Many small business owners have heard Facebook ads is a great marketing channel to generate leads.

But you might wonder…

  • How much money should I spend on Facebook ads to get good results?
  • Is Facebook Ads expensive?
  • What is a good daily or monthly Facebook Ads budget?

With the right Facebook ads budget strategy you can generate as many leads as you like (on-demand).

But… Wait!

Before you think about spending a penny on Facebook ads, you need the right strategy.

So before you read the rest of this article, make sure you sign up for my free masterclass training to learn the exact strategy you need to generate leads and sales appointments in your business predictably each month… in a way that is automated, profitable and scalable.

Have you signed up for the free masterclass training? Yes..? Ok, great. Now keep reading to learn more about the best Facebook ads pricing strategy for your business.

The Best Facebook Ads Pricing Strategy

A BIG mistake people make with Facebook ads is they spend money just “boosting” Facebook posts to get more brand awareness, spend too little (to not get enough data for what works and what doesn’t) or over spend (spending money on Facebook continuously on stuff that doesn’t bring in any results).

So, what do you need to do instead?

Here’s what I recommend you do…

Step 1: Start with a testing Facebook ads budget

In my lead generation online course, I teach business owners how to generate leads on Facebook Ads by first of all having a “testing budget”.

What is a Facebook ads testing budget?

You start off by creating at least 1-5 Facebook Ad sets with a budget of $50-$100/day. I recommend doing this through Facebook’s campaign budget optimization for best results.

In each ad set test a different audience related to your potential clients. And in each ad, have some free content that explains how you can help solve a big problem that your potential clients have.

Note: You can learn more about how this strategy works in step 1 and 2 of my free masterclass training

Let the ads run until you’ve spent about $1,000 in total (this could day 7-21 days).

From this testing budget, you can see which of the Facebook ads sets generate the most leads at the lowest cost.

Step 2: Focus your budget on the best performing Facebook ads

After spending $1,000 with your testing budget, you’ll now know your:

  • Best performing ad (including ad text, headline and creative)
  • Best performing audience (ad set)
  • Cost per lead

Next you need to turn off the worst performing ads and leave on the best performing ads.

Step 3: Choose how many leads you want each month

Now that Facebook has told you your cost per lead, you can decide how many leads you want to purchase each month.

for example, if your cost per lead is $10 and you want 100 leads each month, you would pay Facebook $1,000 ($10 x 100 leads = $1,000).

In other words, you are in full control of exactly how many leads you generate each month.

See also: Should you buy online leads?

How long does it take for Facebook ad leads to convert into clients?

This depends on your sales cycle, but on average we see that from every 100 leads you get, 1 lead will convert into a paying client within 3 months and then more leads will convert into clients after 3 months (as they continue to get your follow up emails).

In other words, the short term conversion rate is 1%. The long-term conversion rate can be much higher if you’re looking at the results over a period of over one year.

Tip: Most leads for B2B Facebook ads do not convert straight away. That’s why it’s really important you have a strong follow up process that goes on for at least 6-12 months.

What if you don’t have more than $50 to $100 each day to spend on Facebook ads?

Then Facebook ads probably isn’t a good fit for you at this time. Instead, I recommend using free or low cost lead generation strategies, such as LinkedIn Lead Generation, Google SEO lead generation or YouTube SEO lead generation.

After you’re winning clients for free, you can reinvest some of your profit into Facebook ads later.

If you’d like to learn how to both free and paid marketing channels to get 5-30 predictable sales appointments each month watch my free masterclass training here.

See also: How much should your business spend on Facebook Ads in 2020? (video below)

How to calculate Facebook ads cost to acquire a new client (CPA)?

To work out your Facebook ads cost per acquisition (CPA), take all the new clients you’ve generated from Facebook ads and divide it by how much you’ve spent on Facebook ads.

For example, if you’re won 5 clients from Facebook ads and you’ve spent $10,000 on ad spend, your cost to acquire a new client on Facebook ads is $2,000 ($10,000 ad spend divided by 5 new clients = $2,000 to acquire a new client)

Next you need to work out if $2,000 to acquire a new client is profitable for you or not.

How can you do this?

You can work this out by calculating your lifetime customer value (LCV).

How to calculate 12-month customer value

To calculate this in your own business, look at how much profit you’ve generated in the last 12 months and divide it by how many clients you’ve won. This will give you your lifetime (or 12 month) customer value (taking into consideration the profit only, not the revenue).

For example, if your business has made $200,000 in profit in the last 12 months and you’ve won 50 new clients, your customer value is $4,000 ($200,000 divided by 50 = $4,000).

How to calculate the ROI from Facebook ads?

Now that you know your cost to acquire a new client on Facebook ads and your lifetime customer value, you can work out if your Facebook ads will make a good return on investment or not.

For example, if you pay Facebook ads $2,000 to acquire a new client and your lifetime customer value (profit only) is $4,000, will your FB ads be profitable?

Yes!

And that’s how you can calculate if your Facebook ads are profitable or not. Simple.

What should you spend your Facebook budget on?

When you’re creating a Facebook paid advertising campaign you’ll see lots of different ways you can spend your money. You can increase your traffic, video views, engagement and leads.

What Is Your Facebook Marketing Objective

My recommendation is to focus on what will bring you the best results.

In most cases, that is more leads.

So in your Facebook campaign, choose “Lead Generation” or “Conversions” as your campaign goal.

Then, focus on creating an offer where you give away a highly valuable free piece of content, in return for your potential clients contact details (such as their name and email) to generate leads.

Split test and measure your Facebook ad results

If this is your first time running Facebook ads, then don’t expect perfect results. It will take some time to measure what works and what doesn’t and it takes a little bit more time to test your offer so that you get the most amount of leads by spending the least amount of money.

One of the most important numbers to look at is your cost per lead and cost per acquisition (in other words, how much does it cost to acquire a client)

You want to try to get this as low as possible and a good ROI on what you’re spending.

And the lower your cost per lead, the more leads you can generate (without paying more money).

How can you improve your cost per lead?

There are many variables but it’s mainly to do with your competition, your message and who you’re targeting.

In particular, if your message (your free piece of content) is going to be highly relevant to your target audience, Facebook will notice your good results and will reward with a higher “relevance score” which in turn reduces your cost per lead and your advertising costs.

It’s a good idea to keep a small percentage of your Facebook ads budget (such as 10-40%) towards testing new Facebook ad ideas to see if you can improve your Facebook ads cost per lead and ROI.

Scale up once you get good results

By testing different offers, target audiences, images, text, etc in your adverts, you can see what one’s perform better and get you a lower cost per click.

Once you’ve tested it to a reasonable level (where you’re getting a good amount of leads that you’re happy with and you’re happy with how much you’re paying per lead) then you can scale up and spend more (if you want to get even more results).

Think about what happens after you generate leads

Generating leads is the first part of a successful social media strategy, but the second part, which is lead conversion is also very important.

Once you start generating leads on Facebook, make sure you also have a plan for converting these leads into paying clients.
You can do this through email marketing, content marketing, live events, webinars, and so on.

If you need any help with running your Facebook ads (through training or our done-for-you services) you can I recommend you watch this short video for to get more help.