Calculating your Facebook ads budget is an important first step to run successful campaigns on the biggest social media platform. Yet, many businesses are confused about which data to use. Or they simply allocate a daily budget and hope their ads will generate profit. So how do you get your budget right? Easy. Just enter your data in my free downloadable Facebook ad budget calculator and stop wondering how much to spend on Facebook ads…
Key takeaways
- Meta’s built-in advertising budget metrics are great to control and monitor your ad spend, but they don’t give the full picture.
- A better alternative is my Data Driven Facebook Ads Budget Calculator.
- Follow the instructions in my video or the remainder of this article.
- Optimize your campaigns (and calculations) based on the awareness level of your target audience.
- Make sure you avoid the 3 biggest mistakes when budgeting Facebook ads.
Download my free Facebook Ads Budget Calculator
You can download the Facebook Budget Calculator below.
Notice how this screenshot already includes vital numbers for your business, like lead to sales conversion rates, product costs, and advertising management expenses?
These metrics are crucial to projecting your budget and earning a profit from advertising. But quite honestly, they are none of Facebook's business!
The calculator I am sharing with you helps you use YOUR business numbers to achieve YOUR business goals (and not somebody else’s, including the ones of Facebook).
- Project and estimate the right budget for your advertising goals.
- Estimate your profit potential from Facebook advertising.
To make data-driven decisions, you obviously need to enter the right data, so let’s look at what that means for you.
Video: how to calculate the optimal budget for Facebook ads?
Watch the video and I'll show you first-hand how to use the calculator to project a target budget for your Facebook Ads. If you prefer written instructions, you can find them further below.
Using the Data Driven Facebook Ads Budget Calculator
With your advertising game plan in mind, let's bust out the Data Driven calculator and start projecting your budget.
The gold cell in the calculator are inputs (or variables).
Access the Facebook Ads Budget Calculator
Changing the numbers in the gold cells will have a trickle-down effect on your estimated results.
Facebook Ad Spend Per Month
The first variable in the calculator is your monthly Facebook Ads Spend. Now, you may be thinking, “If I knew what my Ads Spend should be, I wouldn't be reading this article.”
I hear ya!
But bear with me and I'll show how this works out in the end.
For right now, enter an approximate amount for your Ad Spend.
You could use
- your maximum advertising budget for the rest of the year
- a generic estimate
- or use a dummy number like the total amount you spent at Starbucks last year.
You'll understand how to base this number on YOUR data by the time we finish this exercise.
Average Cost Per Click
Although it's more common to optimize for results or actions on Facebook, you can also optimize for ad clicks.
You can input one of the following into the calculator:
- estimate your click costs using your advertising history
- your target cost-per-click (CPC)
Lead Conversion Rate
Leads are people who engage with your ads and give you opt-in permission to follow up with them.
Your leads might subscribe to your email or messenger list, or sign up for a follow up call.
So for this variable, you want to estimate the rate at which people will respond to your ads and give you their contact information.
Lead Conversions and Cost Per Raw Inquiry
With all your variables filled in the top section of the calculator, you can get an idea of how many leads your budget will produce. You can also estimate your lead costs.
At this point, you may want to adjust your budget based on these estimates. Or, you can keep going and see how your conversion metrics impact your Ad Spend.
Qualified Lead Percentage
Many of the leads your ads produce will not be high quality (or ready to make a purchase decision anytime soon).
Some leads will give you a junk email address. Others will lose interest moments after they take advantage of your opt-in offer.
Qualified leads are those who continue to engage with your messages after they sign up for your email or messenger lists.
You can use the open rates of your “welcome” emails, or your follow-up call response rate to estimate your qualified lead percentage.
Email Sequence Completion Rate
Many advertising campaigns will utilize email sequences to nurture their lead's interest for any new subscriber that opts-in to their list.
Your Email Sequence Completion Rate is the percentage of people who engage with your messages all the way through to your sales offer.
Up-Sell Take Rate
In the calculator, your Up-Sell Take Rate is the percentage of people you expect to take you up on a purchase offer for your product or service.
Average Revenue Per Sale
Your average revenue per sale is the average price of the products or services you're promoting with your Facebook Ads campaign.
Product Cost
Your product cost is represented as a percentage of your average revenue.
For example:
if you're selling a product priced at $100, and it costs $50 to produce and deliver that product, then your product cost is 50%.
Agency/In House Management Fees
Your agency or in-house management fees is the amount you pay a service provider or employee to manage your Facebook Ads.
Now you know what to enter in the cells, let's take a step back and answer another important question.
How your business metrics affect your Facebook Ads budget…. and your profitability
With your conversion data in the calculator, you can start to see
- how your budget impacts your results.
- how your product and sales systems affect your potential to produce a profit from Facebook Ads.
For example, if your product cost is low, and revenue per sale is high, you have the perfect advertising scenario.
But, if your profit margins are average, then your lead conversion and sales rates need to be strong to make advertising profitable.
Customer lifetime value
One of the metrics we didn't discuss yet is customer lifetime value (CLTV).
If your customers are highly likely to make repeat purchases, then you can afford to be ROI neutral (or even negative) on the first sale. This is why advertisers promoting products with high CLTVs are often more aggressive with their Ad Spend.
How the Facebook Ads Game impacts your budget
Before you start crunching numbers in our calculator, we need to take just a minute to discuss how your Facebook advertising strategy will affect your costs.
I like to look at advertising as a quest to achieve 100% awareness. Or from a sports perspective, to reach your goals.
The purpose of your ads is to provide enough awareness of your offering that it motivates potential customers to (eventually) purchase from you.
Think of your ad campaigns are like plays you run on your way to scoring a goal, touchdown, etc.
As an advertiser, you want to help your prospective customers get down the field, without going over your budget.
Advertising success at scale requires you to string together the right mix of plays to run your marketing game plan to a maximum return on your advertising spend.
From unaware to paying customer in one play? That's your highest cost, lowest conversion rate activity
Moving a customer from unaware of your brand to immediate purchase using Facebook Ads is a low percentage play.
It's like a Hail Mary pass in football. It's a strategy that doesn't often work, and it's usually the last effort of a losing team. Take these losers for example.
Aside from marketing geeks like me (and possibly you?), no consumers log into Facebook just to see Ads.
That's why your ads have to steal people's attention away from looking at pictures of their friends or watching viral cat videos. Even then, you have to hold their attention long enough to get them to engage with your marketing message.
You're asking a lot of an “unaware” audience to not only give you their attention but also to make an immediate purchase.
So trying to convert unaware prospects into “right-now” customers is not only inefficient, it's also expensive.
Unaware to lead = Lower advertising costs, medium to low sales conversion rate
It's usually very inexpensive to run ads that aim to bring awareness to an unaware audience.
These impressions won't drive a high percentage of action-takers, but since there is more ad inventory than advertiser competition, you can get clicks for cheap.
This top of funnel advertising may make sense for your business because even your best customers were unaware you existed at some point in time. Typically, people who are unaware of your brand need to familiarize themselves with your product or service before they are ready to make a purchase.
Providing this unaware prospect entertaining ads or a low-stakes offer can help you get their attention while making them aware of your brand.
Then, as the audience becomes more receptive to your messages, you can move them down the field using inexpensive marketing tactics like email, messenger marketing, or re-marketing to progress them on the path to purchase.
Advertising to unaware audiences won't result in a ton of sales from a single ad, but targeting these prospects can lead to less expensive sales costs if you run the right plays to nurture the relationship.
More aware audiences = Higher advertising costs, medium to high conversion rates
What about audiences who have expressed interest in a solution similar to yours?
These audiences are closer to becoming customers. But, it will cost more to target them with your ads.
In an auction-based advertising system, like Facebook's, you are competing with other advertisers. That competition drives up the cost of serving ads to the best audiences.
The good news is that even though you'll spend more money to reach these prospects, they are more likely to convert. So targeting more receptive audiences can still be highly profitable.
Unless you make one of the following mistakes…
3 biggest Facebook marketing budget mistakes
Before you do any calculations about your budget to advertise on Facebook, you need to make sure you are not making one of the following mistakes.
1. Not setting a budget before advertising on Facebook
Facebook Business Manager provides many useful reports on the “known” aspects of advertising, like
- how much you spent on Meta advertising
- when you spent it
- and how many actions were driven.
But when it comes to planning, the data Facebook provides becomes far less useful, because they don't know your business strategy!
You need a tool for validating your business numbers before planning your advertising budget.
And those you can't find in the forest of Facebook ad metrics.
PRO TIP: If you are running ads on Meta now, you can still use my ads budget calculator to get a much higher ROI in the near future.
2. Applying dubious short-cuts instead of using data
We've been peppered with ads showing a barely 15-year-old looking guy posing in rented clothes with his rented girlfriend next to a rented Lamborghini, promising your life will change if you follow this one tip.
Of course, I'm not much of a hype man, so I just stick to the numbers.
If you've ever caught yourself day-dreaming about all the traffic, engagement, and sales others are claiming to be racking up advertising on Facebook and thought about joining the party too, think twice.
And then do your homework with my Facebook ad budget template, which you can download by clicking below
3. Not adjusting your budget for paid ads
Calculating your marketing budget with profit in mind requires brainpower. It’s therefore tempting to do it only once and never look back.
A smarter strategy is to regularly review the budget you have set for Facebook ads.
- Your business probably changes in the course of time. New offerings, services, promotions,…
- Facebook itself changes constantly, like it did for retargeting ads because of stricter privacy regulations.
- And if you use my marketing budget for Meta calculator right, you will soon be able to scale your Facebook budget.
Before we call it a day, let me share some of the most common questions I received ever since I made my budget tool available.
FAQ
How to budget for Facebook ads?
To set the ideal budget to spend on Facebook ads, you need to take your business numbers into account. Since Facebook Business Manager doesn't know these, you can best use our free calculator, which contains all the fields that you only have to enter.
How much money should I spend on Facebook?
If you start running campaigns on Facebook, you don't have data to rely on. But even then, you can use a tool to calculate how profitable your campaigns can be. When you are running the campaigns, you can replace your estimations with real data and fine-tune the calculations on the go.
Is it profitable to run ads on Facebook?
Yes. But many businesses forget to take, for example, agency fees or production costs into account. So, if you really want to know if your paid Meta campaigns actually generate profit, you need to track a lot more than just your ad spend. This is where calculators like the one of Data Driven U come in handy.
How to scale your Facebook budget?
As you update your budget numbers with real data from your ad campaigns, look for areas you can make improvements. The best path to a high ROI in PPC advertising on any advertising platform is small incremental tweaks that lead to compounding results.
Is the Facebook Budget Calculator reliable?
The data-driven Facebook Budget Calculator will only be as accurate as the data you enter. But if you are anxious to start running ads, you don't want to wait around for perfect data.
As a marketer, or PPC service provider, it's possible (and even likely) you won't have access to all the product, sales, and conversion data you need. If that's the case, don't worry about being precise. Instead, guestimate with the numbers you do know so you can still work out your budget.
Then feed your real numbers back into the calculator as you run your ads.
What are you waiting for?
Grab your free copy of my data-driven calculator, enter the numbers in the fields and determine the perfect Facebook Ads budget to make profit from paid social campaigns.
PS: If you're also running Google Ads be sure to check out our Google Ads Budget Calculator, too!