Ask ten people how much to spend on Facebook and Instagram ads and you will get ten different answers. That is because the right amount depends on what you sell and what you earn from each sale. Instead of copying someone else's number, you can work out your own in a few minutes.
Start from your profit, not from the ad
The first number you need has nothing to do with Facebook. It is how much money you keep from one sale after paying for the goods, packaging and delivery.
Here is a worked example with made-up figures. Say you sell a bag for ₦20,000 and it costs you ₦12,000 to buy and deliver. You keep ₦8,000. That ₦8,000 is the most an ad could cost you per sale before you start losing money on every order.
Set a limit for what one sale may cost
You do not want to hand all of your profit to Facebook, so choose a share you are happy to spend to win a customer. Many owners start at about half.
In the example, half of ₦8,000 is ₦4,000. That becomes your limit: if the ad is bringing sales for less than ₦4,000 each, it is earning its keep. If each sale is costing more, something needs to change.
Choose a daily budget you can afford to learn with
The first week or two of any new ad is partly a test. You are finding out which picture, which words and which audience work. Treat that money as the price of learning, and only spend what you could lose without it hurting the business.
A small daily amount over several days teaches you more than one large amount in a single day, because the ad has time to reach different people on different days of the week.
- Pick a daily amount, not a lump sum.
- Run the ad for at least several days before judging it.
- Change one thing at a time, so you know what made the difference.
- Raise the budget only for an ad that is already bringing sales under your limit.
If you sell by enquiry rather than online
Many businesses do not take payment on a website. People send a message, ask questions, and some of them buy. In that case, work out what one enquiry is worth.
Another made-up example: if about one in five people who message you ends up buying, and your limit per sale is ₦4,000, then one enquiry is worth about ₦800 to you. That is the figure to watch.
Remember there are two separate costs
The ad budget is paid to Facebook. Any tool or person that helps you run the ads is a separate cost. Add both together when you decide whether advertising is paying for itself.