A common question is, “How much should we spend on ads if we’re a small business and haven’t made any sales yet?” Many budget tips are based on a percentage of your profits, but what if you haven’t earned anything yet?
So, how do you decide on your ad budget? Here’s a simple 4-step guide to help you figure it out, based on what successful businesses did when they first started.
4 Steps to Decide Your Ad Budget
Step 1: Start with $500 to $1000 a Month
If possible, set aside at least $500 to $1000 a month for your ads. If you can’t afford that much, spend whatever you can. Choose one platform to start with, like Facebook or Google. Don’t spread a $1000 budget across two platforms.
To choose the best platform for your business, think about what you’re selling and where people are most likely to see your ads:
- Google Ads: Use Google if people search for your product or service when they need it.
- Social Media Ads: Use social media ads if your product isn’t something people search for but could be promoted in a more general way.
Once you pick a platform, spend your budget there. Make sure to use your budget wisely to get the most out of it.
Step 2: Test Different Ads (A/B Testing)
A/B testing means running different versions of your ads to see which one works best. You might change one thing at a time, like:
- The ad’s text or image
- The audience you target
For example, run two ads with the same image but different captions to see which caption gets better results. Or run ads with different images but the same caption. You can also test different audiences.
By figuring out what works best, you can make more successful ads in the future. Learn how to set up A/B testing or get help from a marketing agency if needed.
Step 3: Focus on Return on Ad Spend (ROAS)
ROAS, or return on ad spend, tells you how much money you make from your ads compared to how much you spend. For example:
- Ad A: Spent $500 and made $500 in revenue
- Ad B: Spent $80 and made $300 in revenue
Ad B is better because you spent less to get more revenue. To find your ROAS, divide the total revenue by the total ad spend. This shows you if your ads are profitable.
If you’re not selling products or don’t know the value of a lead, check the cost per lead. This helps you understand if an ad is worth running.
Step 4: Stop Bad Ads and Invest More in Good Ones
Once you’ve gathered enough data from your A/B tests, you’ll see which ads are successful and which aren’t. Turn off the ads that don’t perform well and use that budget for ads that do. You can also use it to test new ads.
In marketing, it’s important to keep testing and improving. Don’t just settle for okay results—aim for great results.
By following these steps, you can wisely manage your ad budget and increase your chances of success.
