How much should a Melbourne small business spend on Google Ads?

The honest answer: work backwards

“How much should we spend on Google Ads?” is one of the first questions we hear. The honest answer is that there’s no standard figure. A café, a family lawyer and a plumber can all run good campaigns on very different budgets, because what they pay per click and what a customer is worth are completely different.

What you can do is work it out from the other end. Start with how many enquiries you want, then figure out what each one is likely to cost. That gives you a budget based on your business, not on a number someone pulled from a sales deck.

The three numbers that decide your budget

1. Cost per click

You pay each time someone clicks your ad. The price is set by an auction, so it depends on how many other businesses want the same searches. In Australia, broad averages sit somewhere around $2 to $4 a click, but competitive industries pay far more. Legal services regularly pay over $10 a click, while trades and home services often sit around $4 to $8.

Location matters too. Targeting all of Melbourne usually costs more per click than targeting a handful of suburbs, simply because more businesses are competing for the wider area.

2. Conversion rate

This is the share of clicks that turn into an enquiry: a call, a form or a booking. Across industries, a common benchmark is around 5% to 10%. Your website has a big say here. A fast, clear landing page can double your conversion rate compared with sending people to a slow, general homepage.

3. What a customer is worth

This is the number most businesses skip, and it’s the one that tells you whether ads are worth it. Think about the average value of a new customer over a year, not just the first job. A dentist’s new patient or an accountant’s new client is often worth far more than their first appointment.

The simple formula

Once you have rough numbers, the maths is short:

• Cost per enquiry = cost per click ÷ conversion rate
• Monthly budget = enquiries you want × cost per enquiry

Here’s an example for a Melbourne tradie:

• Clicks cost around $6
• About 8% of clicks become an enquiry
• So each enquiry costs about $6 ÷ 0.08 = $75
• They want 20 enquiries a month, so they need about 20 × $75 = $1,500 a month

If half of those enquiries become paying jobs worth $800 each, that’s ten jobs and $8,000 of work from $1,500 of clicks. Now the budget question becomes a business decision, not a guess.

These are illustrations, not promises. Your real numbers will only show up once the ads are running, which is why the first month or two matters so much.

What clicks cost in different industries

Benchmarks are a starting point, not a forecast, but they help set expectations. Large benchmark studies, mostly from the US, show the same pattern every year:

• Cafés and restaurants: among the cheapest clicks, often just a couple of dollars, and a low cost per booking
• Real estate: clicks are cheap, but fewer people enquire straight away, so each lead costs more than you’d expect
• Dentists and health clinics: mid-range clicks, but strong conversion rates because people search when they need an appointment
• Trades and home services: higher clicks, balanced by urgent, high-intent searches like “emergency plumber”
• Lawyers: some of the most expensive clicks of any industry, so tight targeting matters most here

If you’re in one of these industries, our guides for cafés and restaurants, trades, real estate agencies, law firms and dental practices cover what your website needs to turn those clicks into enquiries.

A sensible starting budget

For most Melbourne small businesses, a first test of somewhere between $1,000 and $2,000 a month in ad spend is enough to learn something useful. Less than that and you may only get a few dozen clicks, which isn’t enough to tell what’s working. Highly competitive industries like legal usually need more.

Treat the first one to two months as a test, not a verdict. In that time you’re finding out:

• Which searches actually bring enquiries, and which just cost money
• What a real enquiry costs you, rather than a benchmark
• Which services, suburbs and times of day perform best
• Whether your landing page is doing its job

After that, you can scale up what works and cut what doesn’t, with real numbers behind every decision.

How Google spends your budget

You set an average daily budget in Google Ads, not a monthly one. On busy days, Google can spend up to twice your daily amount, then spend less on quieter days. Over a month, it won’t charge you more than your daily budget multiplied by the average number of days in a month (about 30.4).

So if you want to spend around $1,500 a month, set a daily budget of about $50. Don’t panic if one day shows $90. It evens out.

Ways to make the same budget go further

• Target tightly. Choose the suburbs you actually serve, and the hours you can answer the phone.
• Use focused landing pages. Send each ad to a page about that exact service, not your homepage. Our guide to website copy that converts covers what to put on them.
• Add negative keywords. Stop paying for searches like “free”, “jobs” or “DIY” that will never become customers.
• Track every enquiry. Calls, forms and bookings should all be measured as conversions, or Google can’t learn what a good click looks like.
• Fix your site speed. A slow page wastes paid clicks. Our free website check shows how your site scores in about 30 seconds.

Don’t forget the management cost

Your ad spend goes to Google. Someone also has to set up, monitor and improve the campaigns, whether that’s you, a staff member or an agency. Doing it yourself saves money but takes real time, and an untended campaign can waste a lot of budget quickly.

When you compare agencies, ask what’s included, how often they’ll report, and whether the ad account is set up in your name. It should be. Our digital marketing service lists our own management fees.

Should you run Google Ads at all?

Ads are great when you need enquiries soon, want to test new services, or compete in a market where the organic results are crowded. They’re less useful if your website can’t convert visitors yet, or if what a customer is worth doesn’t cover the cost per enquiry.

Many businesses get the best results running ads while building their SEO, then easing off ad spend as their organic rankings grow. Our guide to SEO or Google Ads explains how the two work together. And if your business is visual or offer-driven, our guide to Facebook and Instagram ads covers the other side of paid ads.

The short version

• Decide how many enquiries you want each month
• Estimate cost per enquiry: cost per click divided by conversion rate
• Multiply the two to get your monthly budget
• Start with a one to two month test, usually $1,000 to $2,000 for most small businesses
• Let real results, not benchmarks, decide where the budget goes next

If you’d like a second opinion on your numbers, book a free 20 minute call and we’ll help you work out a sensible starting budget for your business.