How much should you spend on Facebook ads for your restaurant?
"Unlike organic, paid social [i.e. ads] directly puts your content in front of users who will most likely show interest." Thank you, Social Media Examiner.
So how much do you need to spend on your Facebook Ads for your Restaurant?
There are several factors to consider:
What industry or niche is your business in?
Local businesses can have a huge range of ad spend. Fortunately, as restaurants, you can get away with as low as $10/day to reach your target audience because you're targeting a small radius (1-5 miles) around your business. We start our restaurant clients at just $10/day, and then we scale up from there once we see results pouring in. Other businesses need to spend more because they are usually targeting a larger geographic area, so there is more competition. Typically $25-50/day is reasonable.
(To learn more about targeting your Facebook ads, check out my blog post here)
How much can you spend to attain a lead?
In my experience and research, CPL (or cost per lead*) can range between 25 cents to $200 each, depending on industry and the experience of your Ads Agency. And converting those leads into customers will be between 1% to 40%. Once you learn your CPL and CPC (cost per conversion), you can calculate your ad spend based on your goals.
*We consider someone a lead once we have at least one piece of contact information for them away from the social platform. So that means at least an email address, a phone number or a Messenger subscription AND their consent to market to them directly.
For example, if you want 25 leads per day and they are costing you $0.40 each, then you should spend $10/day. If you convert 10% of those leads, that gives you your cost per conversion (CPC) of $4.
# Leads Desired x CPL x Conversion Rate = CPC
Ex: 25 leads x $0.40 x 10% = $4 per conversion
But if you want 25 leads per day and your CPL is $4 each, you'll need to spend $100/day. If you convert 10%, your CPC is $40.
Ex: 25 leads x $4 x 10% = $40 per conversion
But how many leads do you need to hit your revenue goals?
You need to figure out how much you are willing to spend to attain a lifetime customer.
I say work backward to figure this one out. Find out your return rate and average order value. Then calculate Lifetime Value. Then you'll know your Lead and Conversion goals.
Average Order Value (AOV) & Return Rate ... how much does an average customer spend at your restaurant? And what is your profit on that? How many times do they return to spend that amount? How many years do you keep them as a customer?
Then, calculate Lifetime Value (or LTV). This is a very important metric to understand. When you know that one restaurant customer spends $150 over the course of a year, it puts it into perspective when you decide to spend $10-15 to acquire them for that first visit.
Here's an example for a restaurant client of mine:
AOV * Return Rate * Years = LTV
Ex: $25 order * 6 visits * 5 years = $750 Lifetime Revenue
- 40% variable expenses (food costs, supplies & labor)
~$15 profit per visit ... ~$450 Lifetime Profit
Remember, change any of those variables and you get a different outcome.
So... how much are you willing to spend to convert clicks into customers?
If you only had to spend $4 to acquire that customer, you still have $11 to spend on the first visit before you break even, and then every subsequent visit after that is profit.
Whew!! Ok that was A LOT to digest, I know. But you're an entrepreneur. You need to know these numbers for the success of your business, so I didn't want to sugar coat it.
Yep, that was a lot of numbers. You need to be on top of your numbers when you're investing in your marketing.
If you want to know how you can target your Facebook Ads better, you can check out this video I did recently:
You can also see more videos like this on my Youtube channel here. Don't forget to subscribe so you can be notified of when I publish new content!
Lastly, if you want to take me up on my offer of a FREE 30min chat to help you work through your ad spend, then please schedule a call with me by clicking here: