How Much Should I Really Spend on Social Media Ads?

Hey there, savvy business owner! Social media ads can be a game-changer for your business, driving traffic, generating leads, and increasing sales. But the million-dollar question (pun intended)is: how much should you really spend on social media ads? The answer isn’t a one-size-fits-all, and it requires a bit of strategy and understanding of your own business needs.

Let’s dive into the nitty-gritty of setting a budget for social media ads and why it’s important to spend at a sustainable level. We’ll also discuss how to manage expectations, especially when it comes to ROI, and the importance of not putting all your eggs in one basket.

Why Social Media Ads Matter

Before we get into the numbers, let’s talk about why social media ads are important. Here’s a quick rundown:

Targeted Reach: Social media platforms allow you to target specific demographics, interests, and behaviors, ensuring your ads reach the right people.
Brand Awareness: Even if people don’t convert immediately, ads can increase brand awareness and keep your business top-of-mind.
Engagement: Ads can drive engagement, leading to more likes, shares, comments, and ultimately, loyalty.
Conversions: With the right strategy, ads can drive sales, sign-ups, and other conversions.

Now, let’s tackle the budget question.

Step 1: Define Your Goals

Your budget should align with your business goals. What do you want to achieve with your social media ads? Common goals include:

Brand Awareness: If your goal is to increase awareness, you might spend more on broad reach campaigns.
Lead Generation: If you’re looking to generate leads, your budget might focus on campaigns that drive sign-ups or contact form submissions.
Sales: If your goal is direct sales, you might allocate more budget towards conversion-focused campaigns.

Impact of Ad Goals on Budget

The type of campaign you run significantly affects how much you should spend. For instance:

Traffic Intent Ads: These are generally cheaper and can be effective even with a budget a slow as $1/day. The goal here is to drive visitors to your website or landing page.
Lead and Purchase Intent Ads: These typically require a higher budget to be effective, often starting at $5/day. These ads are designed to generate leads or direct purchases, which usually cost more due to the higher value action being sought.

Step 2: Determine Your Customer Acquisition Cost (CAC)

To figure out how much to spend, you need to understand how much it costs to acquire a new customer. This involves knowing your:

Total Marketing Spend: The total amount you’re spending on marketing efforts.
Number of New Customers Acquired: The number of new customers gained during a specific period.

How to Calculate CAC:

It’s actually super simple to calculate this number. In fact Facebook ad manager does this for you with their cost per lead or purchase metric. But if you want to calculate this manually on your own or if you’d like to calculate an average from all your marketing channels overall, simply, divide your Total Marketing Spend by your Number of New Customers Acquired in the same period.

This number gives you a baseline to understand how much it costs to get a new customer. Your social media ad spend should be aligned with this cost.

And if this is totally beyond your brain I get it! There’s a super cool and handy Facebook ads Calculator tool from Convoboss that I love using. And honestly it can be used for any type of campaign, so definitely bookmark that!

Step 3: Start Small and Test

It’s crucial to start with a small, manageable budget to test your campaigns. Here’s why:

Minimize Risk: Starting small reduces the risk of losing a large sum of money on a campaign that doesn’t perform well.
Optimize Campaigns: Small budgets allow you to test different ad creatives, audiences, and strategies to see what works best.
Gather Data: Initial campaigns provide valuable data that can inform future spending decisions.

Example Budget:

Start with a budget of $200 to $500 for your initial campaign. Monitor the performance closely and make adjustments as needed.

Step 4: Scale Up Gradually

Once you’ve identified what works, you can gradually increase your budget. However, remember that scaling should be done sustainably. Here’s how to do it:

Increase Budget Incrementally: Don’t double or triple your budget overnight. Increase it by 10-20% and monitor the results.
Reinvest Profits: Use the profits from successful campaigns to fund new ones.
Maintain Balance: Ensure that you’re not overspending and that your ad budget aligns with your overall marketing budget.

Step 5: Set a Sustainable Budget

Your social media ad budget should be sustainable and aligned with your business’s financial health. Here’s what to consider:

Monthly Revenue: Determine what percentage of your monthly revenue you can allocate to social media ads. A common recommendation is 5-10%.
Long-Term Investment: Understand that ROI may not be immediate. Be prepared for along-term investment where you might not see returns right away.
Diversify Spending: Don’t put all your eggs in one basket. Allocate budget to different marketing channels to reduce risk.

Step 6: Monitor and Adjust

Constantly monitor the performance of your social media ads and adjust your budget accordingly. Key metrics to track include:

Click-Through Rate (CTR): The percentage of people who click on your ad.
Conversion Rate: The percentage of clicks that result in a desired action (e.g., purchase, sign-up).
Return on Ad Spend (ROAS): The revenue generated for every dollar spent on ads.

Example Adjustment:

If you find that a particular campaign has a high CTR but low conversion rate, you might need to adjust the landing page. If a campaign has a high conversion rate, consider increasing the budget for that specific campaign.

Manage Expectations: ROI Takes Time

One of the most important things to remember is that ROI on social media ads can take time. Here’s why:

Learning Period: Most digital ad platforms have a learning period (usually 7-14 days) where they optimize your campaign. Don’t judge performance too quickly.
Brand Building: Brand awareness campaigns might not yield immediate sales but are crucial for long-term success.
Iterative Process: Marketing is an iterative process. Each campaign provides data that helps improve the next one.

When Social Media Ads Bomb: It’s Not the End

Not every campaign will be a home run, and that’s okay. Here’s how to handle it:

Analyze What Went Wrong: Look at the data to understand why a campaign didn’t perform well. Was it the targeting? The creative? The offer?
Learn and Adapt: Use the insights to tweak future campaigns.
Stay Positive: Marketing is all about trial and error. Stay resilient and keep experimenting.

Figuring out how much to spend on social media ads can feel daunting, but it doesn’t have to be. Start by defining your goals, understanding your CAC, and testing with a small budget. Scale up gradually and set a sustainable budget that aligns with your business’s financial health. Remember, ROI takes time, and not every campaign will be a hit. The key is to keep learning, adjusting, and optimizing.

So, ready to dive into the world of social media ads? With these tips in hand, you’ll be well on your way to making informed, strategic decisions that drive success for your business. Happy advertising!

And if you’d like a little help from us to monitor or even give you a quick opinion on your ads, we’d love to help! Schedule a free discovery call with us today to get started.