What’s an appropriate and smart ads budget for your Facebook ads campaign? The answer is right in front of you, if you know where to look.

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Transcript:

Hey everyone, welcome to another episode of my podcast. Today, we’re going to talk about how to select a smart budget for your paid ads. Budget is something that I get asked about a lot, and I feel as though when people ask a question about budget—how much should I spend on my ads—they’re looking for some kind of flat, blanket answer like $500, $1,000. That can be okay; you could work with the amount of budget that you have spare in your earnings that you’d like to reinvest into ads.

But there’s actually a more deeper, more in-tune way to do this that is in tune with the cost of selling your product or your course. I’m going to break down how you can use your statistics, the data, the numbers about how your course is selling, in order to actually work on a paid ads budget that works so much better and makes more sense for the cost of your program.

Understanding your conversion rate

The first and probably one of the most important numbers to look at is your conversion rate. Now, if you haven’t heard of this before, your conversion rate is the percentage of people who actually visit your website and go on to make a purchase, opt into your lead magnet, or sign up for your course. The rate is a percentage out of 100 people. So, if five out of 100 website visitors make a purchase or grab your freebie, the conversion rate would be 5%. Your conversion rate with organic sales can help inform the conversion rate for your ads. It can also act as a warning, telling you that maybe it’s not a good time to run ads at the moment.

A healthy conversion rate should be at least 2% or above, preferably above. If your conversion rate for sales, for signups, is way under 2%, I would consider that a warning sign, and I would check on some other things before you decide to run paid ads. For instance, I would consider maybe seeing if there’s something funky going on with your website. Maybe it looks fine for you on your computer, but you’ve got traffic coming from mobile phones, and the people using their mobile phones may be struggling to get the gist of your page and actually find what they’re supposed to do.

If it’s not the website and you’re pretty sure that your website’s working fine, something that could be influencing your conversion rate is actually market fit. If you have something that you’re really gung-ho about selling but you’re not sure if people want it, and you’ve put some offers out there and you’ve done it for a very long time and you swear that you’ve got a good website and your conversion rate is still below what it should be, then yeah, I’d probably take a step back and re-evaluate the market and the product that you’re selling. Or it might not be that bad; it might just be as simple as the value that you’re communicating through your marketing materials and your website.

A few simple word changes could make or break a person’s realization that what you’re offering is actually the thing that they want to buy and are ready to buy right now.

Setting revenue goals

There are some other important considerations that we need to look at when we’re determining a budget for our ad spend. One thing that is really good to have is a goal, a revenue goal. If you know how much revenue you’d like to make, this can help so much when it comes to deciding how much to spend on ads. If you’ve also already got a good idea of what quantity you can sell in a certain time period and you sort of got a feel for the revenue you can make per each item sold or per each course sold, that can sort of help us figure out how much you’d like to spend to capture a lead.

A cost per lead is something else that could actually help us determine how much to spend on ads. For instance, in a lot of cases, many companies will spend a few dollars just to get somebody to sign up into their email list, their email sequence, and get them into the lead pipeline. For a lot of businesses, this cost could be something like $2 per lead. That’s actually pretty reasonable. If you spend $2 in ad spend to get somebody into your email pipeline, your email funnel, that’s pretty brilliant. Otherwise, depending on how much revenue is made per item sold, you could certainly reach for a slightly higher cost per lead, especially if it’s one that also takes a bit more time and consideration.

Certainly, things like commodities and novelties are very easy to sell, and you really don’t need to put people in a funnel for that.

But when it comes to high-touch things such as courses, group programs, professional services where you need someone to work with your money or your life, those sorts of things, it can be, you know, obviously you charge more because you’ve got more skill and expertise, but also, it does make sense to invest a little more to get a lead in your pipeline because you will need multiple touchpoints, as we say, multiple contacts with them. They’ll need to see your ads several times; they’ll need to see your content several times before they feel confident and ready to take the next step with you.

Conclusion

I’m really sorry that this isn’t quite the blanket answer you were looking for, like, “Oh, just spend $100 a day” or “$5,000 a month.” Like, really, I can’t just give you an answer off the bat without knowing more about your revenue and your conversion rates and that data. If you can collect that data first, if you can get a good conversion rate, if you can start measuring those things, then we’ll get a better idea of how much money to actually invest in your paid ads.

Now, I’d also like to tack on a little side note here as well: if you’re looking at getting somebody to manage your ads for you, that is also a cost to consider when it comes to your monthly investment in ads. And look, these can sort of average in the $1,500 to $2,000 to start with just to get somebody to manage your ads. So, I would strongly advise that you be spending more on your monthly ad budget than what you are in having that person manage it for you. If you feel as though you can’t manage a $1,000 a month management fee for somebody to help manage your ads, then you’re probably not ready to have that sort of help.

Besides, once you start spending a lot more money on your ads, it does kind of make sense to have extra help there, managing things, keeping an eye on stats, making sure that the tech is working, etc., and so forth.

But yeah, coming back to the previous point and the thing that I really want to drive home is here is that you really need to be in tune with your numbers, what the revenue is per item sold, how many items you can sell in a time span, in the life cycle, in your funnel, in a month. You really need to be in touch with those numbers because if you’re not in touch with your conversion rate or your cost per lead or things like that, yeah, we’re going to have a difficult time figuring out how much to invest in your ads.

But on the flip side, if you at least know your conversion rate and have a number in mind that you’re happy to spend in order to acquire a new customer or get a new lead into your funnel, then yeah, that actually goes a long way in determining how much to spend on your ads.

Anyway, I hope this information was useful, and if you’ve got any questions to do with paid ads, please don’t hesitate to reach out to me. This is what I do for a living, and I really enjoy helping business owners grow and succeed online.