How Much Should You Spend on Facebook Ads? Budgeting Steps

Today we will be looking at How Much Should You Spend on Facebook Ads?

And the budgeting steps you need to take to create clarity, and get the ROI you were hoping for.

Want to watch the video where I explain this? Click here

The first question we ask a new customer is - “Do you know what your budget is?”

Usually that’s when we see the client’s eyes get as big as saucers as they reply, “I have no idea! That’s what I thought you were here for.”

So we developed what we call “Marketing Math” to help our clients define exactly what they should be spending on marketing.

Different rules will apply for different companies based on stages of growth, results wanted as well as budgets available.

However, our Marketing Maths try to make it a little simpler for you.

*NEW COMPANIES: 1-5 Years old, we suggest 12-20 percent of your gross revenue or projected revenue on marketing.

*ESTABLISHED COMPANIES: 5 year + and already have some marketing share/brand equity, we have suggested allocating between 6-12 percent of your gross revenue or projected revenue.

This may seem like a lot, but remember new and emerging brands are looking to capture new market shares and develop brand recognition with an audience that has absolutely no idea who they are. That’s why it’s so expensive.

Once the brand is established and portion of the market is brand-conscious that number drops significantly.

One of the biggest questions we get is what do I need to spend on social media to get results?

And the answer to this is, what are the results you want?

Because that’s what you need to spend…

#1: Establish Your Facebook Advertising Budget

The first step to determining your Facebook advertising budget is to understand the numbers related to the marketing and sales of your business. For most of our clients, the goal is to make money, which means they’re focused on getting leads and making sales.

Typically, a marketing budget for any business is 5%–12% of revenue. Newer companies may want to spend closer to 12% because they want to grow aggressively.

But let’s say your company has been around for a while and you’ve got great revenue coming in. If you want to maintain or grow incrementally, your budget might be closer to 5%.

You will also need to find out some additional information, such as:

Cost per lead:

First, what’s an appropriate cost per lead for your business? A lead isn’t a sale but it is what you need to get before you make a sale.

Cost per core event: The most important number to focus on is your cost per core event.

For instance, if you’re a business that needs a conversation before a sale can be made,

put a number on what you can realistically afford to spend for that key event.

When you start advertising on Facebook, you’re going to find that the lowest cost per lead ad campaigns may not produce the lowest cost per core event.

If you sell a low-price point value, product or service, you have to figure out the maximum amount you can spend to remain profitable.

If you’re selling a high-price point value item, it’s very similar but you have a little more wiggle room as long as your conversion rates are good.

Cost per customer acquisition: You’ll also need to determine what a strong cost per customer acquisition is for your business. How much money did you have to spend to acquire this new customer? Again, this number varies by business. If you have various products and services, your cost per customer acquisition may differ for those different products and services.

Conversion rate: Look at your conversion rates as well. Whether you have a sales team or are selling something directly online, determine how many leads you need to get on the phone or get to an appointment to make that sale.

I get a lot of questions about what the magic number is in terms of ad spend, but ultimately, it’s heavily dependent on your expectations and goals.

If your business is new and you want to grow to 100,000 in the next few months, that’s a clear goal. Using past industry data, you can reverse-engineer that goal to determine how many leads you’ll need, what that cost per core event will be, and how much you can spend to acquire one customer.

Let us know in the comments, do YOU know what YOUR marketing budget should be?

#2: Distribute Your Facebook Ad Spend

Once you’ve decided what your monthly ad spend is, the next step is to properly distribute it based on the types of Facebook ads you’ll need to run to see results.

Let’s break that down into three categories. About 20% of your Facebook ad spend should be dedicated to education, engagement, and audience-building.

Far too often, business owners will either produce nothing but lead generation-focused ads or content-focused ads.

Ultimately, you need both to succeed. You want that 20% to create an audience you’ll be able to leverage long-term so your results don’t dry up or skyrocket in terms of costs.

About 60% of your budget should focus directly on promoting your offer and generating those conversions.

The remaining 20% you want to dedicate to your retargeting efforts. Retargeting is an effective way to get a lot of bang for your buck, but ultimately, if that’s all you do, your audience will be so small that you won’t see those financial results.

All three pieces of this puzzle need to work together to maximize the impact of your Facebook ad budget.

Hopefully this helps you with your marketing budgets and ad spend.

Have any questions? Please let us know in the comments or come ask us on our social pages.

And if you need help with your marketing and ad strategy, but sure where to start....Book a Strategy session with us!

Apply online and we will get you started.

We are sure we can find the right solution for you.

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