Have you ever wanted a magic formula to calculate exactly the cost of your Facebook ads so to get started cheap and easily?

Something simple and quick to use for when you’re not sure how much ad budget to allocate for your first ads?

Something that can serve as a benchmark and that you’ll be able to adjust specifically to your business?

Here you have it! And more than you bargained for!

In this guide, we will give you all the tips and tricks you need to set the perfect budget for your Ads plus our secret Calculator! It’s FREE and you can download it at the end of this guide! 

Are you ready to get more bang for your buck(s)?

I’ve divided this guide into two different sections depending on whether you are running retargeted ads or ads to a cold audience.

They are different because the objective usually is different between the two.

For retargeting ads, many advertisers consider running low budget, long-term campaigns for brand awareness. For cold audiences, many are often running ads for a specific campaign to e.g. drive new sales, leads or something else that is more short-term focused.

#1 Retargeting ads

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For retargeting ads, your budget will depend on a number of things such as how large your audience size is and how aggressive you’d like to run your ads.

For example, if you are running a last-day deal offer, you’ll want to spend a high amount within a short time.

On the other hand, I see a lot of advertisers having success by just running $5/day ads for a long time to support the occasional burst campaign to support or raise brand awareness.

In my experience for retargeting of a long-term brand awareness campaign, running something like $5 per 500.000 followers is a decent place to start, but by playing around with the budget and audience size in Power Editor you can adjust to fit your ideal reach per day.

The key is to keep track of frequency and performance so you know when it’s time to switch up the ad or pause for a while.

After running your retargeting ad for a couple of days or a week you can adjust budget and speed as you see fit for your business and strategic objectives.

You can also do this in AdEspresso during the Campaign Creation process. You only need to enter your targeting choices after you have chosen your campaign type and added in your creatives (AKA in step 3!) and then keep an eye on the numbers on the reach on the right-hand side of the screen.

After that, you can edit your budget, adjust optimization goals and more:

#2 Cold ads

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I’ve found cold ads to be a different ball game because there often are a lot of difference objectives among advertisers.

Based on how the Facebook algorithm works, it will take you 72 hours for Facebook to optimize your campaign.

If you’re not used to running ads and just want to test it out, running $10/day per ad is a great starting point. You’ll need to run that for 3 days to allow facebook to serve your ad to different groups of people to find the right ones. Turns into $30 per ad to get enough data to know with statistical significance whether the performance is good or bad (I’ll get to that part in a minute).

The last thing you’ll want is to run your ad for a too short time period so you don’t get enough data to know whether your results are something you can count on or running your ad way beyond that point, so you are just wasting money if it’s a bad performing ad.

With AdEspresso, you can set this part on autopilot! Our Automatic Optimization examines all the ads within your campaign by CPA – pausing the under-performing ads and allocating budget to the best ads within the campaign.

It also takes a while for Facebook to optimize itself throughout a day which is why spamming the refresh button on Ad Manager is a terrible idea. Set it and forget it for the next 24 hours.

The way the algorithm works is that the performance of the first 500-1000 people determines which quality of people your ad will be served to in the future. It can seem pretty random which is why some advertisers like to run three duplicates of the same ad within each adset.

It is said to give your campaign the best chance to reach a good group of people right off the bat as you reach three different groups of people and you will be able to pause the to two worse performing ones.

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Statistical significance

In this case, it’s a way to use math to determine that the result from testing your ad variations didn’t happen by chance or randomly.

That means if you are testing say 5 different images on your ad, the best performing one is 95% sure to the best performing one. The 95% is just an example that is commonly used and can be changed by you depending on your needs.

I know many advertisers don’t like doing the math and shy away from numbers but while this is an advanced concept, there are many free calculators out there that can help you in minutes.

Kissmetrics has one of the easiest to use free calculator. All you’ve got to do is enter the number of visitors and conversions (sales) and it will show you how certain the calculator are that one outcome is better than the other.

Calculating your ad budget based on your funnel and expected revenue

There is a more detailed way of calculating specifically how much ad budget you’ll need to reach your goal (if you have a specific revenue number in mind) if you have your funnel dialed in.

I’ll first explain how to go about it and as mentioned you can use the free spreadsheet and simply enter your ad funnel numbers to calculate the estimated ad budget you’ll need.

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I’ll use a common type of funnel model including:

• Ad leading to a
• Webinar that leads to a
• Sales page

Note that the webinar could also be a landing page, an automated series of emails or something else – there are many types of funnels, so basically this is your sales material that turns leads into sales.

We start backward by looking at the revenue goal you are willing to reach and how much your product is selling for to calculate the number of sales you’ll need to reach your goal. That’s step one.

In step two we dive deeper into your funnel and look at the conversion rate of the webinar and specifically how many people you expect to show up (this could also be your email open rate if you are using drip content) and how many eyeballs you’ll need to see your content in order to reach your revenue goal.

Based on that and on your estimated cost per lead or per person who views your sales material, we calculate your required ad budget to reach your revenue goal with Facebook ads in step three.

Key takeaways

• Ads to cold audiences require a different budget than retargeting ads
• Letting your ads run for 72 hours is ideal to allow the algorithm to optimize for the right people
• The first 500-1000 people will help determine the future success of your ad
• Statistical significance is a helpful way to determine whether the winner of among ad variations
• Use the free ad budget calculator (below) to easily calculate what ad budget you need depending on your revenue goal

And now it’s up to you!. Give it a try and let us know in the comments!