Budget planning for Google Ads: How to calculate your optimal advertising budget
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Max-Raphael Feibel
October 23, 2025
October 23, 2025
Why systematic budget calculation is essential
Without a sound calculation, one of two problems often arises:
- Too little budget prevents you from reaching the critical amount of data for meaningful optimizations. Your ads run sporadically, you get too few clicks for in-depth testing - and you may draw the wrong conclusion that Google Ads isn't working for your business.
- Too much budget without a clear strategy leads to wasted advertising money without you being able to assess whether your campaigns are profitable. The solution is to calculate your budget based on specific business objectives.
The three perspectives of budget calculation:
- Traffic-oriented: Planning based on the desired number of website visitors
- Conversion-oriented: Calculation based on the required number of customers or leads
- Profitability-oriented: Determination of the maximum justifiable budget for profitable campaigns
Traffic-based calculation: From the desired traffic to the budget
The traffic-based calculation is the ideal starting point for your budget planning. It answers a fundamental question: How much do you need to invest to bring a certain number of visitors to your website? This method is particularly suitable for companies that are starting with Google Ads, launching a new website or want to collect data for later optimization.
The formula is:
Daily budget = Desired clicks × Average CPC
What values do you need for the calculation?
You therefore need two key figures for the calculation: You determine the desired number of daily clicks based on your business model. A smaller online store could start with 100 to 200 visitors per day, while a service company may only need 20 to 50 qualified visitors.
You can determine the average cost-per-click using keyword research tools such as Google Keyword Planner, Sistrix or SEMrush. Alternatively, you can use benchmark data from your industry or start initial test campaigns with a small budget.
For example, an online store for sportswear that aims for two hundred visitors a day and calculates with an average CPC of 1.50 euros requires a daily budget of 300 euros - i.e. 9,000 euros per month.
What are the limits of this method?
This calculation provides a good starting point, but does not take into account whether the visitors actually become customers. You could generate thousands of website visits and still not make any sales. That's why you need a second perspective that calculates from the perspective of your business goals.
Conversion-oriented calculation: from business goals to the required budget
The conversion-oriented calculation shifts the focus from pure visitor numbers to actual business results. Instead of asking "How many visitors do I need?", this method turns the perspective around: "How many customers or leads do I need to achieve my business goals?"
This business-oriented approach takes into account the reality that not every click leads to a purchase and calculates exactly how many visitors you actually need to achieve your desired number of conversions.
The formula is:
Budget = Desired conversions × CPC / conversion rate
How do you determine your conversion rate?
If you already have a website, analyze Google Analytics or your store system and calculate: Number of purchases / number of visitors × 100.
Typical conversion rates for orientation:
- E-commerce1 to 3 percent
- Lead generation in the B2B sector2 to 5 percent
- SaaS trial signups1 to 3 percent
- High-priced services0.5 to 2 percent
If you don't have any data yet, start with conservative estimates at the lower end of these ranges and adjust as soon as you have real figures.
A software provider that wants to acquire fifty new trial users per month requires a monthly budget of around EUR 8,750 with a CPC of EUR 3.50 and a conversion rate of two percent.
Why is conversion optimization so valuable?
This formula also shows the economic leverage of conversion optimization: If you increase your conversion rate from two to three percent (just one percentage point), your required budget for the same number of conversions will decrease by 33 percent.
Key findings on conversion-oriented calculation:
- Planning based on your business objective, taking into account the actual conversion probability
- Higher conversion rates significantly reduce the required budget
- Clear presentation of the economic value of landing page optimization
- Realistic assessment of the investment required for specific goals
Profitability-based costing: the limits of profitability
The ROI-based formula is another important method because it answers the crucial question: What is the maximum you can spend per click to remain profitable? While the first two approaches help you to plan your budget, this formula defines the absolute upper limit of your advertising expenditure. It takes into account not only the cost per click and your conversion rate, but also the long-term value of each customer and your profit margins. This makes it your compass for sustainably profitable marketing.
The formula is:
Max. CPC = CLV × conversion rate × profit margin
Which three components determine your maximum CPC?
The Customer Lifetime Value (CLV) describes the total value that a customer brings over the entire business relationship. In e-commerce, you calculate it as the average shopping cart value multiplied by the average number of purchases per customer. For subscription models, multiply the monthly fee by the average contract term in months.
You already know the conversion rate from the previous calculation. The profit margin describes the proportion of turnover that remains as profit after all costs have been deducted - i.e. production, personnel, logistics and proportionate fixed costs.
An online store for nutritional supplements with a CLV of 400 euros (customers buy an average of four times for every hundred euros), a conversion rate of 2.5 percent and a profit margin of 30 percent may spend a maximum of three euros per click in order to reach the break-even point.
Why shouldn't you push yourself to the limit?
In practice, the 70 percent rule is recommended: only use 70 percent of your maximum CPC as a target value. This way you create a buffer for fluctuations, remain clearly profitable instead of just breaking even and have room for additional costs such as tools or personnel.
In the above example, this means a recommended target CPC of EUR 2.10 instead of the maximum justifiable EUR 3. With this CPC, the actual margin is nine percent in addition to the planned profitability.
Key findings on ROI-based calculation:
- Definition of the absolute upper limit for profitable advertising expenditure
- With a high customer lifetime value, higher click prices are also economically justifiable
- The 70 percent rule creates the necessary safety buffer and increases the actual margin
- Clear correlation between customer value, conversion rate and maximum CPC
How do you combine the three calculation methods?
The three formulas complement each other perfectly and should ideally be used together. An online course provider with a CLV of 350 euros, a conversion rate of 3.5%, a profit margin of 55% and a target of 80 new customers per month would proceed systematically:
First, he calculates his maximum CPC of EUR 6.74 and reduces this to EUR 4.72 as the target CPC using the 70 percent rule. He then calculates the required budget of around €10,800 per month for 80 conversions. Finally, he validates that this means around 2,300 clicks per month or 76 clicks per day.
The final profitability check confirms this: With an investment of EUR 10,800, a turnover of EUR 28,000 from 80 customers and total costs of around EUR 23,400, a profit of around EUR 4,600 remains - an ROI of 43%.
Systematic application of the three methods:
- All three calculations validate each other and result in a coherent overall picture
- The profitability-based calculation defines your upper limit
- The conversion-oriented calculation determines your required budget
- The traffic-based calculation shows the expected number of visitors
- The final profitability check confirms the profitability
What mistakes should you avoid when planning your budget?
Many companies overestimate their conversion rate at the beginning. It is better to use conservative estimates and be happy when the actual performance is better. When considering customer lifetime value, really take the entire customer lifecycle into account, not just the first purchase. Repeat customers and cross-selling potential often increase the actual customer value considerably.
Make sure you really deduct all costs from the profit margin: Production, logistics, personnel and proportionate fixed costs. An overly optimistic profit margin leads to unrealistic budget calculations. Also plan for a 15 to 20 percent buffer - marketing is not an exactly predictable science.
The formulas presented are your starting point. After two to four weeks you will have real performance data - then adjust your calculations accordingly and optimize continuously.
How to successfully implement your budget planning
Budget planning for Google Ads doesn't have to be a matter of luck. With the three calculation methods presented here, you have a solid framework:
- The traffic-based calculation shows what traffic costs
- The conversion-oriented method plans from the business objective
- The profitability-based formula ensures your profitability
The biggest mistake would be not to calculate at all and just start. The second biggest mistake is to use the formulas only once and then forget about them. Use these calculations as a living tool and update the values regularly with your real performance data. Over time, you will develop an increasingly precise understanding of what works in your business and can systematically scale your marketing.
Successful online marketing is based on sound calculations instead of gut feeling. The three formulas presented form the foundation for profitable Google Ads campaigns that are continuously optimized and generate sustainable business success. We are happy to support you in developing your individual budget strategy and setting up your campaigns profitably.
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