Budgeting Guide: Facebook Ads for Small Businesses

If you are thinking of spending for Facebook Ads, set aside a budget of at least $1 per day. That’s the easy answer I give whenever I am asked this question. Small businesses initially look for way to boost their posts and doing this correctly will cost about, yup, a dollar per day.

With that said, you may have gotten offers from Facebook representatives telling you to set aside $2,500 per month and most likely, if your business is not that big yet, you would think twice about the amount. Well, the fact is, there are businesses that spend $100,000 per day on Facebook ads but these businesses have huge media budgets and teams in the category of Super Bowl ads. Of course they can afford it and you don’t and that’s okay.

If you are new in Facebook ads or if you have done it before without success, we will tell you ways of boosting your posts without spending too much. Note that you will fail in Facebook ads if you start at an arbitrary budget and spend it on cold audiences. What you will get are useless “likes” instead of conversions. You hit people who shouldn’t even be in your radar so of course, they will not buy what you’re selling.

Audience or Awareness and Reconversion

Whatever business you’re into, the rule is, you should spend $1 for every 100 visitors you get per month. If you are already driving conversions via SEO, AdWords, email and other digital channels, Facebook will increase your efficiency being a remarketing engine. The operative term is “remarketing” meaning; you will get more out of what is already working. The number of people who have responded to your email and gone to your website are the same number of people you will retarget in Facebook. For every 100, set aside a dollar; do that on a monthly basis. To do this correctly, there is a prerequisite — make sure that the traffic in your website is of good quality. Then, send these people a follow-up message on Facebook in the form of an ad. Make sure to come up with a good one and not waste the chance to re-deliver your message. Set up a “custom audiences,” a javascript pixel on your site or a one-click integration with your email provider. If you have 5000 clicks on your emails per month and 7000 website visits, that’s 12000 sessions. At $1 per 100 visitors, your start-up budget would be $120 per month for reconversion marketing. Adjust this budget if you sell many products to many segments. If your initial budget is profitable, keep on adding money until such a time when your marginal revenue is at par with your marginal cost.

Engagement

If you have a healthy Facebook account, a third of your budget should go to reconversion remarketing. Then, your engagement budget should be three times your remarketing budget. All these equal, you are budgeting for three warm touches prior to selling. Click Here

  • 1/3 of the engagement budget should be for look-a-like audiences. If you have conversion tracking in place and at least 30 conversions a month, Facebook will find people who look like the people who have already bought. Facebook will entice you to increase your budget here but do it only if the custom audiences you got are profitable and if the look-a-likes become actual buyers.
  • 1/3 of the engagement budget should be for interest/behavioural targets – products they like, life stage events, competitors they like and other targeting criteria.
  • 1/3 of the engagement budget should be remarketing to further engagement. You are already spending $1 per 100 visitors to drive conversions via remarketing. Spend another $1 per 100 visitors to educate them this time. Share stories, talk about issues they care about, so on and so forth.

In our example, $120 per month is for reconversion remarketing and $360 per month would be for engagement. The budget is now at $480 per month. This is just a starting point that you can tinker with based on what’s profitable, your Relevance Score and your content, if any.

There are three parts in the funnel – audience or awareness, engagement and conversion. We must do a layered-boosted post in order to generate a first touch (awareness) that leads to initial remarketing (engagement) and then to cross-channel remarketing (conversion).

We already established that $1 per day is the minimum that Facebook allows per campaign. Start out by boosting five to six posts. Most likely, you will find that one of them will do well based on cost per engagement or cost per lead. Typically, one in five boosts performs decently but if you don’t have good content, your number might go down to one in twenty. If your number is “good,” extend your budget to $30 for another 30 days. Over time, you have boosted dozens of posts and keep only a handful. If this handful continues to spend $1 per day, your total spend could be $10 to $200 per day.

If you have a properly set funnel in place, you have a captured engagement remarketing audience which you can use for your conversion campaigns. Link all your stages to see the profitability then adjust your budget accordingly. The amount you spend on boosting is based on the number of posts you have to boost, how well they perform and how long you’ve been boosting them. Typically, the boost should be a third of your budget and about 80% of your effort because you still have maintenance and testing to consider.

Remember to manage against revenue and ROAs by calculating marginal profitability for every conversion ad. CPC (cost-per-click) divided by conversion rate gives you CPC (cost-per-acquisition). Sorting ads by these two will give us an idea which ads to put more money in, tune and forget. The two factors can be further broken down into (1) relevance score (2) frequency and CTR. When it comes to frequency, be careful not to go overboard. Too much frequency invites negative feedback because it can come out as too “in your face.”

All campaigns are limited by audience or budget so you must know where to make adjustments. Businesses usually have an ad set that is exhausted because they have used up their audience so they try to force the bid higher. Do not do this. Overriding on CPM doesn’t work because Facebook’s algorithm always looks into account user feedback. What you do is, duplicate that ad set to other audiences, rotate new creative, or both. How can you tell if your ads have burned out? Tune them daily for a few minutes instead of doing it big time at an irregular interval.

You now know that what matters is profits and not budget that’s why a lot of optimization is done at the three stages of the funnel. The sum of these changes is budget. When the goal is to spend a certain budget, profit becomes whatever random output. On the other hand, if the goal is maximizing profit, you will spend whatever budget is needed to maximize the outcome.

Getting to your end game may take up to six months because you have to build your audience, boost your content and use your previous profits to fund your current campaigns.

We are done discussing what you should do in budgeting and optimizing. Here are the things you should not do:

  • Do not come up with campaigns that are entirely geared towards conversion.
  • Do not videos scare you. You don’t have to look spectacular or have expensive gadget to do a decent video. All you need is your smart phone and you can go live.
  • Do not be overwhelmed by various tools that can be intimidating. Have a good strategy first and let the tools come second. Remember, content over appearance.
  • Do not be tempted by short-cuts. Do not cheat the system.

Do not assign this task to somebody else because your own goals, content and targeting (GCT) should evident in the entire funnel. It should bear your mark and that is something you cannot pass on.