One question we get asked a lot is, “How big of a budget should we allocate to advertising if we’re a smaller business and haven’t made a sale yet?”
Because a lot of the budget videos out there are based on a percentage of your profits. But what if you don’t have profits yet?
Where do you start? How will you know how much to spend on ads?
We’re gonna show you where to start in this post and give you a 4 step approach to ad spend that thriving businesses took when they first started out.
4 Steps To Help You Determine How Much To Spend On Ads
Step #1: Allocate at least $500-$1000 a month minimum towards your ad spend
If you don’t have that money to spend, then spend what you can. But if you have the ability, we would spend at least $500-$1000 a month on your ads starting out.
Which ads are we referring to you ask? Facebook or Google?
You’ll definitely want to pick one platform to start. You don’t want to stretch a $1000 monthly ad budget across two ad platforms.
You’ll need to determine which platform makes more sense for your business and the nature of your offerings.
Here’s our full post comparing the two if you want to know which strategy for business is worth investing in, but the short version is this:
If the nature of your product or service is one where people Google it when they need it, you need to be on Google.
If it’s something that people don’t really search for or look up on Google or maybe it’s not a necessity, then social media ads are probably the better route.
So think about the nature of your offerings and which route would make more sense for you.
Once you’ve picked the platform you want to invest in, you’re going to start running ads on it with your dedicated ad budget-
But, you want to run ads a certain way so as to maximize your budget which brings us to the next step.
Step #2: A/B split test your ads
A/B split testing is when you run multiple ads, with 1 variable changed in each.
The goal of A/B testing is to see which visual, caption, and target audience combination is going to produce the most results at the lowest cost per result for you.
For example, if you want to test out different captions, you would run the same creative (an image or a video) for multiple ads, but give each ad a different caption.
Or vice versa, if you want to test the creative, you could run a different image or video in each ad, but keep the caption the same in all of them.
Or you could keep all your ads the same and run them to two different audiences.
Then, you identify which ad or ad set performed the best in terms of engagement or sales or whatever your goal is.
Keeping one element the same throughout (such as the caption) and then changing the other element throughout (such as the creative)…
…allows you to see exactly what it was about an ad that made it work.
Or, when you keep the ads the same but send them to different audiences, you can see which audience performs better.
And when you understand the ingredients that make an ad campaign successful, you can then recreate that success at scale.
Here’s how to get started with A/B testing if you need a step-by-step tutorial.
Or if you’d rather hire a professional marketing agency to handle all of your social media advertising for you-
–fill out our contact form to get a free marketing proposal and quote to see exactly how we can help your business grow and at what cost.
The alternative to A/B testing is slowly testing out one variable at a time for a much longer amount of time, draining your ad budget and patience.
So that’s why we recommend small businesses advertising for the first time start A/B testing from the start.
Step #3: Look at the ROAS, not just the conversion value
ROAS stands for return on ad spend. Let’s look at an example to understand why this is important.
If you’re looking in your ad account and see that ad A has 5 conversions and a $500 conversion value…
…and ad B has 3 conversions and a $300 conversion value, you might think that Ad A is the better ad.
Because it’s bringing in more money, right? But you need to take into account that each ad might have spent a different amount of money.
If ad A spent more than $500 to acquire the $500 in revenue from purchases, you’re losing money on that ad. You’re spending more than you’re receiving.
Whereas if Ad B only spent $80 to get the $300 in conversion value, that’s an actual profitable ad.
The ROAS, return on ad spend, takes the amount you spent on an ad into account.
It’s the total revenue generated from your ads (your return) divided by your total ad spend.
So you don’t have to do the math in your head and you can look at that one metric and see if the ad is profitable or not.
Now, if you’re not selling products or haven’t entered into Ads Manager how much a lead is worth-
-then you can just look at the cost per lead, knowing in your head how much you want to spend to acquire a lead, to see if an ad is performing well or not.
If you don’t know how to pull up your ROAS or cost per result column in Ads Manager to see it, then here’s how to analyze Facebook ad results.
But it’s important to be thinking about profitability when it comes to ads, not just whether they’re getting you sales or not.
Step #4: Turn off ads that aren’t worth it and scale the ads that are converting
After you’ve A/B tested and received a fair amount of data on your ads, you can start to identify the patterns of what makes your ads work and what makes them fail.
Turn off the ads that aren’t fruitful for you, and reallocate that ad spend to the ones that are.
Or, reallocate it into new ads to test against the ones that have done the best so far.
In sales, they say ABC always be closing, but in marketing, we say ABT always be testing.
Successful business owners know it’s important to continuously set the bar higher, don’t just settle for an okay ROAS. Strive for a great ROAS or cost per lead!
Now we’re going to wrap up by leaving you with a few resources.
How to set up Facebook ads step by step if you’ve never done it before.
How to create and execute a Facebook ad funnel– so you don’t just spend money to spend money. Run ads that actually result in CUSTOMERS for you.
And here are some Facebook ad examples to get the creative juices flowing.