at spend thresholds — a cheap insurance policy against the "how did we spend £3,000?" Monday morning.
• Separate test budgets. Experiments (new campaign types, new geos) get their own capped budgets. Never let a test draw from the proven campaigns' pool.

When to kill a campaign (the discipline nobody teaches)

Not every campaign deserves more time. Kill criteria, decided in advance: no conversions after 2x the expected click volume (if the maths said 200 clicks should bring 10 enquiries and brought zero, the premise is wrong, not the patience); CPA stuck at 3x target after 8 weeks of active optimisation (some markets just don't work at your economics); structural impossibility (you can't outbid aggregators with 10x your budget and better Quality Scores). Killing isn't failure — it's the discipline that funds the winners. The real failure is the campaign that's been "almost working" for fourteen months, quietly consuming the budget that a proven winner could have used.

The monthly review (30 minutes)

Every month, check: spend vs budget, CPA vs target, conversion rate trend, search-term creep (new junk to negate), and impression share on core terms. One page of notes. That's the entire discipline — PPC budgets don't fail from lack of sophistication, they fail from lack of attention.

Budget planning is where profitable PPC starts — everything else is optimisation. Our PPC advertising team plans spend from your margins and targets, not from guesswork. New to paid search entirely? Start with our PPC beginner's guide. Get a free consultation.