How Much Should I Spend on Facebook Ads? A Guide for Small Business

If you’re relatively new to Facebook ads, or you’re looking back on a recent campaign and wondering if you’re doing it right, it’s a good idea to take a step back and ask “how much should I spend on Facebook ads?”

For some, the answer seems simple: as much as the budget allows. However, we encourage you to look deeper than that, since the goal is to avoid throwing money at an ad campaign that doesn’t render the desired results.

Every business is different, but with a good strategy, you can answer that looming question of how much should I spend on Facebook ads, allowing you to properly target users, run multiple ads at the same time, and utilize the right ad types without spending too much in the first place.

📚 Table of contents:

• Decide what to spend on Facebook ads
• Start with a test budget
• Identify the best performing ads
• Reallocate budget expenses to superior ads
• Build a consistent budget and scale up

How much should I spend on Facebook ads?

One problem we often see with small business owners is that they create one Facebook ad, or boost a post, and hope it does well.

Metrics are checked in the Facebook Ads Manager, maybe a few changes go into place, and the next campaign usually follows the same practice.

When you ask the question of how much should I spend on Facebook ads, you should really be wondering about the best way to test out your ads and discover the ideal budget and strategy for your own business.

A large corporation is bound to spend in a different manner than a small retail shop. A clothing store should have a different budget than a technology store or a lawyer.

Therefore, we’ll walk you through the process of finding that perfect budget with the help of tools already in place on Facebook. Combine that with multiple ads running at the same time and detailed analysis, and you’ll find it much easier to answer that question.

Start with a test budget

All Facebook budgets should start with a test – nothing too expensive, but significant enough to accumulate worthwhile data that drives your future Facebook spending.

We’ll call this the test budget.

Test budgets are used to identify the best ad strategies, but they also produce failures. Therefore, it’s best to stick with a range of money from $100 to $500 for a full seven day week. Ideally, you’ll get closer to the $500 mark to produce the best results.

Why this number?

This initial investment is a requirement to eliminate wasteful spending in the future. Each ad type on Facebook has a minimum spend amount, which usually floats around $10 per ad.

The audience reach for a $10 ad varies, but here’s an example:

I’m planning on running several ads in my campaign to get more leads for a real estate business.

The advertisement will showcase a free paper on how to sell your house in the current market and get the best interest rate for a new mortgage.

At $10 per ad, the estimated reach for seven days is 119-343 people per day. Keep in mind that this estimated reach only factors in adults living in my area, so the targeting isn’t that complicated.

You also have the opportunity to go into detailed targeting, with elements like demographics, interests, and online behaviors. I’ll leave those off for my current test, but they’re rather valuable in the future.

Reaching a few hundred people each day isn’t nearly enough to start making decisions about the future of my spending. However, a $100 budget boosts that reach to 1K to 3K people per day.

A $500 weeklong budget generates an estimated reach of 4.2K to 12.1K per day. That’s more like it!

Now we’re looking at reasonable sample sizes to understand which ads people actually respond to.

Creating multiple sets of Facebook ads

So you’re saying I should spend $100 to $500 on one ad for the week?

Nope!

The test campaign, and all Facebook Ads campaigns, should have multiple ads running at the same time. This allows for comparison and the option to remove those that don’t perform as well. In addition, you may find some advantages to certain designs that you hadn’t thought of before.

We suggest beginning your test campaign with 5-10 ads – not completely different ads, but ones with minor changes, like a different call-to-action, alternate colors, or contrasting media types.

Let’s say you’d like to run an ad for a real estate open house. You can create the following ad variants without spending too much time at all:

Facebook Ads even provides an area for you to see recommended variants of the original ad you created.

This is just a small sampling of ad variants for one industry. Your job is to make a list of how you can change up your original ad to try out new tactics, even if it’s changing one simple line or adding a form at the end of the advertisement.

In the future, it’s recommended you expand this list to 10-30 ad sets per campaign. However, a test campaign with so many ad variants can become overwhelming.

Identify the best performing Facebooks ads

It’s time to evaluate the Facebook Ads results once that week comes to an end.

What matters most to your business right now?

Usually, the answer to this question is a return on investment, aka paying leads. So, you may find that an advertisement with high engagement doesn’t actually bring in any customers.

However, there are other things that might matter to your business as well:

• Leads
• Reach
• Brand awareness
• Traffic
• Engagement
• Installations
• Video views
• Messages
• Conversions
• Sales
• Store visits

Metrics to consider

The “return” in your return on investment varies based on the goals. However, we’ll assume that most brands are seeking out more leads or conversions.

After each ad runs for the entirety of a week you’re left with the results. Skipping the results and going right into your next batch of ads leaves you with minimal information, and it fails to answer the question “how much should I spend on Facebook ads?”

Although Facebook metrics look intimidating at first, they’re your best friend for analyzing the effectiveness of some ads and removing the ones that don’t turn out well.

What metrics should you focus on to figure out the quality of each ad? You have several options to choose from:

• Cost per lead
• Cost per conversion
• Return on investment

Although these metrics are slightly different, they all pretty much say the same thing: how much did it cost you for each lead, or conversion, or sale, or whatever it is you’re trying to gain? ROI, on the other hand, reveals the overall intake from those costs.

With Facebook, the cost per lead evaluation doesn’t take long. Simply open one of the ads to see its performance. Again, your cost per lead number depends on what you’re trying to achieve.

If a “lead” is considered a link click, take the overall spend and divide it by the number of clicks.

In the screenshot example that’s $120.32 spent/25 link clicks, or a cost of about $4.81 per click.

You may want to get more specific with your cost per lead by tracking users who click through to the site and purchase an item – usually done with the Facebook Pixel. Or maybe you’d like to collect email addresses. In that case, you’d divide the total amount spent by the number of email addresses collected.

In general, the cost per lead is a much stronger metric to consider as opposed to raw data like reach, video thru plays, or post engagement.

Reallocate budget expenses to superior ads

Now that you have your list of finished ads and their cost per lead metrics (for each separate ad,) take a look at the top contenders.

The goal is to pick the lowest cost per lead and formulate future ads based on what was done with that ad. If you ran 10 ads in the test campaign, consider keeping the four or five ads with the lowest cost per lead numbers. As you can see, it’s much easier to analyze results when you have a larger sample size. Although five ads is a good start, you’re only going to be able to see one or two top performers.

Consider the following example:

A list like this can be done within a matter of minutes by using the stats provided by Facebook. You can make it even easier by typing the information into an Excel spreadsheet to sort the ads from least expensive per lead to most expensive.

Continuing on with our test campaign, we have four ads out of ten with CPLs below $5. Those are the ones we want to save. Those are the ones to analyze and write down the elements that make them unique.

It’s clear that video slideshows have an effect on my lead generation. We’ll keep that in mind for the future. It also appears that mentioning the price, especially when there is a price reduction, results in more leads at a lower cost for my company.

Hammering down a consistent budget and scaling up

Keep in mind that the results from my own test may end up drastically different than yours, so don’t be discouraged if you keep getting a much higher cost per lead, since it all depends on your target market and the amount you’re willing to spend.

Having said that, the next step is to use this test information to solidify a budget going forward. This would include an ideal budget for each campaign and an estimated cost-per-lead.

For example, it appears that I have the potential to maintain a cost per lead at around $4 or $5, ideally lower. For now, that means I can estimate an intake of 20 leads for every $100 I spend on Facebook ads.

Here’s where it gets interesting. Does that mean you should spend $100 on all ads?

Not exactly.

The budget test simply provides a clearer view of how much you’ll end up spending so that there are fewer surprises and results that make sense.

You may have a budget for $500 per month in Facebook advertising. You now know that each month should pull in a certain number of leads for that budget.

From our example, that means we’re expecting 100 leads per month when sticking to a monthly budget of $500.

Don’t stop there

The objective is to make your Facebook Ads spending predictable and profitable. After that, it’s time to scale up your spending with advertisements you know produce specific results.

For instance, the example from before accumulates around 100 leads per month at a total of $500 for the entire month. If each of those leads brings $5 to your company you’ve hit the break-even point. However, there’s a better chance those leads are more valuable than that.

Essentially, some of the profits gained from those leads should go back into your advertising budget, allowing you to expand the budget and gain even more sales as the months go on.

How much should I spend on Facebook ads? Our conclusion

The question of how much should I spend on Facebook ads is answered with the following steps:

• Running a test Facebook Ads campaign.
• Making sure your sample size and spend are big enough.
• Adding multiple ad variants to the campaign to test which ones perform the best.
• Identifying the top ads using metrics like cost per lead and return on investment.
• Using the results to paint a clear picture of whether or not your estimated budget is realistic.
• Reinvesting the profits from your ads in more campaigns (while still using the same knowledge you gained from before).

Are you planning Facebook ads? Let us know about them in the comments section below!