A Facebook ad budget calculator (of sorts)
You’re wondering how much to spend on Facebook Ads? I’m sure you’ve heard, then… it depends.
As you know, that’s a pointless answer. It’s definitely a true answer, but it doesn’t help anyone.
In this article, I’ll frame out a very basic way to calculate how much you should spend on Facebook ads. It’s more of a “Facebook budget feedback loop” than a “Facebook budget calculator,” because you start with $5/day and go up from there until you find numbers that work for your business.
This is not a one-size-fits-all solution or a fool-proof method for ROI; it’s to show you that Facebook ad spend doesn’t have to be intimidating, and you can start slowly. In the process of explaining, I’ll do my best to give actual numbers and real expectations.
$5 per day is good to start
I think the minimum to test ad spend is $5 per day for at least one week. So, basically, it costs $35 at absolute minimum to run a few ads.
I’m not getting into the details of Facebook ad setup in this article, but that’s $5 per ad set, not per ad, so you could have a group of 5 or 6 ads running to the same audience for $5 per day. If you want to learn more about setting up ads themselves, let me know, and I’ll write an article.
$5/day when you start out should get you 1-5 clicks per day… hopefully more. That’s low, but if it's a high enough percentage of your impressions, it will work.
To put this minimum in perspective, I recommend $60/day for established, healthy companies to start out on Facebook. This is because the more you spend, the more accurately you can judge your results. However, spending more money on a bad ad (or a bad website) gets you nowhere.
Eventually, when you figure out your ad machine (your audiences, ad content, and website conversions), more money will equal more return. At that point, you go all in on Facebook ads. It takes some iterating to get there, though.
After one week, check your ad-to-website conversion rate
Whether you’re spending $5, $60, or $600 per day, check your conversion rate after a week. Generally, a 1-2% conversion rate is OK. As time goes on, you’ll want that number higher, but when you first start, there are a ton of factors that affect this number, and 1-2% just means you’re on the right track.
In this case, I’m talking about the ad-to-website conversion rate, so divide the total number of ad clicks by the total number of impressions (and multiply by 100 for percentage). Facebook calls this metric “Link Click-Through Rate.”
If you have less than a 1% click through rate…
Something is up with the audience you’re targeting or the ads themselves. Either your audience is not interested in what you’re offering, the ad copy isn’t resonating, or the image/video isn’t compelling.
At this point, if you were only doing $5 per day, you should feel relieved. You can fix your ads and then try again, without wasting more money.
There are a lot of resources on finding audiences and creating good ads, but that’s outside of this article. (If you’re interested in a separate article on those topics, let me know and I’ll write one!)
After you change your audience and/or creative, run the ads again for another week to see if conversions improve. It’s generally best to change one thing at a time (like if you update the audience, don’t update the creative), but use your judgement on that one. If your gut says to update a couple things, I say go for it when it’s this early in the game.
If you have a 1% or higher click through rate...
Your ad is good. You should keep trying to improve that conversion rate over time, but the percentage of people clicking to your site is high enough to test your next conversion rate. Read on.
Next check your website-to-sale conversion rate
If your ads are sending people to your website at an acceptable rate, it’s not quite time to dump all your money into Facebook ads. The next thing to check is that your ads are ultimately generating revenue for you. Put another way, your website has to convert visitors to sales before you spend more on ads.
Whether you sell products directly or your site generates leads to close over the phone, figure out your website-to-sale conversion rate. This is easier said than done. (Interested in an article on that? Let me know.)
You’re looking for the percentage of people who’ve landed on your website that ultimately turn into a sale. It’s even better if you can find the number of people who’ve come from Facebook and turned into a sale, but a general sense from all traffic is better than no idea at all.
There isn’t exactly a clear target number here, but this conversion rate needs to be acceptable to you as the business owner. Some industries are as low as 1%. Ecommerce averages only a little higher than that. However, depending on your industry, it could be much higher!
The goal is to make the most of your website traffic. If you’re not sure what your target website conversion rate is, think about how much each sale brings you (either one time or over the customer’s lifetime), and then estimate how many of those you need each month to pay the bills. Consider your website traffic volume and the percentage of your total sales that come from your website. Whatever number you end up with should make sense with all of those variables. Even if you’re not hitting your numbers today (traffic volume or conversions), you should know your target.
Once your ad conversion rate and your website conversion rate are acceptable, you’re basically safe to dump money into Facebook ads. To mitigate risk, only increase your budget by another $5 or $10 per day. It’s important to note that the conversion rates can change with more volume. At some point, you’ll hit a ceiling, but as long as you’re converting well from Facebook-to-site and then site-to-sale, keep pouring gasoline on the fire!
If you’re new to Facebook advertising, you may still have a lot of questions. I’m here to help… not just to sell you my services. Feel free to email me with any questions you have at all, and I’ll give you the best advice I can.
If you're ready to get started with Facebook advertising and want me to set things up for you, I offer a Facebook Ads Kickoff package.