What it means
On most ad platforms you are bidding in an auction, and the price you actually pay per click moves with how many other businesses want the same audience at the same moment. Cost per click is what that auction charged you on average.
Why it matters to a small business
It is the price of the traffic, and it is the one input you can shop around on. The same £200 buys very different numbers of visitors depending on the words you bid on, the time of year and how tightly you have drawn your area. A trade bidding on emergency terms in December is in a far more expensive room than the same trade bidding on maintenance terms in February.
You spend £180 on search ads and get 450 clicks.
£180 divided by 450 clicks
40p a click. Cheap traffic that never books is still money gone, so the next number to look at is what those 450 people did when they landed.
The bit people get wrong
Chasing the cheapest click is the classic own goal. Broad, vague search terms are cheap precisely because the people typing them are not ready to buy, so you get a lovely cost per click and an empty inbox. The expensive click from someone typing your exact service and your town is usually the better buy.