How To Set Up And Maximize Your Facebook Ad Budget

So you’ve decided to invest in Facebook advertising, but how do you make sure that your investment in paid social media is not a waste of your marketing budget?

If you’re deciding to use Facebook ads to help you reach your business goals, you’re not alone. According to eMarketer, digital ad spend will increase by 25.7% as eCommerce continues to boom throughout the COVID-19 pandemic. The downside is that with so many social media marketers prioritizing Facebook ads as a pillar of their social media strategy, Wordstream reports that it’s now more expensive than ever to reach your audience on Facebook. 

As you’re preparing to allocate your budget for your Facebook ad campaign, you might be wondering how much you need to spend in order to yield a strong ROI. Before we get into how much you should be spending, let’s go over how to navigate setting a budget in Facebook Ads Manager. 

As you set up your ad campaign in Facebook Ads Manager, you’ll be able to set a budget for your ads at the campaign or ad set level. Choosing how you set your budget will depend on how much control you want to give to the Facebook algorithm to optimize your ads.

The first option for setting your Facebook ad budget in Ads Manager is at the campaign level. Setting your budget at the campaign level will rely on campaign budget optimization (CBO) to make the most efficient use of your allocated budget based on your selected ad delivery optimizations and bid strategies. 

By using CBO, you essentially create one central budget and rely on Facebook’s algorithm to distribute your money across ad sets to get what it determines to be the best result. The algorithm determines which ad sets have the best opportunities, and distributes more money towards them rather than underperforming ad sets. 

CBO is a great set-up option for people who are new to setting up Facebook ad campaigns because it simplifies the process and reduces the number of ads you have to manage manually. It’s also a good choice if you’re flexible with how your budget is spent across ad sets; if you want to prioritize one particular ad set by spending more money on it, then you’ll want to take a closer look at Facebook’s alternative ad budget option. 

The other option for setting your budget in Ads Manager is at the ad set level. Note that ad sets in Ads Manager share the same settings for how, where and when to run, and that you can run multiple ad sets at a time. 

If you choose to create individual ad set budgets, you’ll have more control over the delivery and measurement of specific ad sets. Setting your budget at the ad set level is a good option if you have further experience with Ads Manager campaigns, and have the capacity to manage and measure varying ad set metrics (though no matter how experienced you are, here are some mistakes to avoid at all costs). It’s also a good option to consider if you have ad sets with varying specifications, like different audience sizes, optimization goals, or bid strategies.

Whether you opt to set a budget at the campaign or ad set level, there are two options you can consider when choosing a budget type: a daily budget or a lifetime budget. These budget types distribute your ad budget in the Facebook auction, which is the process through which the Facebook algorithm shows the most relevant ads to people based on various factors, such as your campaign objective, target demographic and ad placement. The Facebook auction is the reason why Facebook ads have no fixed price, and why Facebook ad costs always fluctuate (just take a look at how 2021 ad benchmarks vary by industry).

A daily budget is the average amount you set to append on an ad set or campaign each day. When you set a daily budget, you must determine the average of what you’re willing to spend each day according to your ad schedule and budget. Because the Facebook algorithm aims to optimize your spending for the best opportunities available, Facebook may spend up to 25% over your set daily budget in order to seize the best opportunities available. 

A lifetime budget is the total amount you’re willing to spend across a whole campaign or ad set. Unlike a daily budget, Facebook won’t charge you any more past your lifetime budget to seek better results. Instead, the Facebook algorithm will work within the budget range that you set for your ad set or campaign, and optimize your ads on the best days available.

Choosing a daily or lifetime budget for your ads will determine in what ways you want to give the Facebook algorithm power to bid on your behalf in the Facebook auction. While both budget types will allow Facebook to optimize your ad spend to retrieve the best results for your ads, a daily budget can result in Facebook charging you a little bit more than you might anticipate if the algorithm can pull the right results. A lifetime budget will help you to set the lowest cost possible for your ads, and gives Facebook bounds for how much they control over your budget.

In short, if you want to keep your ad budget on a leash, go with a lifetime budget type. If you have some wiggle room in your ad budget (or better yet, you can budget for a potential 25% increase in your daily ad spend) go for a daily budget type. 

To gain back more control over the Facebook algorithm, you can also set spending limits for your ads at the account level, which would apply to all of a business’s campaigns over their lifetime. If you choose CBO, you can also set a spending limit at the ad set level, as seen above. Both options allow you to give a hard stop to how much Facebook can charge you for, and once you reach your spending limit, Facebook will pause your ads and stop charging you.

Now that you know how to set up your budget in Facebook Ads Manager, you’ll want to determine the right budget for your ad campaign so that you don’t overspend. Especially if you’re new to social media advertising or have a small budget to work with, you might be thinking, “How much should I be spending on Facebook ads?” 

Well, while there’s no magic number for the amount you should be spending, you should be thinking about your goals, as well as your ad spend relative to the scale of your business revenue. Your advertising budget should account for 5-15% of your overall revenue, depending on how much growth you’re aiming to achieve.

When determining your ad budget, consider your ad goals and content, and what stage they’re advertised within the sales funnel. From there, you can develop a strategy of how you want to distribute your ad budget over campaigns or ad sets.  

As a rule of thumb, you’ll want to distribute more of your ad spend on ads that will boost your revenue. To increase your return on ad spend (ROAS), factors such as the age of your business and the size of your audience will come into play in determining your budget distribution for ads across the sales funnel. Once you’ve established a target demographic and sizable customer base you can use for retargeting, focus the majority of your budget on ads that will result in conversions. 

It might go without saying, but don’t put all of your eggs in one basket.

When first running ads on Facebook, avoid blowing your overall social media budget on the first campaign or two. Instead, start small—either with small-scale campaigns or low-cost ad sets—in order to avoid wasting money and to collect preliminary data on how your ads perform. For instance, start with a small budget (as little as $5 a day) over a short period of time (let’s say, a week), and see how your results fare in that period given the overall context of your ad campaign. 

From there, you can scale your ad budget to get larger over time. This also leads us to our last (and most important) tip...

Test, don’t guess. As you begin to run ads, the key indicator of how much you should be spending and distributing from your ad budget is results metrics. 

In an interview with the SocialMedia Examiner, Facebook ads expert Tara Zirker shared, “If you go into your ads with a testing strategy—no matter your industry—it will resolve at least 80% of your problems. The other 20% are probably just making sure you have the right strategies specific to your niche or industry in terms of what you’re advertising, such as your offer.”

Testing and iteration with Facebook ads go a long way, and Ads Manager has various metrics available for you to analyze and use towards your overall budget strategy. To keep track of the results that matter to your campaign, you can customize your Ads Manager columns to easily access key metrics.  

Here’s a shortlist of metrics you’ll want to keep tabs on when evaluating your ad performance, as they will also likely determine how you’ll get charged: 

• Cost per click (CPC): This metric breaks down the amount of money you spend for each click on your ad, which Facebook can charge you for depending on your objective.
• Cost per mille (CPM): This refers to the average cost per thousand ad impressions, given that each impression counted is based on your ad being displayed the first time in a Facebook browsing session. Depending on your objective, Facebook can charge you based on CPM, calculated as Ad Spend x 1,000 ÷ Total Impressions.
• Cost per action (CPA): Depending on your objective, Facebook can charge every time someone completes the action you intend people to take when seeing your ad. This can indicate how efficient your ad spend is in prompting people to take action based on your ad.
• Cost per result (CPR): Based on your objective, Facebook can charge you every time someone takes the intended result you choose when seeing your ad. This can indicate how efficient your ad is at yielding conversions based on your intended result.
• Click-through rate (CTR): This refers to the rate at which people click on your ad. A high CTR can indicate a strong-performing ad, which you might want to study and replicate in the future. 
• Conversion rate: This refers to the rate at which your ad leads to a conversion. A low conversion rate might flag misalignment between your ad’s content and the landing page your ad takes people to.

Ready to invest in your business through ads? Now that you know how to set up your budget in Facebook Ads Manager, and determine how much you should be spending on your Facebook ads, we hope you’re ready to take the plunge and get spending.

Remember, you don’t need to shell out the big bucks right away! In fact, it’s better to start small and grow as you figure out what the Facebook advertising game is all about. 
Besides, what you’ll be spending to reach potential customers and boost your revenue will all be worth it! Join the 93% of social media marketers using paid Facebook ads to help reach their revenue goals. Also, be sure to follow more of KlientBoost’s tips to make sure your Facebook ads are a success.