Is Google Ads worth it for a small business? Do the break-even sum first

Google Ads is worth it for a small business when the cost of winning a customer through ads is lower than what that customer is worth to you. That is the whole test. You can work out whether it is likely to be true before spending anything, from three numbers you already have or can get for free.

You will see articles quoting a return per pound spent on Google Ads. Ask where the figure comes from. An average across other businesses tells you almost nothing about yours, because your click prices, website and margins are your own.

The break-even sum

You need four numbers:

1. Cost per click. Google's Keyword Planner, free inside a Google Ads account, gives estimated bids for the searches you enter.
2. Enquiry rate. Of the visitors to your website, how many get in touch? Your analytics will show it, or use an honest estimate.
3. Close rate. Of your enquiries, how many become customers? Your own records will tell you.
4. Customer value. What a new customer is worth to you in profit over the time they stay.

Then:

Cost per customer = cost per click ÷ enquiry rate ÷ close rate

An illustration with round numbers, to show the method rather than to suggest the figures:

• Clicks cost about £2.
• One visitor in 20 enquires (5%).
• One enquiry in 4 becomes a customer (25%).
• Cost per customer = £2 ÷ 0.05 ÷ 0.25 = £160.

If a customer is worth £600 in profit, £160 is a good deal and ads are worth testing. If a customer is worth £100, ads lose money on every sale unless something changes: a better landing page, a higher close rate, or a higher-value offer. Google also adds a 2% UK DST Fee to ad spend served in the UK, and any management fee is on top, so include both.

When it tends to be worth it

• People search for what you sell, in words you can list, and Keyword Planner shows real volume.
• The need is urgent or specific. People searching for an emergency service or a named product are close to buying.
• A customer is worth a lot relative to what a click costs.
• Your website converts. A clear, fast page built for the search.
• You can answer enquiries quickly. Paying for an enquiry and replying two days later wastes it.

When it tends not to be

• Hardly anyone searches for it. Ads cannot create searches.
• The arithmetic does not work, even with realistic improvements.
• There is no tracking, so nobody can tell which clicks became customers.
• The landing page is weak. Better to fix that first; see landing pages that convert.
• You cannot handle more work.

Why it "didn't work" before

If you have tried Google Ads before and decided it does not work, check whether it was ever set up to succeed:

• Was conversion tracking working? If not, nobody knew what worked.
• Which searches were you paying for? The search terms report can show money spent on irrelevant searches.
• Where did clicks land? A homepage instead of a page for the search loses many of them.
• Were there enough clicks to judge? A small budget over a short time rarely produces a fair test.
• Was the location setting right? Google's default location option also reaches people who have shown interest in your area, not just people in it.

We go through each of these in why your Google Ads aren't working.

How to run a fair test

1. Do the break-even sum above, and write down the cost per enquiry that would count as success.
2. Set up tracking and test it with a real enquiry.
3. Build a landing page for your main service.
4. Start with a small number of tightly related searches you know convert, rather than everything at once.
5. Set a budget that buys enough clicks to judge. If one visitor in 25 enquires, a few hundred clicks is a sensible minimum before drawing conclusions.
6. Agree a date to decide: scale up, change something, or stop.

Our guide to what Google Ads cost covers how Google bills a budget and how to set the daily figure. For what the rest of your marketing costs, see what marketing costs in the UK.

Decide with your own numbers

Tick these off before you spend. The ticks are saved in this browser.

• I have looked up estimated click costs in Keyword Planner.
• I know my website's enquiry rate, roughly.
• I know how many enquiries become customers.
• I know what a customer is worth in profit.
• My break-even cost per enquiry is written down.
• Tracking works, and I have tested it.
• Clicks will land on a page built for the search.
• I have a test budget and a decision date.

If you would like the account built properly from the start, our Google Ads launch is a fixed £2,500, including 30 days of changes as the first data comes in.