Mastering Google Ads Budgets for SaaS: A Proven Framework

Let’s be honest. One of the most common questions I get asked by founders is, "How much should I spend on Google Ads?" usually followed by a hopeful look, as if I’m going to pull a magic number like "£2,000" out of a hat that guarantees success.

The truth is, asking for a generic "startup budget" is a bit like asking "how long is a piece of string?"—it depends entirely on what you're trying to tie up. But I know that’s not a helpful answer when you're trying to plan a runway.

I’ve worked with SaaS startups where we generated thousands of users for under a quid each, and others where leads are significantly more expensive because they sell enterprise solutions to a tiny pool of decision-makers. The budget for those two scenarios looks wildly different.

If you just pick a number—say, $1,500 a month—because that’s what you feel comfortable losing, you’re already approaching this wrong. You need to approach your Google Ads budget not as an expense, but as an investment equation. If you put £1 in, and you know your math works, you should get £3 back. If that happens, the question changes from "what's my budget?" to "how much cash can I get my hands on to dump into this machine?"

I'm going to walk you through exactly how to calculate a starting budget that makes sense for your specific SaaS, avoiding the vanity metrics and focusing on unit economics.

The "Test Budget" vs. The "Growth Budget"

First off, we need to separate your budget into two phases. Phase one is the Validation/Test Phase. Phase two is the Scaling/Growth Phase.

Most startups mess this up by trying to scale before they’ve validated. They throw $5k at ads in month one, get zero conversions, panic, and shut the account down saying "Google Ads doesn't work for us."

Google Ads works. It captures intent. If someone searches for "accounting software for freelancers," they want accounting software. If they click your ad and don't buy, the problem isn't usually Google; it’s your offer, your price, or your landing page.

For the Test Phase, your budget needs to be just enough to buy statistical significance.

What does that mean? It means you need enough clicks to know for sure if a keyword or ad is a winner or a loser. If you spend $10 a day and clicks cost $5, you get 2 clicks. You could run that for a month and still learn nothing because 60 clicks might not be enough data if your conversion rate is 2%.

My rule of thumb: You want at least 100-200 clicks per keyword group to make a data-backed decision.

If your average CPC (Cost Per Click) in your niche is $5 (common for B2B SaaS), and you want to test 200 clicks, you need a test budget of $1,000 for that specific campaign. If you want to test it faster (in 2 weeks rather than 2 months), you front-load that spend.

Calculating Your "Max CPC": The Unit Economics

Before you set a budget cap, you need to know what you can afford to pay for a click. This is where most founders get glazed eyes, but stick with me, it’s actually simple math.

You need to work backwards from your LTV (Lifetime Value).

Let's say you sell a subscription for $50/month.
Average customer stays for 20 months.
LTV = $1,000.

In SaaS, a healthy LTV:CAC (Customer Acquisition Cost) ratio is usually 3:1. You want to make 3x what you spent to get the customer.
So, your target CAC is $333.

Now, work backwards through your funnel:

1. Sales Conversion: If you get a lead (demo request or trial signup), how many actually pay? Let's say 20% (1 in 5).
2. Target Cost Per Lead (CPL): $333 * 20% = $66.60. You can afford to pay $66.60 for a signup.
3. Landing Page Conversion: How many visitors sign up? Let's say your site is decent and converts at 5%.
4. Max CPC: $66.60 * 5% = $3.33.

If the keywords you want to target cost $15 per click, you cannot afford Google Ads with your current funnel metrics. No amount of "budget optimisation" will fix that. You either need to increase your price, improve your conversion rate, or find cheaper keywords.

I've built a calculator below to help you visualize this. It's better than guessing.

The "Nobody Knows Who You Are" Tax

When you are a new SaaS, nobody is searching for your brand name.

Big companies like Salesforce or HubSpot get cheap conversions because thousands of people search "Salesforce pricing" or "HubSpot login" every day. Those are branded keywords, and they convert at like 20-50% for pennies.

You don't have that luxury. You have to bid on "non-branded" terms like "best project management tool for remote teams".

The problem? Everyone else is bidding on those too.

This is where your budget can disappear into a black hole if you aren't careful. For example, bidding on a broad term like "CRM" is often a budget-killer. The CPC is often astronomical, and the intent is mixed. You might spend your entire budget on a handful of clicks with no conversions to show for it.

Actionable Advice:
Don't blow your budget on "Head Terms" (1-2 word keywords). Go for the "Long Tail".

• Bad: "Video editor"
• Good: "Browser-based video editor for real estate agents"

The volume is lower, but the intent is higher, and the competition (and price) is usually lower. You might find you can get clicks for $3 instead of $15. This allows your smaller budget to actually stretch further and get you that statistical significance we talked about.

If you are struggling to make the math work with a low budget, you might want to read our article on SaaS marketing strategy for a low budget for some alternative ideas.

Competitor Campaigns: The "David vs Goliath" Strategy

Another way to spend your budget smartly is Competitor Bidding. This is where you bid on your competitor's brand names.

If someone searches for "Jasper AI alternative", they are:

1. Problem aware.
2. Solution aware.
3. Ready to buy (or switch).
4. Probably unhappy with the current solution or looking for a better price.

This traffic is gold. However, it can be expensive because your "Quality Score" (Google's rating of how relevant your ad is) will be low, because your website isn't actually your competitor's website.

But, if you have a unique selling point—like "No monthly fees" or "Privacy-focused"—you can steal market share here. We often allocate about 15-20% of a startup's Google Ads budget to aggressive competitor intercept campaigns. It’s often where we see the fastest traction.

Where does the money actually go?

It's helpful to visualize how a budget gets sliced up. You shouldn't just dump it all into one bucket.

High Intent (60%): This is your bread and butter. "Tax software for sole traders". Specific, solution-oriented.
Competitor (20%): "TurboTax alternatives".
Retargeting (15%): This is crucial for SaaS. Most people don't buy B2B software on the first visit. They need to see a case study, read a review, or just be reminded you exist. Retargeting is usually cheap and has a high ROI.
Brand Defence (5%): Bidding on your own name. Only necessary if competitors are bidding on you or if your SEO is weak.

The "Quality Score" Loophole

Here is a secret that agencies often gloss over: You can lower your CPC without lowering your bid.

Google assigns every keyword a "Quality Score" from 1 to 10. It’s based on:

1. Expected Click-Through Rate (CTR).
2. Ad Relevance.
3. Landing Page Experience.

If you have a Quality Score of 10/10, Google actually gives you a discount on the click. If you have a 2/10, they charge you a penalty tax.

For instance, we worked with a Medical Job Matching SaaS where we managed to reduce the Cost Per Acquisition from £100 to £7. A huge part of this success comes from ensuring your ads and landing pages are perfectly aligned, which improves your Quality Score and lowers your costs. If you send traffic to a generic homepage full of jargon, your Quality Score suffers. But by building dedicated landing pages for each feature, you can drastically lower costs.

• Ad about "Automated Invoicing" -> Landing page about Automated Invoicing.
• Ad about "Expense Tracking" -> Landing page about Expense Tracking.

This is why you shouldn't just throw money at ads; you need to look at the whole ecosystem. If you've maxed out your current efficiency and are wondering where to go next, check out our guide on what to do when Google Ads is maxed out.

Bidding Strategies: Don't Let Google Spend Your Money

When you set up a new campaign, Google will beg you to use "Smart Bidding" (Maximize Conversions). They'll say their AI is smarter than you.

For a new startup with no historical data? Do not do this.

Google’s AI needs data (conversions) to learn. If you have 0 conversions, the AI is guessing. It will spend your budget effectively randomly trying to find what works. You will burn through cash fast.

Start with Maximize Clicks (with a bid cap) or Manual CPC. Tell Google exactly what you are willing to pay. Once you have 30-50 conversions a month, then you can switch to Target CPA or Maximize Conversions and let the machine take over.

If you are just starting out, you need to understand the basics. I'd recommend reading our beginner tips for B2B SaaS Google Ads campaigns to avoid the rookie traps.

So, what is the number?

Okay, I know you want a number. Based on my experience running campaigns for dozens of SaaS companies:

If your LTV is <$500:
You will struggle with Search Ads unless you have very high viral growth or expansion revenue. You might want to look at Facebook/Meta ads where CPMs are lower.

If your LTV is $500 - $2,000:

• Minimum Viable Budget: $1,500 - $3,000 / month.
• This allows you to get roughly 300-600 clicks (assuming $5 CPC). That should yield 15-30 leads. Enough to prove the model.

If your LTV is $2,000 - $10,000+:

• Minimum Viable Budget: $3,000 - $5,000 / month.
• Keywords here are more expensive ($10-$20+ CPC). You need the higher budget just to get into the auctions.

Important: These numbers are for the US/UK/Europe markets. If you are targeting developing nations, you can slash these numbers by 70%.

The "Hidden" Costs

When budgeting, don't forget it's not just ad spend.

1. Management: Are you doing it yourself? If not, an agency or freelancer will cost $1k-$3k/month or 10-20% of spend.
2. Creative/Copy: You might need banners for display/retargeting.
3. Tools: Do you need Unbounce for landing pages? ClickCease to stop bot clicks? That's another $200/month.

Tbh, many startups forget the tooling costs and then wonder why their burn rate is higher than expected.

When to Scale (and when to kill it)

You scale when your CAC < LTV / 3.

If you are acquiring customers for $200 and they are worth $1,000, spend as much money as you possibly can. Go get a loan. Raise VC money. The machine works.

If your CAC is $800 and LTV is $1,000, stop increasing the budget. You are on thin ice. You need to optimise the funnel first.

If you are struggling to calculate this because your costs are messy (salaries, overheads, etc.), take a look at our guide on calculating marketing ROI for B2B SaaS with complex costs.

Summary: Your Action Plan

I've detailed my main recommendations for you below:

SaaS advertising is a minefield of wasted budget if you don't know your numbers. But when you get the unit economics right, it’s the most scalable growth engine you’ll ever build.

If you're looking at your account and thinking "I have no idea if my tracking is even set up right," or you want someone to look over your LTV calculations before you commit thousands in spend, consider booking a free consultation with us. We can review your strategy and account together, giving you a clear roadmap of whether paid ads are the right move for your startup right now.

Hope this helps!