Hi there,
Thanks for reaching out!
That's a very common question, and honestly, the way most people think about it is completely backwards. They ask "What's the optimal budget?" when they should be asking "How much can I afford to pay to get a new customer?". If you get that second part right, the budget almost sets itself. You're not just trying to spend money in Sheffield; you're trying to invest it to get a predictable return.
I've put together some thoughts below on how we'd approach this. It’s a bit of a different way of thinking, but it’s how you build a marketing engine that actually makes you money instead of just costing you it. We'll basically work backwards from the value of a customer to figure out exactly what you can spend and how to spend it effectively.
TLDR;
- Stop trying to find an "optimal budget." Instead, calculate what a new customer is actually worth to you over their lifetime (LTV). This number will dictate your entire advertising strategy and what you can afford to spend.
- Your target customer isn't a demographic; it's a person with an urgent, expensive problem. Focus your ads on solving that specific pain, not on reaching a broad audience in Sheffield.
- Work backwards from your LTV to determine your maximum allowable Cost Per Lead (CPL). If a customer is worth £2,000 and you close 1 in 5 leads, you can afford to pay up to £400 for that customer, which means your max CPL is £80. This is the maths that matters.
- Start with Google Search ads targeting high-intent, "nightmare" keywords like "emergency electrician sheffield" or "leaking pipe repair cost," not broad terms like "local tradesman." This pre-qualifies your audience and reduces wasted spend.
- This guide includes a fully interactive LTV calculator and a budget forecasting tool to help you figure out your own numbers and plan your initial ad spend.
We'll need to look at your customer's problem, not their postcode...
Most businesses, especially local service ones, make the first mistake right here. They think their target customer is "homeowners in Sheffield, aged 30-60". That tells you nothing. It’s a useless demographic that leads to generic, ineffective advertising that gets ignored.
Your real customer is defined by their nightmare. Your Head of Engineering client isn't just a job title; she's a leader terrified of her best developers quitting out of frustration with a broken workflow. Your real customer in Sheffield isn't just a homeowner; it's someone standing in a puddle of water at 10 PM because a pipe just burst. It's someone whose boiler has packed in on the coldest day of the year. It's a person with an urgent, stressful, and often expensive problem that they need solved right now.
This isn't just marketing fluff; it's the absolute foundation of your entire Google Ads strategy. When you understand the nightmare, you understand the exact words they will type into Google in their moment of panic. And those words are where you need to be. You're not advertising to a city; you're advertising to a specific, urgent problem state.
So, the first bit of homework is to forget demographics. Write down the top 5 'nightmare scenarios' your customers face before they call you. That list is going to become your keyword goldmine.
I'd say you need to figure out what a customer is worth before you spend a quid...
Right, here’s the most important part of this whole letter. The reason you're worried about "overspending" is probably because you don't know what a customer is actually worth to your business. Once you know that number, the fear disappears and it just becomes a maths problem.
We need to calculate your Customer Lifetime Value (LTV). For a service business, this isn't just the profit from the first job. It's the total profit you expect to make from an average customer over the entire time they do business with you. Maybe you do an initial repair, but they call you back for an annual service, and then a bigger installation job two years later.
Let's break it down:
- Average Revenue Per Job (ARPJ): What's the average value of a single job you do? Let's say it's £400.
- Gross Margin %: What's your profit margin on that job after materials and your direct costs? Let's say it's 60%.
- Jobs Per Year: On average, how many times does a customer use your service in a year? For many trades, this might be low, say 0.8 (as some call you once, others twice).
- Customer Lifespan (Years): How many years does a customer typically stick with you? Let's say a happy customer stays for 3 years.
The calculation is simple: LTV = (ARPJ * Gross Margin %) * Jobs Per Year * Customer Lifespan
Based on our example numbers: LTV = (£400 * 0.60) * 0.8 * 3 = £240 * 0.8 * 3 = £576.
This means every new customer you acquire is worth, on average, £576 in pure profit to your business over the next few years. Suddenly, paying £50 or even £100 for a lead doesn't seem so scary, does it? It looks like a brilliant investment. Use the calculator below to figure out your own LTV.
You probably should work backwards from LTV to find your true budget...
Now that you have your LTV, we can finally answer your question about budget. We do this by deciding on a ratio of LTV to Customer Acquisition Cost (CAC). A healthy, sustainable business typically aims for a ratio of at least 3:1. This means for every £3 of lifetime profit a customer brings in, you can spend £1 to acquire them.
So, using our £576 LTV from the example:
Maximum CAC = LTV / 3 = £576 / 3 = £192
This is your magic number. You can afford to spend up to £192 to get one new paying customer and still run a very profitable business. Now we break it down further.
You need to be brutally honest about your sales process. How many leads does it take to get one customer? If you're great on the phone and you close 1 out of every 4 qualified leads that come in, your close rate is 25%.
Maximum Cost Per Lead (CPL) = Maximum CAC * Close Rate = £192 * 0.25 = £48
And there you have it. You now know you can pay up to £48 for a single lead from Google Ads. Any lead you get for less than that is a bonus. This is how you stop worrying about "overspending". You're not guessing anymore; you're operating based on what your business can sustain.
So, what's your budget? It's simply:
Monthly Budget = (Target Number of New Customers per Month) * Maximum CAC
Want 10 new customers a month? Your budget is 10 * £192 = £1,920 per month. Want 20? It's £3,840. The budget is no longer an arbitrary number; it's a direct function of your growth goals. This calculator will do the heavy lifting for you.
You'll need to use keywords that scream "I need help NOW"...
Okay, you have your Max CPL and a starting budget based on your goals. Now, how do we make sure we don't just spaff that money up the wall on bad clicks? By being incredibly picky with our keywords. We have to go back to the 'nightmare scenario'.
You want to target keywords that express extreme urgency and commercial intent. Someone searching for "how to fix a dripping tap" is in research mode. They're a tyre-kicker. Someone searching for "emergency plumber sheffield S11" is a customer with their credit card out.
Here's how to think about it:
| Keyword Type | Example | User Intent | Value to You |
|---|---|---|---|
| High Intent / Nightmare | "24 hour electrician near me" "burst pipe repair cost sheffield" |
Urgent need, ready to hire. | Very High |
| Mid Intent / Service | "plumbers in sheffield" "local joinery services" |
Shopping around, comparing options. | Medium |
| Low Intent / Informational | "how to install a light fitting" "DIY plastering" |
Looking for free information, not a service. | Very Low |
Your job is to spend 80% of your budget on those High Intent keywords. They will be more expensive per click, but the conversion rate will be so much higher that your actual Cost Per Lead will be lower. It's about quality, not quantity. You also need a strong list of 'negative keywords' to block traffic from people searching for "jobs", "courses", "free", "DIY", "youtube" etc.
And finally, let's talk about realistic costs in the real world...
The calculations we did are perfect for setting your strategy, but you still need a reality check. What are other businesses *actually* paying for leads in the UK?
From our own campaign data, the range is massive and highly dependent on the industry and how competitive the local market is. We're currently running a campaign for an HVAC company in a competitive area, and they are seeing costs of around $60 per lead. On the other hand, we’ve run ads for childcare services where the cost per signup was around $10. Our best performing campaign in this space was for a home cleaning company, which got down to an incredible £5 per lead.
So what should you expect in Sheffield? It's a major city, so there will be competition. I would recommend planning for your CPL to be somewhere in the £20 - £50 range to start with. If it's lower, fantastic. If it's higher, you know you need to work on your ad copy, landing page, or keyword targeting. This is why a starting budget of £1,000 - £2,000 per month is sensible. It's enough to gather meaningful data over a few weeks and figure out your *actual* CPL, which you can then plug back into your budget calculator to refine your strategy.
This all goes to say: don't just pick a budget out of thin air. Do the maths first. Understand what a customer is worth, decide what you can afford to pay, and build your campaign around that. It turns advertising from a cost into a predictable, scalable investment in your business's growth.
This is the main advice I have for you:
| Step | Action | Why It's Important |
|---|---|---|
| 1. Know Your Numbers | Use the LTV calculator to find out what a customer is worth to you in profit over their lifetime. Be realistic. | This single number dictates your entire strategy and turns advertising from an expense into an investment. |
| 2. Set Your Max Costs | Using a 3:1 LTV:CAC ratio, calculate your maximum allowable Customer Acquisition Cost (CAC) and Cost Per Lead (CPL). | This gives you a clear performance target. You'll know instantly if your campaigns are profitable or not. |
| 3. Define Your Budget | Use the budget forecaster. Multiply your target number of new customers per month by your Max CAC to get your ideal budget. | Your budget is now tied directly to your growth goals, not guesswork. |
| 4. Target the Pain | Build your keyword list around high-intent "nightmare scenarios" (e.g., "emergency," "24 hour," "repair cost"). | This ensures you're spending money on people who need to hire someone now, not on DIY researchers. |
| 5. Start Testing | Commit a starting test budget of at least £1,000 for the first month to gather real-world data on your actual CPL in Sheffield. | This initial phase is for learning. The data you get will allow you to refine your strategy and scale confidently. |
As you can probably tell, getting this right involves a lot more than just plugging some keywords into Google and setting a daily budget. It's a strategic process that requires a deep understanding of business metrics, user psychology, and the ad platform itself. While you can certainly do this yourself, it's a steep learning curve, and mistakes can be expensive.
Getting expert help can significantly shorten the time it takes to get profitable and help you avoid common pitfalls that waste thousands in ad spend. If you'd like to go through your specific numbers and build out a tailored strategy for your business in Sheffield, we offer a free, no-obligation initial consultation. We can review your goals and give you a clear roadmap for what it would take to succeed with Google Ads.
Hope this helps!
Regards,
Team @ Lukas Holschuh
