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Posted on August 9, 2022

How to Decide the Right Facebook Ad Budget

Denver PPC
Denver PPC
PPC Specialists
How to Decide the Right Facebook Ad Budget Feature Image
How to Decide the Right Facebook Ad Budget
Denver PPC
Denver PPC
PPC Specialists
Posted on August 9, 2022

It’s recommended that small businesses spend roughly 7-8% of their gross revenue on marketing and advertising. Larger businesses on average spend anywhere from 10%-12%.

Depending on what size company you work for, you’ll likely spread this budget across various platforms and advertising outlets, including Google Ads, LinkedIn Ads, and Microsoft (Bing) Ads.

Many small companies solely rely on Facebook and Instagram ads to sell more products, and increase their online following and awareness.

The problem is that many businesses simply don’t know where to start with their Facebook Ad budget.

In this article, we’ll go over Facebook Ads and their main objectives, and offer tips on how you can find the appropriate Facebook Ad budget to achieve your business goals.

First, come up with your campaign’s goals and ad’s objective

Many companies use Facebook Ads to direct visitors to their online store to drive eCommerce sales, while others use the platform to create awareness.

Your campaign’s goals and objectives will determine which category of ad you will create.

Facebook Ads currently offers three main advertising objectives, or goals, to their users.

Awareness Ads

When you need to bring extra visibility to a product or service and want people to recall your brand later, then the awareness category ad should be selected.

Awareness ads are great for reaching as many people as possible through impressions and increasing brand awareness by showing people your company’s brand and products.

Consideration Ads

When you want your target customer to interact with your ad and to learn more, then use consideration ads.

Consideration ads can achieve more business goals than just awareness ads, such as:

  • Boost traffic to an external website (landing page, eCommerce store, blog post)
  • Improve engagement through likes, comments, and shares
  • Direct people to the App store where they can install your app
  • Share videos with more people
  • Generate leads
  • Encourage new Facebook messages

Conversions Ads

When you want to specifically sell more of your store’s products and items through your ads, choose the conversion ads option.

Conversion ads are more targeted for generating product sales, encouraging app downloads, registers to your site, phone calls to your business, and more.

What’s the average monthly Facebook Ads budget for small companies?

There’s no standard formula to determine your Facebook Ad budget, as every industry has different average cost-per-click prices.

For example, the finance and insurance industries have the highest CPC rates, while retail has some of the lowest CPC rates.

We recommend working with an experienced Facebook Ads PPC agency to find the perfect budget for your campaign.

Bidding strategy tips — determining the right Facebook Ad budget that performs the best

When you start your Facebook Ad campaign, you’ll need to find the right price point where you’re not spending too much, but spending enough to achieve your campaign’s goals and objectives.

Finding the right price point at the beginning will require a bit of experimentation to test different ads and ad budgets.

After the initial testing phase, you should have a clearer understanding of the budget required to match your business’s goals.

Start small

Facebook’s minimum ad budget starts at just $1 a day for impressions, which can be used to show your ad to many people quickly.

Impressions are good for increasing your Facebook following, getting likes, and generating engagement.

$1 is not enough, however, to generate enough data or conversions. We recommend starting out a bit higher in order to scale up your ad’s reach and start measuring engagement and conversions.

You can then optimize your budget for better ad spending.

Conversely, you may wish to start high with your budget, and scale down

Another tactic is to spend more on Facebook Ads at the beginning of your campaign, during the initial ad testing phase.

This tactic is useful because the increased ad spend will scale up your ad’s reach and generate more engagement and data early on in your campaign, which can be analyzed to make improvements to your campaign.

Once you know which ads work, and which don’t, you can begin to scale down your Facebook Ad budget to find the perfect price point, where you’re not wasting money, but also spending enough money to reach your goals.

Use Facebook’s Campaign Budget Optimization tool

Managing ad budgets across ad sets can be confusing, which is why Facebook introduced its Campaign Budget Optimization (CMO) tool.

The CBO tool distributes your overall budget automatically to ensure your money is being spent efficiently on the highest-performing ad sets.

Target the right audience

Well-written ads that target the wrong audience will not convert, because the people that see the ad will never be interested in those products or services.

This is why PPC marketing professionals frequently check these ad metrics to diagnose why certain ads work better than others.

You’ll need to be aware of these important metrics when monitoring your ad campaign’s performance:

  • ROAS
  • Conversion rates
  • Cost-per-click

Watch your Return on Ad Spend (ROAS)

Ideally, the money you spend on advertising will generate more revenue than what you’re spending to show the ad. This is why checking your return on ad spend (ROAS) is so crucial for successful ad campaigns.

The return on ad spend (ROAS) is one of the most important metrics for online advertisers — it tells them how much money they’ve earned per dollar spent on an ad.

A great ROAS will generate twice the amount of money spent on advertising into new revenue, meaning $200 spent on ads will generate $400 of revenue.

Try out Denver PPC’s free ROAS calculator.

Conversion Rate (CR)

The average conversion rate for Facebook Ads is around 9%, meaning that out of every 100 people who see your ad, nine of them will convert, performing whichever action you wanted them to take, e.g. purchasing an item, signing up, clicking, calling, etc.

If your conversion rates are lower than 9%, you may need to change your approach. Consider making the following changes:

  • Choose a different ad format
  • Change your target audience, either narrow down or broaden
  • Try creating different ads with different visuals and text
  • Choose a different conversion goal

Cost per click (CPC)

You can expect to pay roughly $0.94 per click or roughly $12 per 1,000 impressions.

Use this information to help you determine your Facebook Ad budget, whether your goal is to build brand awareness and reach as many people as possible through impressions, or to generate clicks to sell more products online.

Get more online advertising success rates with Denver PPC

Are you looking to start a Facebook Ad campaign, but don’t know where to start?

Hire Denver PPC to manage your Facebook Ad campaigns. Our team of PPC professionals can help you set up your next Facebook Ad campaign to sell more products, generate more leads, and build brand awareness,

Read through our case studies to see how we’ve helped businesses in the past, and how we can help you reach your goals.

Do you work for a marketing agency that wants to offer its clients more services? Then ask us about our white label PPC management services.

Get your free PPC analysis started now. Text or call us at 877-584-3772.