If there’s one thing that I see people mess up with their ads time and time again…
It’s their budget.
They don’t know how much they should budget…
Or they aren’t willing to budget enough…
Or they don’t understand when they need to adjust their budget…
So, in today’s episode of The Hirsh Marketing Underground Podcast, I’ll be talking you through the two different kinds of ad budgets:
- Testing Budgets
- Scaling & Optimizing Budgets
Plus, I’ll explain how to set a realistic budget for your business based on your goals and how to interpret your results to see where you need to make changes.
Have any questions about your ad budgets? Hop over to my Instagram page (@emilyhirsh) to share them with me in the comments section of my latest post!
If you need additional support with your ads and other aspects of your marketing, apply to work with Team Hirsh at helpmystrategy.com!
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Hello, everybody. Welcome back to the podcast. I hope you’re all having an amazing week. I cannot believe we’re halfway through July, wow. And this year is just like, crazy enough, is flying by when you think it feels so slow because of like being quarantined, and everything’s closed, and there’s not a lot to do, but I don’t know. Maybe it’s because I have three kids now, maybe it’s because my business has been busy and we’ve got a lot of cool projects going on. I have no idea, but it has gone by very fast and I can’t believe, I mean, it feels like it was just Christmas. So anyways, today’s training, I’m going to talk about the two different types of ad budgets.
So this is inspired because I recently did a training for Ignite students. I, for a little bit paused on training my monthly, doing my monthly trainings for the Ignite students and my team took it over just because of having a baby and all of that. But I really enjoy crafting new trainings and putting a lot of time into that type of content where I have to create the new training for people and spend time creating the slides and like creating something new. And so I took it back over because I just want to be in it still, in the trenches there and kind of learning. And that’s how I feel about my podcast too. So creating those trainings helps me with my podcast because I go and do the research and I talk to my team and I get example ads and I figure all that out. And so anyways, I did a training on ad budgets and it was really, really good, and it was just about, well, these two different types of ad budgets, but then how to choose your budget, how to make sure you set up like retargeting ads right, and splitting your budget. Just all the questions about budgets and tracking, because that is such a common issue that people have with their ads, and making sure they’re clear on their budget before they start ads is something a lot of people kind of miss.
And so today I want to talk about the two different types of budgets that I actually did clarify on this training and kind of created this training around. So I’m going to give you guys like a mini sneak peak version of the training. So there are two different types of ad budgets. Like there’s two different camps that you’d find yourself in choosing an ad budget, depending on where you are with your strategy, where you are with your marketing, how much you’ve run ads in the past, how much data you have.
So the first type of ad budget is a testing budget, okay? And a testing budget has to be, in my opinion, more than $500 a month, and it basically has to be a budget that you’re okay saying, “I’m not going to make this back.” And so the way you choose a testing budget is you just literally choose a number and you say like, “Okay, in the next 30 days I am comfortable spending X amount of dollars on my ad and I might not make it back, especially not right away, and I am good with that. It’s an investment. I’m doing it because I need to test my funnel because I need to get data because if I don’t do this, I’m going to stay in the place I’m in right now and not be moving forward by getting people in my funnel that they didn’t give me intel and information on how to make it better.”
Now, a testing budget doesn’t have to be small, like $500. So I’ve seen people have a $10,000 testing budget. You know, when I launch a new webinar, or I launch something new, I know that my messaging is good and I know my audience and I’ve been doing this for a while that it’s not going to totally fail. So I’ll spend $6,000 easily on a webinar even if it’s brand new, even if it’s a new offer, a new funnel, because I have that kind of base. And a lot of our bigger clients who were in that position, when they have a new campaign or a new funnel or a new product, their testing budget will be quite large because they’re in a place where they’re like, “If I’m going to put the energy into creating a new funnel, doing a live webinar, creating a new product and launching it, I don’t want it to be small, like $500 a month.”
Now, if you’re not there and it’s like brand new and you’ve actually not had a converting funnel or product in the past, you probably want to start with like $500 to $2,000 as your testing budget. And the higher you go with that testing budget, the faster you’re going to get momentum. So the higher you go with the budget, the more leads you’re getting into your funnel, the more data you’re getting back, the more intel on what those leads are, the faster you can make changes and fix things, the faster you’re going to see progress. If you choose an ad budget of like $5 a day, it’s going to probably take you like six months to see any momentum, because if you really think about it, $5 a day, how many leads are you going to get? Not very many. You know maybe one, if it’s $5 a lead, right? And then if 1% of your leads buy and you get one lead a day, you’re getting 30 leads. Like you may not even get a sale, right?
So that’s why at least $500, I say more $1,000, because otherwise it’s going to feel like it’s not working when the actual problem is just that it’s too slow, you don’t have enough momentum. So you are in the camp of a testing budget. If you have never run traffic to that specific funnel or product, and you can move out of this camp of testing in 30 days once you get data. So the way you decide, if you’re choosing this type of a budget is one: Have I ever run ads to this offer or this funnel? You might have other offers and funnels you’ve run ads to, but if this is new, you are choosing a testing budget and then you choose an amount that you are okay not making back right away, like it’s an investment just like as if you were to pay a VA or hire another team member or hire a coach or pay to get your funnel built. This is just like that. So you’re just choosing that number and you’re like, “Okay, here is what I’m going to do with it.”
Now, here is the key and I want you to listen here. You don’t just choose a number and say, “Okay, I’m going to spend a thousand dollars a month and see what happens. Just do it. Like just spend it.” No, you still have to have goals attached to that number. So you still have to say like, “Okay, if I pay $5 cost per lead with a thousand dollars, I should be able to get 200 leads. And then you’ve got this base SMART goal, and if I convert 2% of those people, all of those leads, I should be able to get four sales. Hopefully I did that math right on the fly.
Okay, but you still choose a testing budget like that. Choose a testing budget by choosing an amount that over the next 30 days, you were okay if you don’t get it back, but then you take that budget and you set base mark and metric goals for how many leads, the cost per lead, how many sales, your sales conversion – and if you do hit that sales conversion, how much money you would potentially make. Chances are, you’re not going to hit all those goals because you’re testing, or you might actually get a lower cost per lead, but then a way lower sales conversion. Right? So we don’t know what you’re going to get, but you still can assign metrics to that so that then when you go run ads, you know where you’re falling. Okay? Cause if we took a thousand dollar budget and we said, we’re going to pay $5 cost related to, we get 200 leads, and then we actually go and we only get 150 leads. Okay, we know now this is where we’re falling. That’s why we did the testing budget. Or we go, we get 200 leads, but then we only get one sale, we know where we are falling. Okay? And that tells us where we could potentially improve our funnel or marketing strategy.
That is the purpose of the testing budget. It’s not just to choose a number, spend it and then have it come back and tell you, did it work or not? Did I get any sales? And was I profitable? That’s not the deciding factor. We have to go a level deep here and say, “Did it work in terms of my cost per lead? My cost per click, my ads, my sales conversion, my webinar conversion, my overall ROI? Like how did it work? And how many layers did I go to see where it did and didn’t work?” That’s why we did that testing budget.
So if you are in the camp of a brand new funnel, brand new offer, you haven’t run traffic to it before you have to choose a testing budget. You choose that budget by saying, how much money am I good if I don’t make it back in the next 30 days, I’m okay with it. And then you set goals with that testing budget and a testing budget should be at least $500 a month. Ideally, at least a thousand. And it can be higher. It can be three, four, five, six, seven, like I said, thousand dollars a month because especially if you’ve got an audience and you’ve had success before you might, you know, like I said, justify spending more because you’re putting so much work into the funnel that if you only spend $500, it’s not going to even pay off for the work that went into the funnel. Okay? So that is a testing budget.
One more thing here with a testing budget. When you are in this camp where your main goal is get as many leads as you can into the funnel to see what happens, to see how it converts, to see how my messaging and my targeting and all of those pieces are – just put all the budget into the front end of your funnel. If it’s a webinar, put all the budget into there. If it’s a product, put all the budget straight to that product. Don’t worry about retargeted ads yet. And I said this on my training yesterday. I was like, you know, this is my opinion and you don’t have to listen to me, but here’s why one, with a $500 a month budget, your retargeting ads will be so small. I guarantee you Facebook will not spend the money because your audience will be so small of people, 200 leads? Too small, like you won’t spend the money.
So that’s the main problem too. A lot of people see retargeting ads as like, “well, if I just get my retargeting ads up and I get those working well, then my funnel will convert. That’s what I’m missing.” They’re not. Retargeting ads are icing on the cake. If the foundation is not working, then retargeting ads are not going to solve that. So if your cost per lead is way too high or your webinar isn’t converting to sales and you’re getting literally zero sales and the leads are wrong or whatever is wrong in your funnel and the data is telling you this, retargeting ads will not fix it. Retargeting ads will just increase and improve and amplify the foundation that’s already working. So when we’re in a camp of a testing budget, what we want is as many leads as we can get into the funnel to actually take action and to see what they do to see if they watch my webinars, to see if they take action on my webinar, to see if they buy, to see if they buy a byproduct when they go to my sales page, if it’s a physical product funnel.
So we want to put all of our budget, at least for that month into the front of the funnel, that first step that you want people to take – buy the product, sign up for the webinar, sign up for the challenge, your opt in – whatever it is, put all the budget there. Then once that’s working and – at least somewhat working, it doesn’t have to be working to the sales conversion that you necessarily want or even profitable yet – but you have to prove that the messaging and the targeting and the strategy and the product work before retargeting will work. So I think you’re wasting your money if you put money into retargeting ads, especially if it’s a low budget.
Now, if you’re spending $6,000, that’s kind of a different situation. Like if I have a new webinar, I’m going to run retargeted ads cause I spend a lot and I had thousands of people sign up for it. But I, you know, it’s different than a brand new product brand new campaign and I haven’t even proven the product yet. Like then I just need leads. I just need leads in the funnel to see what they do and see if they take action. Okay? That is the first type of budget.
The second type of budget is a scaling and optimizing budget. This is where you’re taking data, actual data from paid ads and ideally some cold traffic. Here’s the other mistake that people make. They will come and they’ll say, “well, I know that my webinar converted at 8% and I got a $2 cost per lead.” And we’re like, “awesome! This is converting so well. Like let’s go let’s scale.” And then we get into the ad account and it’s like, well, you only spent $500 and you only targeted your warm traffic and your email list and your video views and people who knew you and so this result is not going to compute to cold traffic who don’t know you. It’s just not going to match up.
You’re not going to get the same result of people who have no idea who you are, who your brand is and have no trust to the people who do. You just won’t, and that’s okay. Like we have to get cold traffic working because that’s the way you scale is you have to reach new people consistently, but you have to make sure that your data matches what you’re trying to replicate. So if you come in and say, “well, I got a $2 cost per lead when I targeted my email list,” you’re not going to get a $2 cost per lead when you target people who don’t even know who you are. So we have to meet in the middle, maybe at $4 or something like that.
So just something to keep in mind, once you have data and you’ve gone through that testing budget phase, ideally where you’ve targeted some cold traffic, you prove that you could get new people who don’t know you in and see what they do and how they take action. Now you’re in the scaling and optimizing phase and you’re either scaling or you’re optimizing. And so you’re taking that data and you are creating, you know, creating ads, but here’s where you create goals based on that data.
So before I said we’ll guess the cost per lead, we’ll guess the sales conversion, we’re kind of guessing here with our testing budget. Well, when we move into this part of the budget, now we have data. So we can say, “okay, well, last month I spent a thousand dollars and I got $3 cost per lead when I targeted cold traffic and new people, and so now I know I can hit $3 or below cost per lead. Okay. So if I have a thousand dollars, I should be able to get 300 leads for next month.” Like even though I might still be testing the funnel, but I have some more data to base my metrics off of. And then, okay, last month I spent a thousand dollars and I got one sale out of 200 leads. I have half of a percent conversion, which I want to improve. So I’m going to fix my webinar, but I’m going to base it off of this half a percent conversion. So if I choose to spend a thousand dollars again and get 300 leads, then I might, you know, get one sale where it’s like one and a half, but now you have data.
So even you can move into the scaling and optimizing phase, even if you haven’t necessarily proven that your funnel is working perfectly, but you have data that you can actually create realistic goals. And so what this means is now you have a budget based on your sales goals. And so you could say, “okay, I did a 30 days of a testing budget and here is my data and results. Now, if I want to make a thousand dollars, here is what I have to do to make that money.” So do you see how that flipped? Whereas with testing budget, we just choose the budget. We just choose what we’re okay losing, because we don’t really know our metrics and we can assign some metrics to it and guess, and kind of say like, “okay, if I want to make this much, I’ll have to spend this much” and have that guess. Now we have real data. So we could for sure say, “if I want to make X amount, here’s what I have to do. Here’s what I have to spend. Here’s how many leads I have to get. And here’s how many sales based on my data.” Okay?
And so now when you’re in this phase, you’re a lot more sure of your budget, and I’m not saying you’re sure because it’s converting. You might still be optimizing and you might still be in a place where you’re not making your money back and you need to get leads in, but at least the data from those 30 days told you what you need to fix. And you’re like more hyper focused on that. I need to improve my sales conversion. I need to get my ad costs down, whatever it is cause there’s action items attached to everything that you would need to fix. And so your goal is to identify those through a testing budget and then optimize and ultimately scale in your scaling and optimizing budget.
I just talked really fast. So if you listen to me on one and a half speed on podcasts, then sorry, literally my throat is a little bit tired from this because I’m so excited about budgets. Like when I talk about this, I just get so pumped because doesn’t it just break it down in a process for you guys? It’s not about like pulling a secret strategy or having this Ninja tactic or crossing your fingers and hoping it works. It’s like just follow the data, follow the process and it’s going to tell you exactly what you have to do and your marketing will work. If you just follow this. That’s why I get so pumped about this stuff, because it’s just a game changer when you start looking at it this way.
Okay, so two different types of budgets, a testing budget, and a scaling and optimizing budget. I told you guys how to choose those budgets. And the last thing I want to mention, which I did do a podcast on, When Do I Increase My Ad Spend, but I want to mention this one thing. If you are in the testing budget phase, and you’re moving into the scaling and optimizing phase, and you’re not still profitable, let’s say you’re spending $500 a month and you’re still not profitable, but you have data. So you know what your cost per lead is and your sales conversion is, and you’re working on what’s broken. Some people sit there and they go, “okay, well, when can I increase my ad spend? Do I wait until I’m profitable? Or can I increase it to get more volume?”
If you’re spending a low amount of money, like $500, it might make sense for you to increase your ad spend in month two to get more volume in. And so I might be in a scenario where I spent 500 or a thousand dollars and I did that testing budget and I was okay losing that money. And now I have data and I know I’m going to get X amount of leads, And from those leads I should get X amount of sales. Or maybe you’re going to get zero sales because you haven’t proven your funnel and you have to continue to get leads in, which is okay too. But if you want to speed the process up, you have to get more volume in your funnel. And so as long as if you haven’t proven your funnel, it’s not converting yet, as long as you’re still okay kind of losing that money for temporarily while you get volume in, it is okay to increase your ad spend a little bit just to purely get more volume in.
And I think people get frustrated with marketing when they spend a low amount of money. I see this cycle – they spend a low amount of money, they have really low momentum because they’re not getting a lot of leads in. So they’re not really getting sales because they’re barely getting enough leads in to get even one sale a month at an average conversion, and then they think it’s not working so they just turn everything off. And so sometimes your problem is actually just volume. And if you can, and you’re able, and you have the investment to be able to increase your ad spend a little bit, increasing your ad spend to get more volume is a good idea in some cases. So I want to make sure I throw that in there, cause you don’t have to necessarily wait until everything’s profitable. If you started out at a really low, like $500 a month ad spend.
So, all right guys, those are the two different types of budgets. And I also on this training showed our projection calculator cause I was like, I want you guys to understand how to calculate this, but then here’s this really cool calculator that plugs in your ad spend and what you’re going to get out of that cost related sales conversion. And then it’s just like science, it’s like a diagnosis. Okay, where did I not hit those numbers? That is how we look at all of our clients’ marketing. We start with the projection calculator, then we go out and track against those goals. We see the actual data and we make changes, and we just test refine and repeat that process over and over again.
If you want support, either through our course where I teach those type of trainings and you’re doing it yourself, or our done for you support where we are doing it for you… Obviously walking you through that projection calculator and kind of telling you and working with you on that, but that’s our done for you through our agency… You can go to helpmystrategy.com to see if you qualify to work with us in either of those two capacities.
Thanks so much for listening today and hanging with me on budgets and numbers. And this might be one that I’d say go back and relisten to if you’re in this spot, because I’m just telling you so many people get this wrong. So many people don’t spend the time they need to on their budgets, and it amazes me because it’ll bring so much clarity to your marketing if you do so. Thanks so much, guys, I’ll see you on the next episode.