How do you know if it’s time to run Facebook ads for your small business?
Should every entrepreneur, at any stage of business, start running ads to increase their sales?
My answer might surprise you.
As a Facebook ads coach and the owner of a successful Facebook ads agency, you might think I’d tell you “everyone and their mother should be using Facebook ads”.
And while Facebook ads are awesome, here’s the reality.
Not every small business is ready for Facebook ads.
There is a criterion for whether or not Facebook ads for your small business will be effective.
Sidenote: Many business owners think this criterion has to do with whether they’re a B2C (Business to Consumer) or B2B (Business to Business) business.
But in reality, that has nothing to do with it. Both B2C and B2B companies can be incredibly successful with Facebook ads. You just need to learn the B2B Facebook ads strategies.
In fact, at my digital advertising agency, ScaleDriven, 95% of our clients are B2B and we’ve been crushing it.
So B2B or B2C, let’s get into the two indicators your small business is ready to crush it with Facebook ads!
Facebook Ads For Small Business – Are You Really Ready For Paid Advertising?
There are two main criteria to know whether Facebook ads truly make sense for your small business.
I was reminded of these criteria the other day when I was on a call with a potential client.
She reached out and was super excited to run ads for her business.
Now, you might think the main goal of our sales calls is to sell Facebook ads services to entrepreneurs.
But that’s not quite right.
On the call, my sales team and I actually try to diagnose whether your business will be able to achieve an ROI through our Facebook ads services.
We do this by asking as many questions as possible.
Dan Kennedy talks about this concept of diagnosing the problem before providing a prescription.
A lot of marketers will tout their solution BEFORE fully understanding their customer’s problems.
Not us. We refuse to work this way.
A potential customer asked me the other day, “How much will I pay for a lead?”
I told him I couldn’t give him an answer.
Because he was asking me to prescribe something without first running a diagnosis.
Getting a diagnosis requires data, and lots of it!
When you go to the doctor, they have to ask you questions about your symptoms and do a bunch of tests before giving you your diagnosis.
And it’s the same thing with marketers.
If a marketing agency tries to sell you their services without FIRST asking questions to prescribe a diagnosis…there’s something shady going on there.
Going back to our potential agency client, we were asking her all of the questions to see if Facebook ads for her small business would be a good idea.
She answered all of our questions, but at the end of the call, I wasn’t sending her a contract to get started.
Instead, I told her we couldn’t help her.
Because the reality is, not everyone should be advertising on Facebook.
This particular client didn’t fit the two most important criteria for Facebook ad success.
Indicator #1: You’ve Hit Business Maturity
Facebook ads only make sense for a small business once it’s hit a certain maturity level.
Is your business mature enough to advertise on Facebook?
Or any other platform for that matter?
In this particular scenario, I’m talking about Facebook ads for small businesses, but this also applies to paid advertising on Google, YouTube, TikTok, or wherever else you want to be advertising.
So how do you measure business maturity?
It all comes down to your offer.
Do you have people giving you money, right now, for what you’re offering?
- Not people who have said they’re interested.
- Not people who’ve said they might want to buy.
- People who have handed cold, hard, cash for your product or service.
If the answer is yes, you’ve ticked the first box to be able to advertise.
Because there are a lot of newbies out there who want to pour a ton of money into Facebook ads.
But if you don’t have a proven offer that people are paying for…it’s going to be money down the drain.
Indicator #2: Advertising Aligns With Your Margins
The next question you have to ask to see if your small business should start Facebook ads is this:
Is the math going to pan out when I start advertising?
The reality is that it’s become a lot more expensive to advertise on Facebook in recent years.
Collectively, we’re all experiencing an increase in the cost to acquire a customer on Facebook.
Before COVID-19, things were a little different. Say you had an e-commerce store in 2019, and you were doing pretty well with Facebook ads.
It wasn’t because the platform was easier to manage. There’s always been bugs or challenges with the platform.
The reason you probably saw more success is simply: because Facebook ads were cheaper.
In 2017 or 2018, it wasn’t uncommon for e-commerce stores to achieve a 15%, 20%, or even 25% profit margin.
They were able to crush it!
But when the pandemic hit, it messed with the supply chains, resulting in an increased cost to advertise.
So if you had a 15% profit margin and now it’s 15% more expensive to reach your audience, then you can see just how much you’re eating into your profit margin.
In the case above, the math just wouldn’t work.
How To Increase Your Profit Margins For Facebook Ads
If you see yourself in the scenario above, there are a few things you could do.
1.Rework Offers Or Sell On The Backend
In order for the math to work, you’d have to rework your offers to be more profitable or sell more on the backend.
However, if you’re an e-commerce brand, you most likely only sell products on the front end.
For example, at ScaleDriven, we have both front end and back end products. We sell our $97 offer on the front end, and we sell our high-ticket agency services on the back end.
This means that only once someone has bought our low-ticket offer and gone through our funnel do we offer them our higher-priced services.
2.Leverage Existing Customers
If you’re an e-commerce brand (or any other brand for that matter!), one of the smartest ways to increase your profit margins is to leverage your existing customers.
You want to sell more products to the people that have already bought from you.
Because in the words of the legendary Dan Kennedy, “a buyer is a buyer is a buyer is a buyer”.
You only need to focus on acquiring a buyer once and then you can sell them more stuff to increase your bottom line.
3.Add More Information Products To Your Product Suite
The problem with many businesses that sell low-ticket products, is that when they start running Facebook ads for their small business, it takes them forever just to break even.
Because again, the math isn’t in their favor.
This happens to a lot of SaaS business owners.
They only have one product (their software) and they might be selling it for just $8/month.
If you’re having to pay $20, $30, or even $40 a buyer, you can see just how long it would take to get an ROI on your Facebook ads.
A great example of a SaaS business that overcame this is ClickFunnels.
Not only is their product slightly higher ticket than your average software (starting at $97/month) but they’re also well-known for the information products they sell on the front-end.
Information products have a huge upside because of their extremely high profit margin.
You make the products once, and then there’s no extra work to deliver them. And people are willing to pay good money for education!
My favorite type of information product to run Facebook ads for?
Coaching and consulting products and services.
Even better if they’re high ticket.
Because if you have a $5,000 coaching program, and you spend $2000 to acquire a customer…you’re still getting a pretty good ROAS!
The bottom line is, no matter where you advertise, it’s going to be pricey.
Many people mistakenly assume that organic marketing is ‘cheaper’.
But if you prioritize organic marketing with YouTube, SEO, your Instagram or LinkedIn profile –
You might not directly be paying with money (if you’re not outsourcing), but you WILL be paying with your time.
And in a way, I believe that time is even more expensive.
Because money replenishes, and time doesn’t.
But the reality is that once you jump into the paid advertising game, you need to start thinking about these two criteria.
- Is my small business mature enough to pay for Facebook ads?
- And is the math going to work out in my favor?
So how can you KNOW if the math is going to work out for you?
Well, a good starting point would be a two-to-one ROI on your campaign.
So if you’re spending $1 today, in 30 days, you should be taking $2 or more out.
If your high-ticket coaching program is $5000, and you’re spending $2500 a month and signing 1 client, then you’d be hitting that marker.
If you have a $500 product, and you’re spending $250 a month to make a sale, you’re hitting that marker.
Now if your products are lower ticket, especially under $150, you have to start thinking about how long it would take to recoup your investment.
Start thinking about what else you could sell to make your money back faster. If you use a subscription model, start thinking about how many months it would take you to make an ROI.
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