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How many times have you been faced with the question of how much to budget for your ad campaigns? Or maybe you’ve had to answer this for your clients. A lot of the time we’ll just take a random shot in the dark – or, even worse, tiptoe our way into spending enough money to actually collect reliable data.

The goal of this post is to give you a new perspective to use when formulating your ad budgets, as they are related to your goals.

Whenever I am constructing a new ad budget, it really just comes down to a few key elements:

How big is your target audience?

How often would you like to reach them?

What is your estimated click-through rare (CTR)?

What is Facebook’s recommended bid range for your audience?

Obviously if you have a smaller audience, you will likely spend much less than someone with a much larger target group. This is a very common-sense statement, but it’s worth stating that the size of the audience you are trying to reach will have a large impact on the dollars you’ll be spending to reach them. If you have a small ad budget to work with, but a very large target audience, I would recommend segmenting your audience into smaller clusters until you can reliably have enough theoretical touch points with these users.

So, how many theoretical touch points constitute as ‘enough’? That depends on your industry, and how frequently you’d like your messaging and content to appear in front of your prospective audience. If you sell a product or service that has a longer consideration phase for most buyers, you may want to have more frequent touches. This often correlates with the margins on your product or service. Generally a longer sales cycle happens for bigger-ticket items, and these generally produce higher margins, which can be used to generate more ad impressions.

If you’ve already run a few ad campaigns and have a general idea of what kind of CTR you can expect from your target audience, you’re in great shape. If not, there are a few routes you can take. One option is to run a smaller test campaign to discover a rough idea of what your CTR will be. Another option is to look at similar campaigns run online; occasionally other ad agencies or brand marketers will post their CTR data online for you to use as benchmarks for your industry. While this is not a perfect approach, it still gives you a rough idea of where to start, which is what we’re after here.

Finally, what is the suggested bid range Facebook gives you when you build out your target audience and set your bidding options to cost-per-click (CPC)? Generally I will use a number smack-dab in the middle of the range Facebook suggests when building out my ad budgets.

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So here’s the math:

[(Estimated CTR * # of users in you target audience) * Suggested CPC] = Monthly Budget

After you have your monthly budget, just multiply it by how many times you would like your message to reach your target audience each month.

Example:

If we had a projected reach of nearly 2,000,000 users, with a CTR benchmarked at 0.217%, and a suggested CPC bid from Facebook of $0.45 per click, this is what our equation would look like:

[(0.217% CTR * 2,000,000 Reach) * $0.45 mid-range CPC] = $1,953.00

In this instance, I would start this ad budget at roughly $2,000 per month assuming we wanted to get in front of the users in our target audience once per month.

Pacing is also a consideration. If you don’t have a team in place that can handle a certain capacity of work or leads, you may want to lower your budgets. This is going to require looking deeper into your conversion rates, etc.

By no means is this an exact science, but at the very least this should allow you to set rough expectations and save one more bullet from going off in the dark. Best of luck on crafting your next Facebook advertising budget!

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Franco Puetz
Franco Puetz is the co-founder of Magnifyre, a boutique agency based out of central Missouri that helps small businesses grow with digital smartness, specializing in PPC advertising, search engine optimization, and content marketing.