This is a big question that we get asked a lot.
And we think the reason why is because there isn’t always a clear-cut answer. You hear how it’s different for every business and industry.
But today, we’re going to give you a different way to think about your Facebook ad spend.
And, we will also give a formula that any business can use to calculate exactly how much should you spend on Facebook advertising.
Let’s get started!
How Much Should You Spend On Facebook Advertising?
The answer to this question will be different…
So we’re going to show you how to approach your Facebook budget in both scenarios.
Let’s start with the first one.
1. If you are a newer business and have not significantly marketed on any channel yet.
The formulas we often hear around how much should you allocate to advertising are usually directly tied to our CAC, or Customer Acquisition Cost.
But what if you don’t have many or any customers yet?
How can you allocate a social media budget based on data that you don’t have yet?
For this reason, newer businesses may not only find it difficult to know how much to allocate towards Facebook ads…
…but also are usually working on a smaller budget, to begin with.
And that doesn’t help cushion the blow of what we’re about to tell you next.
In these cases, the majority of your initial Facebook advertising investment is going to result in brand awareness and audience building before sales.
In our Facebook ad costs post, we said you need to be ready to not make money back on your initial Facebook ad investment.
And that’s a reality we think many business owners don’t want to hear.
But before you tap out totally deflated, here’s the flip side of that reality.
In your initial period of investing in Facebook ads, you are laying a solid foundation for a profitable, sustainable outcome later.
All of the FB results you’ve seen us share in this blog, where we’re generating hundreds of thousands in revenue from FB ads from our clients…
…started by using an initial period to test and figure out who and where their most profitable audience is on Facebook.
And we give all of our new clients in this situation the same budget recommendation that we’re about to share with you.
So are you ready to know how much should you spend on Facebook advertising?
This is what our agency recommends if you’re totally new to it and don’t have any customer data.
$600 a month, for 6 months straight at a minimum, a MINIMUM.
If you can do more, do more.
It’d be better if you can spend closer to $5-$7K over 6 months, but we just try to be mindful and realistic with new business budgets.
So that’s just the minimum to start acquiring some Facebook-specific data.
Don’t hear us say $600 a month for 6 months, and go running thinking that’s all you gotta spend on Facebook to make millions.
You have to note the amount of time, testing, and budget that went into those campaigns we showed earlier.
These are the 3 huge things that allocating a budget for initial Facebook advertising will do for you:
- It will show you how much of your audience is on Facebook, and what ad verbiage, content, and creatives resonate with them best.
Knowing this will be helpful as you go on to hone in your Facebook ads and explore other marketing channels down the road.
- It will show you which specific demographics, interests, or behaviors within your target audience are most likely to convert.
Thus, maximizing your profit at minimal cost, and again, helpful to know in general as an entrepreneur growing your business.
- It will start the traffic flow of fueling your advertising funnel.
You can’t start getting conversions at the bottom of your funnel if nobody is in your funnel, to begin with. So you want to use what we call the testing period effectively.
And before we move on, we want to list out a couple of things to take note of, but before we do…
…be sure to check out our new social media ads training course to learn more on how to create and run successful social media paid ads.
Things To Note As You Start Your Facebook Ad Testing Period
a. The lower the price of your product or service, the faster the testing process will go.
This is usually because there are fewer objections to overcome on the buyer’s side.
You always want to build brand-consumer trust.
But usually, consumers don’t need to build as much trust with a company selling a $10 scarf…
…than a company selling a $1500 piece of furniture or monthly service.
This is why a lot of low-risk eCommerce businesses can start seeing sales quicker.
b. The caveat to this is if you have lower prices, it’s going to take more sales to cover your expenses and make a profit.
In general, we usually see businesses with higher-priced products and services come out more profitable in the long run.
Although it just takes them a little longer to start seeing initial conversions.
So if you’re a new business, new to Facebook ads, and have no customer data, put $600 a month towards it for 6 months straight at a minimum.
And then allocate more if you can.
2. If you’re a business that already has some customer data but is just new to Facebook.
How much should you spend on Facebook advertising if you’re a business that already has some customer data, but is just new to Facebook?
If you have existing customer lists of 1,000 people or more, you can upload them into your Facebook Ads Manager to:
- retarget them, and
- create Lookalike audiences out of them.
We cover what those audiences are and how to set them up in our Facebook ads targeting post so be sure to read it next.
But in a nutshell, these audiences produce conversions at a lower cost because the retargeting audience is a warm audience…
…and the Lookalike audience is a group of new people who look like your customer base.
So if you’ve been successful on other marketing channels or if you’ve already generated some purchases…
…you can put all of that to use on Facebook to start out ahead of the game.
You’ll still want to A/B split test different ads and audiences to a degree to fine-tune what ad combination is going to produce…
- the most results, and
- the lowest cost on Facebook.
But even so, you’ll be leaps and bounds ahead than if you were just starting from scratch.
You’ll just want to optimize your ads and ad sets…
…and then turn off the ones that aren’t generating you profitable results to reallocate your budget to the ones that are.
We have a whole post on Facebook ads optimization if you want to learn more about optimizing your FB ads.
So once you’ve got a pretty good rhythm going on FB, you’ve done some initial A/B split testing, and you’re seeing some steady conversions come in…
…you can transition your testing budget to a formula-based budget.
How Much Should You Spend On Facebook Advertising: Formula To Follow
In our small business marketing budget post, we shared that your marketing budget = CAC x customers.
And even though we were talking about your marketing budget as a whole, we can follow a similar model with your Facebook ads.
Your Facebook budget = your cost to acquire a customer on Facebook x the amount of customers you want from Facebook.
So for example, if you know it takes $30 to produce a sale from your Facebook ads…
…then multiply that by the amount of customers you want, which let’s say is 100.
Then you need $3000 to see 100 new customers from Facebook. Or, you need to lower your cost per result in Ads Manager.
We share 7 ways to do this in our how to lower Instagram ad costs post, all of which can be applied here to Facebook too.
And looking back at the funnel, you want to keep fueling that funnel, right?
So within your Facebook ad budget, you can generally distribute your budget:
- 25% towards audience building,
- 60% offer promotion, and
- 15% towards retargeting.
Overall, you just want to get to a point where this is a well-oiled machine…
…and that the budget you are allocating towards FB ads is a number pulled directly from how well FB ads are serving you and producing sales for you.
We hope this post answered your question on how much you should spend on Facebook advertising.
We know budgeting can be a tricky thing, especially when real-life ad results fluctuate over time.
Otherwise, that’s all we have for you today.
If you need more help with your Facebook ads, don’t hesitate to get in touch with our Facebook advertising agency today.
Contact us now at 404-596-7925.