Let’s talk numbers. When deciding how much of your advertising budget should go to Facebook ads, we refuse to give you general advice.
We don’t want to tell you that 5% of your budget needs to be allocated to Zuckerberg’s pocket.
What you give Zuck depends on what you can afford and your business goals. That’s where the numbers will come in.
We will take you through marketing formulas that will tell you personally how much money you should spend on Facebook ads. These are the same formulas you can use when your Facebook advertising budget is $100 per week to when you grow to spend $10,000+ per week (don’t you dare let imposter syndrome tell you that you can’t! ).
It’s all in the numbers; we will show you which numbers are below.
Marketing Formulas to Figure Out Your Facebook Ad Budget
Your Facebook ad budget isn’t something you pull out of the sky after a deep meditation session of Wim Hof breathwork. It’s a number that comes from turning the logical side of your brain on and working through the data.
We don’t want to go full math teacher here, but getting your calculator ready is a good idea.
Here are the formulas you’ll use to determine how much you can spend on Facebook ads depending on your product’s cost. Once we’ve gone through these formulas, we’ll walk you through an example so you can see them in action.
The first formula will be your return on ad spend (ROAS). Your return on ad spend tells you how much you make per $1 spent on ads.
To figure out your Return on Ad Spend (ROAS):
Return on Ad Spend = Revenue / Spend
For example, if you spent $250 on ads and made $1,000 in revenue, you’d have a $4 return on ad spend for every $1 you put into Facebook ads.
The second formula is your return on investment (ROI). Your ROI is how much you make after you take away all the money invested in advertising. Unlike ROAS, it’s not telling you how much you make per dollar spent on Facebook. It tells how much you’re making after you take away all the advertising costs and figure out your Return on Investment (ROI):
ROI = [(Revenue – Advertising Costs) / Advertising Costs] x 100
For example, you spent $500 on Facebook ads and made $3,000. But, you had to hire a paid ads expert who charged you $1,000 and had you purchase a $50 SaaS tool for analytics. Your ROI would be ($3,000 – $1,550) divided by $1,550. To turn that into a percentage, multiply by 100 and get a 93.55% ROI.
We’ll focus on these formulas to give you an idea of what you can afford to spend on your Facebook ads. But, once you start setting ads live, you’ll also want to figure out your:
Cost Per Lead (CPL)
Cost Per Click (CPC)
Customer Lifetime Value (CLV)
These formulas will give you information on specific ads to let you know how well each is performing in the grand scheme of your Facebook marketing strategy. Depending on how well each ad or ad set is doing, you can put more dollars behind them if they’re working well or turn them off if they’re too expensive.
How These Formulas Look in Real Life
Remember sitting in geometry class wondering when you would use these formulas in the real world? This isn’t going to be like geometry class.
We want to show you exactly what these formulas will look like when you implement them to determine your Facebook ad budget.
Time to open the calculator app.
We’re looking for how much your spending and advertising costs will be to meet your ROAS and ROI goals. Those goals are dependent on the following:
How much profit your business is bringing in
How much you’re selling your product for
How much your product costs to make or maintain
For example, if you’re a brand-new startup with a small marketing budget, your ROAS and ROI must be pretty high. It would be best to have that profit to help your business find momentum. But, if you’re an established business, you can handle a lower ROAS and ROI in return for more leads that *could* turn into customers in the future.
Let’s say you sell a $100 online course and want it to bring in at least $10,000/month from Facebook to make it worth your time. The average ROAS on Facebook varies. To estimate how much money you can put into the platform, let’s say it’s 6-10x. Your goal is to catch the higher end and get a 10x ROAS.
To figure out how much you can spend on ads, you’ll use the ROAS formula but look for the “Spend” variable:
Return on Ad Spend = Revenue / Spend
Your formula will look like this:
10 = $10,000 / Spend
And we’ll do the math to find that you need to spend $1,000 to make $10,000 from Facebook ads.
How does that work for your business?
You’re going to do the same thing with your ROI. Look at the numbers to determine how much ROI you need from your ad spend. You can do the math to find the maximum advertising costs to succeed on the platform.
Check out these Facebook ad benchmarks to get an idea of your ROI, depending on your industry.