“You have to spend money to make money.” We’ve all heard the saying a million times, and probably roll our eyes at the notion. But it’s true, and even more so when it comes to utilizing the power of Facebook ads.
So how much should you spend on Facebook Ads for your online coaching business? Well, how much do you want to make? Warning! Before you go any further, this article has a lot of numbers and acronyms. But we promise we’ll try to make this as painless as possible.
So let’s start again. How much do you want to make from your online coaching business?
Of course, you want to make more! Once you’ve figured out exactly how much you want to make (your profit), you then have to figure out how much revenue you need to generate to get there, minus all your expenses.
That’s your “sweet spot” — the point where you spend just enough on your Facebook Ads to get the maximum result. Spend too little and you may miss the amount of revenue you need to generate, spend too much, and you might be cutting into the profit you wanted to make. It’s all about knowing your numbers and finding that ideal balance.
Defining the Terms
If you’ve spent any time in the Facebook Ads Manager, you’ve seen the list of terms Facebook uses for key performance indicators (KPI’s). To fully understand and maximize your Facebook Ads, here are a few you should become familiar with:
|Definition||why it’s important|
|Impressions: Number of times a post from your page is displayed, whether the post is clicked or not.||You know when you’re scrolling through Facebook and an ad pops up, that’s an impression.|
|CPM or Cost per 1,000 Impressions is calculated as your cost divided by the number of impressions, multiplied by 1,000.||CPM is how much you pay every time Facebook shows your ad to 1000 people. The lower the amount, the more people you’re able to reach with less money.|
|CPC or cost per click is how much each click on your ad will cost.||This is a great option to choose to get more traffic to your site or landing page.|
|CTR or click thru rate is the percentage of times people saw your ad and performed a link click.||Your click thru rate basically tells you the percentage of people interested enough in your ad to take action and click on it.|
|The bounce rate is a single-page session on your site.||Is your ad delivering on its promise? If it isn’t, visitors will leave your site and you won’t convert.|
|Conversion rate or CVR is the percentage of conversions there were out of the total number of visits to your site.||If your ad’s goal is to get them on your site and convert (purchase a course, sign up for a subscription, or lead generation), so the higher it gets, the more effective your ad is.|
|CPA or Cost Per Action allows you to pay only for actions people take because of your ad.||You get to choose what action you want them to take and your CPA is how much you pay every time they take that action.|
Okay, now that you’re familiar with the basics, let’s take a look at how these numbers actually come into play when calculating the ideal ad spend for your coaching business.
The Basic Calculation
To understand the calculation, we’ll take a look at standard benchmarks and make assumptions regarding your data. Follow along and plug in your own numbers. Let’s say you’re selling a course for $997.
Here are the ideal benchmarks:
- 1 % CTR
- $1 CPC
- $15 CPM (1,000 impressions)
- 25% Bounce Rate
- 2% Conversion Rate
Now it’s time for a little math. With the numbers assumed above, if you spend $5,000 on Facebook Ads, this is how it will all break down.
100,000 Impressions at $15 CPM = $1,500 ad spend
1% CTR on 100,000 Impressions = 1,000 Clicks
**With these numbers we know it should be approximately $1.50 per click**
1,000 Clicks with a 25% Bounce Rate = 750 Landing Page Views
750 Landing Page Views with a 2% Conversion Rate = 15 Sales ($14,955 in Gross Profit)
That immediately puts us at $100 per sale, also known as your CPA (Cost per Acquisition).
With this knowledge as a rough indicator of success, and assuming we maintain that CPA at scale, with $5,000 in Ad Spend you’ll achieve 50 Sales.
If your product is $997, that’s $49,850 in revenue.
$49,850 Revenue – $5,000 Ad Spend = $44,850 Profit (Minus Product & Operational Costs)
As you can see, Spending Money to Make Money can pay off BIG when it comes to Facebook Ads to grow your coaching business. But that doesn’t mean it’s easy . . .
To make this all work, you’ll need to spend time testing your ads — their goals, your copy, your creative, frequency, and audiences to find your ideal “sweet spot” that will allow you to scale. Simply throwing more budget at your campaign isn’t always the answer.
And while your Facebook Ads will dramatically help you grow your online coaching business, the real, long-term power lies in increasing the customer lifetime value (CLV) of your online course.
Read our post here to learn how you can increase the lifetime value for your online course.