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How much should you spend on your Facebook ads in order to reach your goals?

Are you currently running Facebook ads or planning to in the future? Do you have nightmares about how much it could cost you or how much it is costing you? Then this quick article is for you.

Here is a simple three step formula for understanding how much you need to spend on Meta ads in order to reach your revenue goals.

Step 1: Define your sales goals from your Facebook ads

Before you even begin to run Facebook and Instagram ads, you need to define your sales goal and understand the amount of revenue you wish to achieve from your Facebook ads over the next 30 days.

Once have that straight in your mind (and in a spreadsheet), you need to calculate how many products you need to sell in order to achieve that number.

FORMULA #1: Sales goal ➗ Cost of product = Number of products you need to sell

For example: If you wish to make £1,000 from your Facebook and Instagram ads over the next 30 days and your product sells for £100, you would need to sell 10 products in order to reach your revenue goal.

£1000 ➗ £10 = 100

Step 2: Determine how many leads you need to reach your goals

When you are clear on how many products you need to sell in order to achieve your sales goal, you then need to calculate how many leads or website views you need from your Facebook and Instagram ads. To do that, you need to know your sales conversion.

This can be taken from your CRM, e.g Shopify.

Now, if you don’t know your conversion rate, you can use industry averages. However, I would suggest holding off on running Meta ads until you have sold products organically – so you know what resonates with your customers and what sells well – your ads can then amplify that.

For the next step and to work out how many leads you need to reach your revenue goal, you need to take the number of sales (using the formula above) and divide that by your sales conversion

FORMULA #2: Number of sales ➗ Sales conversion = Leads

For example: If you wish to make £1,000 from your Facebook and Instagram ads over the next 30 days, which means selling 10 products and your conversion rate is 5%, you would need 20 leads

FORMULA #2: 10 ➗ 5% = 200

Landing page views (website visits)

If you are or plan to run Facebook and Instagram ads that direct people straight from to your product page on your website, you then have to calculate how many landing page views you need (instead of leads).

If 3% of all of the people who land on your product page, go on to buy your product – you will need to take your sales goal and divide it by 3% (10➗3 = 333 landing page views)

*You need around 333 people to land on your product page to generate 10 sales of your product.

Step 3: How to calculate your Facebook ad spend

In order to calculate how much Facebook ad spend you need to reach your revenue goal, you need to multiple the number of leads or landing page views by your cost per lead (or cost per landing page views, LPV).

*If you don’t know your cost per lead or LPV, don’t worry – you can get industry averages online to start off with. The costs can depend on your industry, offer, product, your website and more. Use industry averages to start, and refine as you continue testing.

Number of Landing Page Views x Cost per Landing Page View = Ad Spend Budget

Number of Leads x Cost per Lead = Ad Spend Budget

For example: Say your cost per lead is £4 and you need 200 leads in order to reach your revenue goal – you need around £800 in Facebook and Instagram advertising budget.

200 x £4 = £800 ads budget

Conclusion

Facebook and Instagram ads are all about testing, and costs fluctuate depending on the auction process as well as market and economic conditions. I hope this article serves as a basis for understanding how much you need to spend on your ads in order to reach your revenue goals.

But, if you are still feeling overwhelmed when it comes to Facebook and Instagram advertising, please book a free call with me here, and let’s crack the confusion together.

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