It’s this question that NO one seems to have an answer to. Even I tried to avoid it since I couldn’t stomach the idea of anyone shelling out hundreds of dollars in case their investment didn’t pay off.
But it can’t be avoided. Everyone wants to know: “How much should I spend on Facebook ads?”
Up until now, I’ve always answered with a watery, “well that really depends on a number of things…” I could sense clients’ eyes glossing over at the thought of having to do some math to figure out their budget.
Well today you’re going to find out exactly how much you should spend on your Facebook ad campaigns.
Nothing has really changed; your investment in ads still depends on a number of factors, particularly how much revenue each customer brings in and how good you are at converting subscribers to customers.
But the difference is that I’ve done all the math for you in a handy Google spreadsheet. All you need to do is enter a few of your own numbers and you’ll see exactly how much you should be spending on ads.
Click here to grab the spreadsheet for free, and then watch the video below on how exactly to use it.
Here are instructions if you want to dive right in without watching the video:
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Export or make a copy of this doc (File > Make a copy) so you can manipulate the data.
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In cell A10, input the price of your product or service.
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In B10, input your conversion rate (the percent of your subscribers who become customers or clients). A 2% conversion rate should be written as 0.02, 0.5% as 0.005, etc.
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Input 500 in C10.
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Input 2.5 in D10.
After these steps, you’ll see approximately how many new leads you’ll generate (E10), how much revenue those leads will bring in (F10), and what your return-on-investment should be (G10) after spending $500 on Facebook ads.
Thinking about spending more or less than $500? Fiddle with the amount in C10 to see how those different investments will impact your ROI.
Now this is very important:
You’re only guessing about your conversion rate and your cost-per-lead generated from Facebook ads. If your guesses are completely off, then your revenue and ROI numbers will be very, very different from what you see on the spreadsheet. (If you don’t quite understand what I’m talking about, watch the video above. I don’t recommend you use this spreadsheet without watching the video, but I know many of you will anyway! You’ve been warned.)
You know I want to answer your questions in the comments below.
It’s one of my all-time favorite pastimes, aside from watching Master of None on Netflix. So let me know what you think of this formula and what if any questions you have about it!
very good claire ;)
Thanks Leo!
this is awesome, Claire — thank you!
one note: for those who have physical products with labor costs built in, revenue from ads is going to have to be larger than the initial investment in order to actually break even.
GREAT point Lora, thanks for bringing that up!
Thank you, Claire! This was crazy helpful especially because I just had a conversation about this last night, trying to figure out my numbers.
I have a question for you pertaining to my specific product. I’m selling a monthly membership. So that adds a whole new layer. While my price is low, it adds up if they stay for a few months. Have you dealt with this at all? Learning churn rate, etc., keeping an eye on how long people stay and how many people leave each month.
Hey Erica! Yes, I certainly have experience with running ads for membership sites. If you’ve already been running yours for a while, you should have a sense of your LTV, or long-term value per customer. If you don’t know that yet, you’ll just have to ballpark it based on what you kind of churn you’re seeing. Insert that amount under Value per Conversion.
If you’re interested in more stuff about churn and membership sites, I had 2 great guests talk about their experiences on my podcast: clairepells.com/7 and clairepells.com/16/
Hope that helps!
This is awesome Claire – thanks so much! I am trying to figure out the wording on your Google doc, next to what appears on my Ads Manager and its a little different. Are Conversion Rate & Cost Per Lead, the same as Click through Rates and Cost per Conversion?
Hey Ashley, the metrics in my doc don’t follow Facebook’s metric names. You won’t find Conversion Rate in FB’s reports since that’s about your product’s conversion rate, not your ads. And cost per lead MIGHT be cost per conversion if you set your objective to Website Conversions. It’s tricky, I know. This post might help out a bit more: clairepells.com/metrics/. If not, Absolute FB Ads will definitely straighten things out for you! clairepells.com/absolutefbads
Hi Claire, I’m getting good results with FB Ads thanks to your recommendations! I am very grateful.The only problem I seem to have is that most of the new subscribers via the FB ads I set up do not confirm their subscription (I have a double opt-in). Do I have to assume that they are not qualified lead then? Any recommendations?
Hey Olga, glad to hear that about your ads! A lot of people struggle with the same thing. Check out this article I wrote on how you can increase the number of people who confirm: https://clairepells.com/unsexy-but-crucial-list-building/
Thanks so much, Claire. That’s what I was looking for.
I will implement your ideas inmmediately!
Thanks for providing such a great resource and clear explanation! Top notch! ????