"How much do I need to spend on ads to get started?" is one of the questions we hear most from businesses that have never advertised. The honest answer is that it depends, but it does not have to be a guess. You can reach a figure with a simple calculation, worked backwards.
Ad spend and agency fees are two different things
Before the calculation, an important distinction. Ad spend is what you pay directly to Google or Meta, the owner of Facebook and Instagram, for your ads to run. Management fees cover the work of planning, creating and optimising the campaigns. When you build your budget, think about the two separately.
Start with what a customer is worth
The right question is not how much to spend, but how much you can pay to win a customer without losing money. To answer it, look at three numbers:
- Average order value: how much a customer spends, on average, on their first purchase.
- Margin: how much is left from each sale after costs.
- Repeat purchases: if customers come back, their value over time is much higher than the first sale.
This gives you the maximum acceptable cost per customer. It becomes the yardstick for the entire campaign.
Work the numbers backwards
Here is an example with illustrative numbers. A business wants 10 new customers a month. Based on its history, 1 in every 5 people who message on WhatsApp becomes a customer. So it needs 50 enquiries a month. If each enquiry from an ad costs R$ 20 on average, the budget needed is R$ 1,000 a month.
The cost per enquiry varies a lot from one industry to another and from one city to another, which is why the first month is for finding out the real number for your business.
Google Ads or Meta Ads: where should you start?
- Google Ads appears for people who are already searching, such as "dentist in Passo Fundo" or "equipment rental". It usually brings in enquiries that are closer to buying. Learn more about Google Ads management.
- Meta Ads, on Facebook and Instagram, appears for people who are not searching yet but match your customer profile. It is great for generating demand, launching products and keeping your brand top of mind. See Facebook Ads and Instagram Ads.
With a small budget, it is worth starting with a single channel and making it work before opening a second one.
Give your campaigns time to learn
The platforms use the first results to figure out who is most likely to respond to your ad. That takes a few days. Three precautions help a lot during this phase:
- Concentrate your budget on a few campaigns instead of spreading it across many.
- Avoid changing your campaigns every day.
- Evaluate results over periods of at least 7 days.
Smaller cities have their own dynamics
In cities like Passo Fundo and the surrounding region, the audience is smaller than in a state capital. That often makes enquiries cheaper, but it also means the same people see your ad many times in a short period. Refreshing your creative often and monitoring ad frequency prevents audience fatigue.
What to track in your reports
- Cost per enquiry: how much each WhatsApp conversation, call or form submission costs.
- Close rate: how many of those enquiries become customers.
- Cost per customer: the number that shows whether the campaign pays for itself.
Likes and reach help you understand an ad, but they do not pay the bills.
When to increase your budget
When your cost per customer is below the limit you set and your team can handle more customers, it is time to grow. Increase gradually, so the campaign does not lose what it has already learned.
At iodo, we manage paid media for businesses in Passo Fundo, the surrounding region and other states, always starting with this calculation. If you would like to know how much it makes sense to invest in your case, get in touch.