Fazley RabbiThe question behind "how much should I spend?"
"How much should I spend on Facebook ads every month?" There is no single right figure, and anyone who gives you one without looking at your numbers is guessing. The useful question is different: how much can you afford to pay to get one order, and how many orders can you actually handle?
Once you know those two things, the budget almost works itself out.
Step 1: Find what one order really earns
For each main product, write this down on one line:
- Selling price
- Minus product cost (what you paid to buy or make it)
- Minus packaging
- Minus the delivery charge you pay, if you offer free or discounted delivery
- Minus any courier cash-on-delivery charge or payment fee
- Minus an allowance for returns and cancellations
What is left is the contribution per order: the money available to pay for advertising and profit. Many owners are surprised by how small it is once delivery and returns are included.
Do this per product, not as one average. A high-margin product can carry advertising costs that a low-margin one cannot.
Step 2: Set a break-even and a target cost per order
Your break-even cost per order equals the contribution per order. If ads cost more than this to bring in one order, you lose money on every sale.
Your target cost per order should sit comfortably below break-even, leaving the profit you want. Write both figures next to each product before you start a campaign.
A note on repeat customers: if your records show that buyers really do come back, you can accept a higher cost for the first order. Base this on your own order history, not on hope.
Step 3: Turn the target into a budget
- Decide how many orders per month you want from ads, checked against your stock, packing time and the people who confirm orders.
- Multiply that number by your target cost per order. That is your planned monthly budget.
- Start with a smaller test budget for a week or two, enough to produce a reasonable number of orders, not just a handful of clicks.
- Measure the actual cost per order, counting orders that were delivered and paid for, not just messages or "purchases" reported by the ad platform.
- If the actual cost is below target, raise the budget gradually. If it is above, fix the ad, the offer or the landing page before spending more.
Ads Manager reports its own results, but your order book is the truth. Returns and cancellations deserve their own tracking, which I cover in measuring real profit after COD returns.
Do not forget cash flow
Ad platforms charge you as you spend, while cash-on-delivery money comes back from the courier later. If you scale up quickly, you can run short of cash even while each order is profitable. Plan the budget around the money you will actually have on hand each week.
Common mistakes
- Setting the budget from "whatever is left this month" or from what a competitor seems to spend.
- Judging success by likes, reach or message count.
- Leaving delivery charges and returns out of the margin.
- Doubling the budget overnight because one day looked good.
- Stopping a campaign after two days, before there is enough data to judge.
What you can do, and where help fits
The margin sheet is something only you can fill in properly, because you know your costs. An experienced hand helps with setting up conversion tracking, structuring campaigns so cost per order can be measured for each product, and deciding when to scale up or stop. That is part of my social media and ads management.
Start here
Take your three best-selling products and work out the contribution per order for each, including delivery and returns. Write the break-even cost per order next to each one, then compare it with what your ads actually cost per order last month. That single page will tell you more than any budget rule of thumb. If you would like help with the numbers, get in touch.