How to Calculate your Facebook Ad Budget

‘How much will my Facebook Ads cost me?’ is the question I get asked more often than any other.

Each Facebook Ads Specialist has their own preferred formula for working this one out. The one I am going to walk through here is a ‘goal based’ formula. I like it because it’s broad and straightforward, and helpful for those who are maybe running ads for the first time.

Pic Credit: Fabian Blank @ Unsplash

There is a saying in marketing that, ‘if you haven’t got the money, you need to have the time’. This translates as, the more money you are prepared to put into your ads, the faster you will see results. If you don’t want to spend much money, then results will take more time.

As a rule, we spend less money at the beginning of a campaign when we are running the initial ads and harvesting data. Most of the budget will be spent later retargeting which is where the real power of Facebook ads is.

Here are some steps you could follow to work out what your goal-based ad-spend might look like:

First, decide what your goal is!

This is so obvious (“I want to sell my stuff!”) that people often simply ignore it!

One reason this step is so important is because when you set up your ads, you need to tell Facebook what your specific goal for the ads is. Do you want your ads to give you video views or engagement or reach or something else? Facebook doesn’t treat these electives in the same way. For example, it costs more to serve up an ad for ‘conversions’ than it does for a ‘video view’. Therefore, it’s important when you’re budgeting to be clear on exactly what you’re trying to achieve with your ads.

The overall goal of your ads might be:

• Product sales for a certain period
• Lead generation
• Engagement
• Conversions
• Video Views
• Event RSVPs

The next step is to decide how many of the above you want e.g. ‘I want to sell 10 products’, or ‘I want 100 responses to my Event RSVP’.

Next, we work backwards.

So, if you want to sell 10 products, you need to think about how many leads this will take. When we talk about Facebook leads, we’re talking about people who engage with your ad and click the ‘find out more’ button because they’re interested in your product. If you’ve never done online advertising before this can be difficult to gauge. You could think about how many people you might have spoken to at a networking event before one said, ‘yes, I’m interested’. Maybe one in every 20 people wanted to hear more from you, so in that case your average was 5%.

Or if you really are stuck, you could work on the basis that the average lead conversion (i.e., the amount of people who will engage with a lead gen ad) on Facebook is between 10% and 12%.

Now you need to calculate your audience size.

So, if we want to generate 10 products sales, based on a (let’s say) 10% conversion rate, we need to have 1,000 leads.

How big of a Facebook audience do I need to gather leads?

For Facebook, there are several variables such as:

• How many people overall will see your ad?
• How many of your target audience will be on Facebook each day?
• What if Facebook serves my ads to my audience but they either don’t see it?
• Ad frequency (how often will my ad be served up?)

This is where setting our budgets and expectations is important.

Think about:

• How long you wish to run the campaign for? Remember — Facebook is not ‘run and go’ platform. You will need to be constantly monitoring your ads and refreshing them.
• How likely is it that Facebook will serve the ad to your target audience?

You have very little control over how your target audience see and engage with your ad. But — and here’s where we come back to the time/money conundrum — the more you can spend, the more likely it is that your ad will get seen. If you do not have a big budget, then you need to be prepared to keep your ad running for longer to try and get it seen by the audience you want.

If you are running the same lead generation campaign, and you keep an ad set running for at least three months, then you can probably expect about 99% of your target audience to have logged into their account at least once. This being the case, assuming your offer, landing page etc are okay (remember — the ad is only part of your funnel!) you are well placed to get 1000 leads from which you will then get your 10% conversion.

So, to recap:

1. Decide your tangible goal in numbers (how many conversions do you wish to achieve?)
2. Work out how many leads you need to generate to get to this figure.
3. How much do you usually/are you prepared to pay per lead?
4. Multiply (3) x (2)
5. Think about how likely it is that your target audience will see the ad (basically, how often are they on Facebook?)
6. On this basis decide how many days you will leave your ads running.
7. Multiply (4) x (6)
8. You should now have your approximate goal-based Facebook Ad budget.

Finally, one very important takeaway from this is that you should not be using your entire ad-spend budget at this ‘cold ad’ stage. The early part of the campaign is simply data gathering and testing the water. But, with a tangible goal, you can now calculate how much you really need to be spending to success with your Facebook ads.

I hope this is helpful and please don’t hesitate to ask any questions!