Solved: Determining Minimum Daily Budget for Facebook Ads

Hi there,

Thanks for your enquiry and reaching out! It sounds like you're grappling with a common problem, especially when you're starting out with a smaller budget, and to be honest, there's a lot of dodgy advice out there.

The short answer is that the whole '2/3x your CPA' rule is, frankly, complete cobblers. It’s one of those bits of 'guru' advice that sounds clever but falls apart in the real world, especially in your situation. Let's get into why that is and what you should be doing instead.

We'll need to look at why that budget rule is a trap...

First off, let's just be brutally honest about the data you have. You spent €315 and got one sale. That doesn't mean your CPA is €315. It also doesn't mean your CPA is €45 because that was the spend on the day the sale happened. With only one conversion, you don't have a 'Cost Per Acquisition' at all; you just have a number. It's not statistically significant. It's a single data point, and trying to build a strategy around a single data point is like trying to navigate a ship with a broken compass. It's pure guesswork.

The Meta algorithm needs data to learn. Lots of it. To get out of what they call the 'learning phase' and start optimising properly, it ideally wants to see about 50 conversions (in your case, purchases) per ad set, per week. You're getting one. This means your campaign is stuck in 'Learning Limited' mode forever. In this state, performance is all over the place, and your costs will be unpredictable. Following a rigid budgeting rule based on this unpredictable data is a surefire way to burn through your money with very little to show for it.

The rule forces you to make one of two bad decisions:

1. Based on the daily CPA (€45): You'd set a budget of €90-€135. This might seem sensible, but it's based on a fluke. What happens next week when you spend €400 and get zero sales? Does your CPA become infinite? The logic doesn't hold.

2. Based on the weekly CPA (€315): You'd set a budget of €630-€945. For someone on a low budget, this is a massive jump based on a single sale. It's a huge risk and doesn't guarantee you'll get two sales. You could easily spend that and get one sale again, or none, and then you've just spent a load of cash for nothing.

So, we need to throw that rule in the bin and start thinking like a proper advertiser. That starts with understanding the only number that really matters.

I'd say you need to calculate your Customer Lifetime Value (LTV)...

The most important question isn't "How low can my CPA go?" but rather "How much can I actually afford to spend to acquire a customer and still make a healthy profit?" The answer to this lies in your Customer Lifetime Value, or LTV. This is the total profit you can expect to make from a single customer over the entire time they buy from you.

Forget the daily CPA fluctuations. Your LTV is your strategic North Star. Once you know it, you can work backwards to figure out your maximum allowable Customer Acquisition Cost (CAC).

The calculation is pretty straightforward. You need three bits of information:

• -> Average Revenue Per Account (ARPA): For an eCommerce store, this would be your average order value (AOV). If customers buy more than once, you'd want to calculate the average amount a customer spends over, say, a year.
• -> Gross Margin %: This is crucial. It's the percentage of revenue left after you've paid for the goods sold. Don't use your revenue figure; you must use your profit margin.
• -> Monthly Churn Rate: What percentage of customers do you lose each month? For an eCommerce business that doesn't have a subscription, this is a bit trickier. A simple way is to look at repeat purchase rate. If, for example, 20% of your customers buy again within 3 months, your retention is good. If almost no one ever buys again, your churn is effectively close to 100% after one purchase.

Let's run through a hypothetical example for a small eCommerce store. Let's say you sell unique art prints:

• -> Your Average Order Value (ARPA/AOV) is €80.
• -> Your Gross Margin is 60% (after printing, materials, packaging, etc.).
• -> You find that about 5% of customers place another order within 6 months, so you have a very high churn. Let's model it based on a customer's lifetime being just a few purchases. A simpler way for non-subscription businesses is to estimate the total number of purchases a customer will make. Let's say the average customer buys 1.2 times. So, total lifetime revenue is €80 * 1.2 = €96. Your total lifetime gross margin is €96 * 60% = €57.60. This is your LTV.

A more standard LTV calculation for a business with recurring revenue looks like this:

In this second (subscription-style) example, each customer is worth €700 in gross margin profit. A healthy business often aims for a 3:1 LTV to CAC ratio. This means you could afford to spend up to €700 / 3 = ~€233 to acquire a single customer.

Now you have a real number to work with. Your goal isn't to get a €45 CPA. Your goal is to acquire customers for less than your maximum allowable CAC. Suddenly that €315 CPA from last week looks terrifying, but the €45 one looks amazing. The point is, you now have a ceiling. You know the absolute maximum you can spend. This is a much more powerful and sustainable way to manage your budget.

You probably should focus on getting more data faster...

Okay, so you have your maximum allowable CAC. But you're still only getting one sale a week, which means the algorithm is flying blind. With a low budget, you can't just crank up the spend to get more data. So we need to be cleverer.

Instead of optimising for the final, most difficult conversion (a purchase), you can give the algorithm an easier target to aim for. This gets you more conversion events, which helps you exit the learning phase faster and gives the algorithm the data it needs to find better pockets of your audience.

Think about your customer's journey:

Visits Product Page -> Adds to Cart -> Initiates Checkout -> Purchases

You're getting very few 'Purchases'. But you're probably getting more 'Adds to Cart' and even more 'View Content' or product page views. You could temporarily switch your campaign objective from 'Purchases' to 'Adds to Cart'.

Yes, the quality of the traffic might be slightly lower. People who add to cart aren't as valuable as people who buy. But you might go from 1 conversion a week to 10 or 15. This gives the algorithm enough data to start properly optimising. Your cost per add-to-cart will be much lower, and you'll build up a valuable audience of people who have shown strong interest, who you can then retarget with a separate campaign focused on purchases.

I've seen this work for lots of eCommerce clients. One women's apparel store we worked with was struggling with a high cost per purchase. We switched their main prospecting campaign to optimise for 'Adds to Cart' to feed their funnel and then hit those people hard with retargeting ads showing testimonials and special offers. Their overall return on ad spend shot up by 691% because we were generating cheaper traffic at the top of the funnel and converting it more efficiently at the bottom.

This brings me to the next point: your audience.

You'll need to get your targeting and funnel right...

When you're on a tight budget, you can't afford to waste a single impression on the wrong person. A lot of advertisers start with really broad audiences, hoping Facebook will figure it out. You don't have the budget for that. You need to be laser-focused.

I usually structure accounts by funnel stage. This is how I'd prioritise audiences for a new eCommerce store:

1. Top of Funnel (ToFu) - Finding New People

This is your prospecting campaign. The goal is to find people who have never heard of you. Don't go broad. Get specific.

• -> Detailed Targeting: Don't just target 'fashion' if you sell clothes. Target people who are interested in specific, niche designers that match your style, or who follow smaller, independent fashion magazines. Think about what your ideal customer *really* likes. What podcasts do they listen to? What tools do they use? What blogs do they read? If you sell high-end camera gear, don't target 'Photography'. Target people interested in 'Phase One' cameras or who follow specific professional photographers. The more niche, the better. Your audience might be smaller, but it'll be far more relevant.
• -> Lookalike Audiences (Once you have data): Once you get at least 100 purchases, you can create a Lookalike audience. This is where Meta finds people who are similar to your existing customers. A Lookalike of your purchasers is the most valuable audience you can build. Before you have 100 purchases, you can make a Lookalike from your 'Add to Cart' list or even your email subscriber list. Always prioritise Lookalikes from audiences that are further down the funnel.

2. Middle of Funnel (MoFu) - Warming Them Up

These are people who have shown some interest but haven't bought. They've visited your website or engaged with your ads. You need to remind them you exist.

• -> Website Visitors (last 30-90 days): Anyone who's been to your site.
• -> Social Engagers (last 90 days): People who liked, commented on, or saved your Facebook or Instagram posts.

3. Bottom of Funnel (BoFu) - Closing the Sale

These are your hottest leads. They are on the verge of buying. You need to give them a final push.

• -> Added to Cart (last 7-14 days): These are your most valuable prospects. Hit them with ads reminding them what they left behind. Maybe offer a small discount or free shipping to get them over the line.
• -> Initiated Checkout (last 7-14 days): Same as above. They were so close.

With a small budget, you could group all your MoFu and BoFu audiences into a single 'Retargeting' ad set. The key is to separate your prospecting (ToFu) from your retargeting (MoFu/BoFu). They need different messages and different ads.

And a realistic view on what this actually costs...

It's also important to be realistic about performance. Advertising costs money, and eCommerce is competitive. Your €45 CPA might feel high or low, but without context, it's meaningless. Let's look at some typical ranges for developed countries in Europe.

Here’s a rough idea of what you might expect for an eCommerce store, based on our experience with many campaigns.

As you can see, a CPA can realisticaly range from €10 to €75 or even more. Your €45 CPA from that one day falls right in the middle of this range. It's not amazing, but it's not a disaster either, *if* your product's profit margin can support it. If you're selling a €60 product with a 50% margin (€30 profit), then a €45 CPA means you're losing €15 on every sale. If you're selling a €300 product with a 50% margin (€150 profit), a €45 CPA is fantastic and you should be trying to get more of them.

This all comes back to knowing your LTV and maximum allowable CAC. Without that, you're just guessing.

Finally, your ads and website itself play a massive role. If your creatives are weak or your website is untrustworthy, you'll struggle. Look at your store with a critical eye. Are the product photos professional? Is the copy persuasive? Do you have customer reviews? Is it easy to check out? Improving your website's conversion rate by even half a percent can have a huge impact on your CPA.

This is the main advice I have for you:

I know this is a lot to take in. Running paid ads effectively isn't about finding one secret rule; it's about building a solid, strategic framework. Here’s a summary of my main recommendations for you to implement.

Dealing with low-budget, low-data accounts is one of the hardest things in paid advertising. It requires patience, a clear strategy, and a disciplined approach to testing. It's easy to get discouraged and make reactive decisions based on flimsy data, which is what most people do.

This is often where bringing in an expert can make a massive difference. We've managed hundreds of campaigns and have the experience to interpret noisy data, build a robust testing structure, and identify the key levers to pull to make a small budget work as hard as possible. We’ve turned around countless accounts that were struggling just like yours, helping clients achieve significant improvements in their return on ad spend, like the women's apparel store I talked about earlier, which achieved a 691% return on ad spend.

If you'd like to have a chat and see if we can help, we offer a free, no-obligation initial consultation where we can take a proper look at your ad account and website and give you some more specific advice. It might be helpful to have a second pair of expert eyes on it.

Hope this helps!

Regards,

Team @ Lukas Holschuh