How much budget do I need for Meta ads to work?

How much budget do I need for Meta ads to work?
Nick Binza
Nick BinzaPurpose Digital

Posted: Tue 9th Jan 2024

Before you launch yourself into Meta ads, make sure you're clear on what you're trying to maximise.

Most of the time our clients are looking to acquire customers or drive sales on their site. This objective is often restricted by a maximum cost you are willing to pay to acquire a customer or order. For Meta to "work", it needs to be able to achieve a CPA or ROAS at or below the target CPA or ROAS you set.

Depending on your business, you may be looking to achieve other objectives. These could include driving traffic to your website, getting foot traffic to a physical store or obtaining email sign-ups.

Watch this webinar to save time with Meta Business Suite:

How to test Meta ads

There are many ways to run campaigns that can all have a significant effect on performance:

  • ad content (video, images, copy, carousels, collection ads, catalogue ads, instant experience)

  • campaign types (ASC, conversion, traffic, etc)

  • conversion objectives (add to cart, purchase)

  • audiences (broad, lookalike)

  • locations targeted

  • landing page of the ad traffic (home page, collection page, product page)

The optimal formula and account structure often look very different across businesses. As a result, the combination you decide to run an initial test with is unlikely to be the best performance you can achieve.

There will be room for significant optimisation and scaling.

This is compounded on new accounts by the learning that Meta can do over time. The algorithm which drives campaign performance starts from no data and will perform the worst it ever will on brand-new accounts. Its performance will improve quite rapidly over the first few weeks of running.

The more budget and testing, the more you can optimise your performance.

How to establish your budget

We would always recommend committing enough budget to be able to establish a CPA or ROAS, which is reliable when first testing Meta ads. As a minimum, you should plan a budget which is x20 your target CPA and spend it over two weeks.

If you are using a target ROAS, calculate your budget as Budget = (AOV / ROAS) x 20. This ensures that having spent this budget you have established a reliable CPA that allows you to conclude on the initial test. Based on the results you obtain, we recommend you proceed as follows:

If you have 20 or more conversions

  • You are acquiring orders profitably (positive CM3)

  • You can scale the campaigns to start maximising orders while monitoring CPA/ROAS to maintain it at your target

  • You should start testing variations of your set-up (content, audiences, conversion objectives etc) to try and further improve performance

If you have 10 to 20 conversions

  • You are able to acquire new customers but not quite profitably

  • You work to start testing variations of your set-up (content, audiences, conversion objectives etc) to try and further improve performance to reach the target CPA

  • Maintain spend at a level that you are comfortable with knowing that the orders acquired are at a loss. Depending on your LTV this might not be a problem

If you have less than 10 conversions

In this instance, it seems like the CPA is extremely unlikely to average out at your target.

  • You should identify the biggest areas that seem to be underperforming

  • Benchmark against industry data

  • Check platform engagement metrics, CPC, CPM etc.

  • Investigate your site for underperforming aspects

  • Are there large drop-offs on certain pages or steps of your funnel?

  • Are there any poor UX or broken links?

Only continue spending if you are testing specific aspects of your campaigns that you believe could have a significant impact on performance.

Relevant resources

Nick Binza
Nick BinzaPurpose Digital

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