This is a common question that I’ve been asked many times. I wish there was a simple answer, but deciding how much money you should spend on testing Facebook ads depends on a lot of different things.
Still, I try to stick to a few basic rules whenever I start a new test campaign on Facebook or any other paid traffic platform for that matter.
Risk Tolerance
You need to ask yourself this before deciding how much you should spend testing your Facebook ads. “How much money am I willing to lose if this doesn’t work?”
You should be ready for the fact that this might not work right away and that you might not get back any of the money you spend on your test.
Learn how to count.
Without a doubt, knowing your numbers is the most important thing you can do to figure out how much you should plan to spend to test your ads.
To figure out your break-even CPS (cost per sale), you need to know your COGS (cost of goods sold) and subtract it from your sales price plus any shipping costs for the customer.
To show this, let’s make up some numbers that don’t exist.
First of all, let’s say I want to sell something that costs me $15 to make. So I know I have to pay the vendor $15 for every unit I sell. This $15 covers both the price of the item and the cost of sending it to the customer. Don’t forget to add the cost of shipping to this.
Now, let’s say I sell the item in my store for $35 and charge the customer $5 for shipping, making a total of $40.
Using these numbers, I could figure out that my break-even CPS is $25. That means that for every $25 I spend on advertising, I need to make at least one sale to cover the cost of the goods, shipping them to the customer, and my advertising costs.
In this case, there is no profit left over, but in my experience, it is a good sign if you can at least break even on your first test run. Everyone wants to make money right away, and sometimes that does happen. However, in the paid traffic game, it is more likely than not that a first test campaign will not work right away.
Decide How Much To Spend
Once you know your numbers and are ready to start your test campaign, you will have to decide how much you will spend each day.
This goes back to what I said earlier about risk tolerance, but a good rule of thumb that I have used many times is to set a daily budget that is high enough for me to get at least one conversion per day at my break-even CPS.
Using the example we just used, that number was $25. So, a daily budget of $25 would be a good place to start in that situation. But you could still get results if you went higher or lower.
Because every market and product is different, there is no hard and fast rule about what kind of daily budget works best. I just wanted to tell you about a way I’ve used to test new campaigns many times with success.
At the end of the day, it doesn’t matter as much what your daily budget is as much as how much you spend on a new test campaign as a whole.
You should start with the end in mind. By “end,” I mean that you should know ahead of time when you’re going to stop if your test isn’t going well.
When testing new ads, campaigns, and products, the most important thing to remember is not to let your feelings get in the way. You should never be so attached to a product or an idea that you keep testing it even though it’s not working because you think it’s going to turn around on its own.
When people are just starting out, it’s easy for them to make that mistake. This is also why it’s so important to know your numbers ahead of time. When you know how much you’re going to spend to find out if something works or not before you start, it’s 10 times easier to cut your losses and move on when things aren’t going well.
I’ve always stuck to a rule of 2-3 times my total budget. That means I’m always willing to spend 2–3 times my break-even CPS to make my first sale (and hopefully more!). If I don’t make at least one sale by then, I’ll stop that test campaign and move on to the next.
So, again using a break-even CPS of $25, I would decide before starting any test campaigns that I would spend between $50 and $75 (2–3x), and if I didn’t make at least one sale after spending that much, I would stop the test and move on to a new product or a new campaign with different targeting and creative.
With a budget of $25 per day, it could run for at least 2 days. Then, on the third day, I would decide whether or not to keep going with the campaign based on what had happened.
Now you might be thinking, “Wait a minute, only one sale on a $50–$75 purchase is actually losing money!” … You’re right, but making the first sale was always enough to show me that this campaign is doing something right. It was enough to convince me to let it run for at least another 2–3 times the breakeven spend in the hopes that as Facebook starts to optimize the ad campaign, more sales will start coming in.
Often, that’s exactly what will happen, but you should still be ready to turn it off if, after a few more days of testing, you don’t get close to your break-even point.
DATA!
Information about what worked and what did not. Don’t just turn off a failed test campaign, throw up your hands, and say to yourself, “This will never work!”
Instead, look back at everything you’ve done and ask yourself… “How come this didn’t work?”
Did you miss your mark? Did it go too far? Is it just that your product doesn’t look that good? Was it just that your idea wasn’t that interesting?
Read the comments people left on your ads to find out what they thought of it. If no one said anything, that’s often a sign that people weren’t very interested.
That also goes for how relevant your ad is and how often people click on it. I usually tell people not to worry too much about likes, shares, and comments because they are not the most important metrics in a campaign that is focused on getting people to buy something. But I’ve never seen a successful campaign that didn’t get them on their own. So, if your campaign didn’t work and there wasn’t much or any social interaction, that’s a good sign of what may have gone wrong.
At the end of the day, if you do this long enough, you’ll win some and lose some, and you’ll start to know what works and what doesn’t just by feeling it.
So, use the tips I’ve given you here to do better on your tests. You will do well if you are willing to take the time to learn from your mistakes.
Conclusion
No matter what happens when you test your campaigns, whether you find a winner or not, you should always remember that when you pay for advertising, you always get something back.
