PPC · Google Ads
A worked example of breakeven cost per lead, the cases where I would tell you not to bother, and what has to be in place before you spend.
Know your breakeven cost per lead
Fix the landing page before the ads
Judge it at 60 days
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Google Ads is worth it for a small business when three things are true: people already search for what you sell in the area you serve, a new customer is worth noticeably more to you than it costs to win one, and you can tell which clicks became customers. When those hold, it is one of the most predictable ways to buy new business. When they don’t, it is an expensive way to find out.
The number that decides it is what a customer is worth to you, in gross profit, not revenue. Google Ads works when you know that number. Without it, you are guessing with real money, and Google will happily take the guesses. Most of the owners I talk to who say “we tried Google Ads and it didn’t work” could not tell me what they were willing to pay for a lead. That is not a criticism. Nobody is taught to work it out. So here is how.
Take an illustrative heating and cooling company. These numbers are made up but realistic in shape, and you should swap in your own.
The most it can pay for a lead and break even on the first job is $405 × 0.30 = $121.50. Pay less than that and each lead makes money on average. Pay more and each one loses money, unless customers come back.
Now the ads side. Suppose clicks for “AC repair near me” in its area cost about $12 each (your account’s keyword planner will show your real range), and the landing page turns 8 percent of visitors into a call or form. The cost per lead is $12 ÷ 0.08 = $150. That is $28.50 over breakeven. On these numbers the campaign loses money on the first job, and the owner is right to be unhappy.
Here is the interesting part. Nothing about the ads needs to change to fix it. If a better landing page lifts the conversion rate from 8 to 12 percent, the cost per lead drops to $100, which is comfortably under $121.50. If the office answers the phone faster and books 40 percent of leads instead of 30, breakeven rises to $162. Do both and the same budget becomes clearly profitable.
And if a typical customer comes back for a maintenance plan worth, say, $300 of gross profit over the next two years, the real breakeven is higher still. That is why lifetime value matters. Be honest about it, though. Count only repeat business you can actually show in your books.
There are businesses for which Google Ads is a poor fit, and I would rather say so up front.
If almost nobody searches for what you sell, there is nothing to buy. A new kind of product that people don’t know to look for needs awareness first, which is a different channel. If your average sale is small and one-time (a $40 service with no repeat), the arithmetic rarely leaves room for clicks that cost several dollars each. And if you cannot answer the phone during the hours the ads run, you are paying for calls that go to voicemail and then to your competitor.
The fourth case is the one that hurts most. If you can’t track which leads came from ads, you will never know whether it is working. Google’s own help pages are clear that conversion tracking is what lets you see which clicks led to calls, form fills and sales. Without it, you are judging the campaign by gut feel and the bank balance, and both lie.
Before a small business puts serious money into Google Ads, I want to see these, in roughly this order:
What budget is “enough” depends on your click prices. Our article on how much Google Ads costs a small business explains the cost drivers.
Don’t judge Google Ads on clicks, impressions or click-through rate. Those are useful to whoever manages the account, but they don’t pay your rent. Judge it on cost per lead against your breakeven, and on how many of those leads became paying customers.
A home-services advertiser we worked with is a good example of why. They were spending on Google Ads and measuring success by clicks and taps on the phone button. The search terms report showed money going to informational searches and to locations outside the area they serve, and the conversion tracking counted repeat taps on the phone button as separate leads. We tightened the geography to the territory they actually dispatch to, excluded the irrelevant searches, split emergency services from routine jobs, and rebuilt conversion tracking around connected calls of meaningful length and confirmed form submissions. Then we went through the calls with the business to tell new customers apart from existing customers ringing for service. The budget didn’t need to go up for the account to become useful. What improved was that they could see where each inquiry came from, and fewer inquiries were wasted. (I won’t put a cost-per-lead figure on it here. The honest number is the one in the account’s verified reporting for that period, and I’m not going to invent one after the fact.)
If cost per lead is above breakeven, look at the landing page and the phone handling before you blame the ads. If leads are cheap but few become customers, the targeting is probably pulling in the wrong people, or the leads are spam. If both numbers are fine but volume is low, there may simply not be much more demand to buy in your area, and that is worth knowing too.
For what it’s worth, I think 60 days is the right first checkpoint for most local service businesses. Shorter, and you are reacting to noise. Much longer, and you have spent real money without a decision.
If you want a second opinion on whether Google Ads makes sense for your business, or on why an existing campaign isn’t paying, book a free 30-minute call. We will look at what you have, run your breakeven with you and tell you what we would change first. Book your free call.
You can run Google Ads yourself, and some owners do it well. The work is mostly weekly: reading the search terms report, adding negatives, adjusting bids and budgets, and checking that leads are real. Through our PPC management service we adjust accounts weekly, more often early in a campaign, and we report on cost per lead and customers rather than clicks. Whoever runs it, make them show you the breakeven number before they show you a single chart.
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Enough to get a month or two of meaningful data at your local click prices, which you can see in Google’s keyword planner. The more useful number is your breakeven cost per lead. Budget is just how many of those leads you can afford to buy.
You will see clicks and calls within days. I would wait about 60 days before deciding whether it pays, because that is usually enough to see cost per lead and how many leads become customers.
They do different jobs. Ads buy demand now and stop when you stop paying. SEO builds over months and keeps working. Many local businesses use ads while their organic rankings grow.
Usually the landing page, the targeting or the hours. Check the search terms report for irrelevant searches, make sure the page matches the ad and has a visible phone number, and confirm someone answers during the hours the ads run.
