Question 1

How do you calculate advertising budget?

Accepted Answer

Calculate advertising budget using the ROAS method: Budget = Revenue Goal ÷ Target ROAS. For example, if you want $50,000 in revenue with a 4:1 ROAS target, your budget should be $50,000 ÷ 4 = $12,500. Alternatively, use percentage of revenue method (typically 5-12% of gross revenue). The budget should account for CPC, conversion rate, and average order value to ensure profitability. Always start conservatively and scale based on actual performance data.

Question 2

What is a good ROAS for advertising campaigns?

Accepted Answer

A good ROAS varies by industry and business model: E-commerce: 4:1 or higher is excellent, 3:1 is acceptable, B2B/Lead Gen: 5:1 or higher (longer sales cycles), SaaS: 3:1+ (considering LTV), Retail: 4:1 to 10:1 depending on margins. ROAS below 2:1 is typically unprofitable after expenses. Top performers achieve 6:1 to 10:1. Remember: ROAS doesn't account for product costs, shipping, or overhead. A 4:1 ROAS with 25% product cost and 25% overhead breaks even at 2:1 profit ratio.

Question 3

How much should I spend on Google Ads or Facebook Ads?

Accepted Answer

Ad spend should be based on revenue goals and ROAS targets. Beginner budget: $500-$1,000/month to test and learn, Small business: $1,000-$5,000/month for consistent results, Medium business: $5,000-$20,000/month for scale, Enterprise: $20,000+/month for maximum reach. Start with daily budget of $30-50 minimum for Google Ads, $20-30 for Facebook Ads. Increase budget by 20-30% weekly if ROAS targets are met. Never scale too quickly; test, optimize, then scale.

Question 4

What is break-even CPC and how do you calculate it?

Accepted Answer

Break-even CPC is the maximum cost per click where you neither profit nor lose money. Formula: Break-Even CPC = (Average Order Value × Conversion Rate ÷ 100). Example: $150 AOV × 3% CVR = $4.50 break-even CPC. If your actual CPC is $2.50, you have a $2.00 profit margin per click. CPC above break-even = losing money. Target CPC should be 50-70% of break-even for profitable campaigns. Improve conversion rate or increase AOV to allow higher CPCs and more competitive bidding.

Question 5

How do you allocate budget across different advertising channels?

Accepted Answer

Channel allocation strategy based on performance: Start with 70/20/10 rule: 70% to proven channels, 20% to growing channels, 10% to experimental channels. Common allocations: Google Search Ads: 30-40% (high intent), Facebook/Instagram: 25-35% (awareness + retargeting), Google Display: 10-15% (awareness), LinkedIn: 10-20% (B2B only), TikTok/Emerging: 5-10% (testing). Adjust based on ROAS performance. Top-performing channels should get more budget. Test all channels for 30 days minimum before cutting.

Question 6

What percentage of revenue should go to marketing?

Accepted Answer

Marketing budget as percentage of revenue varies by business stage and industry: Startups/New products: 12-20% (aggressive growth), Growth stage: 10-15% (scaling), Established businesses: 6-10% (maintenance), B2B: 5-10%, B2C: 10-15%, E-commerce: 8-12%, SaaS: 10-20%. In first year, expect to spend more (15-20%). As brand recognition grows, reduce to 6-10%. Profitable companies reinvest 40-50% of profits into marketing for continued growth. Adjust based on competition and market conditions.

Question 7

How do you calculate expected conversions from ad budget?

Accepted Answer

Expected conversions = (Budget ÷ CPC) × (Conversion Rate ÷ 100). Example with $10,000 budget, $2.50 CPC, 3% conversion rate: ($10,000 ÷ $2.50) × 0.03 = 4,000 clicks × 0.03 = 120 conversions. Then calculate revenue: 120 conversions × $150 AOV = $18,000 revenue. ROAS = $18,000 ÷ $10,000 = 1.8:1. If conversion rate improves to 4%, conversions increase to 160, revenue to $24,000, and ROAS to 2.4:1. Focus on improving CVR for maximum impact.

Question 8

What is the difference between daily and monthly ad budgets?

Accepted Answer

Daily budget is amount spent per day (Daily = Monthly ÷ 30). Monthly budget is total spend over the month. Google and Facebook use daily budgets but can spend up to 2× daily budget on high-performing days (averaging out over the month). Best practices: Set daily budget for campaigns (easier to control), Monitor monthly spend for reporting and planning, Use campaign budget optimization (CBO) for Facebook, Consider dayparting (different budgets for different times). Start with small daily budgets ($20-50) and scale gradually based on performance.

Question 9

How do you optimize advertising budget for maximum ROI?

Accepted Answer

Budget optimization strategies: 1) Test multiple ad variations (A/B testing), 2) Focus budget on high-performing campaigns (80/20 rule), 3) Optimize for conversion rate (landing pages, ad copy, targeting), 4) Use negative keywords to reduce wasted spend, 5) Implement retargeting (typically 30% lower CPC), 6) Adjust bids based on time/day performance, 7) Increase budget on profitable campaigns, 8) Cut underperforming ads quickly (7-14 day rule). Track ROAS daily and reallocate budget to top performers weekly. Even 1% improvement in CVR can dramatically improve ROI.

Question 10

What metrics should I track with my advertising budget?

Accepted Answer

Essential advertising metrics to track: Performance: ROAS, CPC, CPM, CTR, CVR, Profitability: Customer Acquisition Cost (CAC), Lifetime Value (LTV), Profit per conversion, Efficiency: Cost per lead (CPL), Cost per acquisition (CPA), Budget utilization %, Quality: Quality Score (Google), Relevance Score (Facebook), Click quality. Create a dashboard tracking these metrics daily. Set alerts for: ROAS below target, CPC above break-even, Budget pacing issues, Conversion rate drops. Review weekly and adjust budget allocation based on trends.

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