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What Should a Lead Cost? Building a PPC Budget That Holds Up

Most PPC budgets are set backwards

The typical conversation goes: “We can afford about $2,000 a month – what can you get us for that?” It sounds responsible. It’s actually the root cause of most failed campaigns, because it starts from what feels comfortable instead of what the math requires.

The right question is: what is a customer worth to you, and what can you afford to pay for one? Everything else falls out of that.

The math, on one napkin

Work backwards through four numbers:

  • Customer value. For a recurring-revenue business like an MSP, use first-year contract value at minimum. A $2,500/month client is worth $30,000 in year one.
  • Allowable acquisition cost. Decide what share of that you’ll spend to win the deal. For high-retention businesses, 10-20% of first-year value is common. Call it $3,000-$6,000 per closed customer.
  • Close rate from lead to customer. If you close one in five qualified leads, your maximum cost per qualified lead is $600-$1,200.
  • Lead volume the budget can buy. If real-world cost per lead in your market is $250, a $2,000 budget buys roughly 8 leads a month – about 1-2 new customers a quarter. Now you can decide if that’s worth it before spending a dollar.

Notice what happened: the budget became an output of the math, not an input. Sometimes the math says paid search is a bargain. Sometimes it says fix your close rate first. Both answers are wins.

Why campaigns miss their numbers

When cost per lead comes in way over the model, it’s almost always one of these:

  • Counting clicks as leads. A click is a click. A lead is a name, a need, and a way to contact them. Optimize the account to leads, not traffic.
  • Sending traffic to the homepage. Paid clicks need a dedicated page with one job. This is why we build landing pages alongside campaigns instead of hoping the homepage converts.
  • No negative keywords. “IT support” also matches job seekers and DIY fixers. Untended accounts pay for all of them.
  • Quitting during the learning phase. The first 60-90 days are for buying data. Judging a campaign at week three is like judging a hire on day two.

What “working” looks like

A healthy paid search program hits predictable cost per qualified lead by month three, then improves quarter over quarter as search-term data compounds. If your current program can’t tell you its cost per lead – or reports rankings and impressions instead – that’s a red flag worth chasing.

We run this exact framework in every PPC engagement and tune accounts to cost per qualified lead, not clicks. Want us to run your numbers? Book a strategy call – bring your average deal size, and we’ll do the napkin math together.