Solved: How to Increase ROAS with a Small Ad Budget?

Hi there,

Thanks for your enquiry about hiring an agency to run your Facebook ads.

It's a question we see a lot, and honestly, it’s not as simple as just hiring someone to press the buttons better. Breaking even at 1.0-1.5 ROAS when you're self-taught is actually not a terrible starting point; it means something is working, it's just not profitable yet. The real challenge, and where a good partner can make a difference, is figuring out the underlying strategy to make it profitable and scalable. I’m happy to give you some guidance on how to think about this.

So, can an agency really improve your ROAS?

The short answer is yes, a competent agency or freelancer almost certainly can. If you're running ads with limited knowledge, an expert will immediately spot opportunities in campaign structure, targeting, creative, and optimisation that you've missed. I remember one eCommerce client we worked with, a women's apparel brand, that couldn't get past a 2x ROAS. We helped them achieve a 691% return. So it's definitely possible.

But that's the wrong question to be asking. It's like asking a doctor "can you lower my temperature?" when you have a serious infection. Yes, they can, but the real job is to cure the underlying disease. Your 1.0-1.5 ROAS isn't the disease; it's a symptom.

The real disease for most small businesses is one of three things:

1. They don't know their numbers (specifically, their Lifetime Value).
2. They don't truly understand their customer (their real pains and problems).
3. Their offer isn't compelling enough to overcome the cost of advertising.

A good agency doesn't just promise a better ROAS. They force you to confront these deeper business issues first. A bad agency will take your money, tweak a few audiences, change some ad copy, and maybe get you to a 1.8 ROAS while telling you they're a genius. You'll still be breaking even, just at a slightly higher ad spend, and you'll be paying their fee on top.

The goal isn't just to get a better ROAS. The goal is to build a profitable, scalable customer acquisition machine. And that starts with understanding the maths of your business.

We'll need to look at your business maths first...

This is the most important part of this whole letter. If you ignore everything else, please pay attention to this. The question isn't "How low can my ad costs go?" but "How high a cost can I afford to acquire a truly great customer?" The answer is found by calculating your Customer Lifetime Value (LTV).

LTV tells you the total profit you can expect to make from a single customer over the entire duration of their relationship with you. Once you know this number, everything changes. You stop panicking about daily ROAS and start making strategic investments in growth.

Here’s how you calculate it, simplified for a small business:

• Average Order Value (AOV): What's the average amount a customer spends in a single transaction?
• Purchase Frequency (PF): How many times does the average customer buy from you per year?
• Customer Lifetime (CL): How many years does the average customer stick with you?
• Gross Margin % (GM): What's your profit margin on each sale? (e.g., if a product sells for £100 and costs you £30 to make/source, your gross margin is 70% or 0.7).

The basic LTV formula is: (AOV x PF x CL) x GM = LTV

Let's play with some numbers. Use the calculator below to get a feel for your own business. It's a simplified model, but it'll give you a powerful starting point for your thinking.

Once you know your LTV, you can determine your target Customer Acquisition Cost (CAC). A healthy benchmark for a sustainable business is a 3:1 LTV to CAC ratio. This means for every £3 of lifetime profit a customer brings you, you can afford to spend £1 to acquire them.

So, if your LTV is £90, you can afford to spend up to £30 to acquire a new customer. Suddenly, a 1.5 ROAS on a £20 product doesn't look like breaking even anymore, does it? It looks like you're making a profit over the long term, assuming they buy again. This single calculation changes your entire perspective. You're no longer just running ads; you're buying customers at a predictable price.

I'd say your Ideal Customer is a Nightmare, Not a Demographic...

Now that you know how much a customer is worth, the next question is: who are they? Most people answer this with sterile demographics. "Women aged 25-45, interested in fashion, living in London." This tells you absolutely nothing useful and leads to generic ads that get ignored.

You need to stop defining your customer by who they are and start defining them by the problem they have. I call this their 'nightmare'. Your Ideal Customer Profile (ICP) isn't a person; it's a specific, urgent, expensive, career-threatening, or emotionally-draining problem state.

Let's imagine you sell high-quality, sustainable cleaning products. Your old demographic ICP might be "homeowners, aged 30-55, eco-conscious". Borning.

Your new 'nightmare' ICP is "The New Parent". What's their nightmare? They're terrified that the harsh chemical cleaners they've always used are going to harm their crawling baby. They're up at 3 AM, Googling "are bleach fumes safe for infants?". They feel guilty, anxious, and overwhelmed. Their problem is urgent (the baby is already crawling) and deeply emotional.

Once you understand that nightmare, your whole strategy shifts:

• Messaging: You don't sell "eco-friendly surface spray". You sell "Peace of mind for parents. Clean without compromise."
• Targeting: On Facebook, you don't just target "eco-friendly". You target interests like "new parents", "parenting blogs", "baby safety", and layer that with purchase behaviours for baby products. You target people who've recently engaged with content about newborns.
• Creative: Your ads aren't just pictures of a clean kitchen. They're a short video of a baby safely playing on a floor that's just been cleaned with your product.

This process of defining the nightmare first and then building your strategy from it is what separates amateurs from professionals. Any agency you consider hiring should be obsessed with this, not just with audience sizes and click-through rates. Their first questions shouldn't be about your budget, but about your customer's biggest frustrations.

You probably should rethink your offer...

Once you've nailed the nightmare and the audience, you need to look at what you're actually offering them. For a small business, your product itself is the offer, but how you frame it in your advertising makes all the difference. "Buy my stuff" is not an offer. "10% off" is a weak offer that just attracts bargain hunters.

A great offer feels like an irresistible solution to the nightmare you just identified. It reduces risk, adds value, and makes the decision to buy feel easy and smart. For our cleaning products example, a strong offer isn't a discount. It's a "New Parent Starter Kit" that bundles your most popular products, includes a free guide to 'detoxing your nursery', and has a money-back guarantee. It's not just a collection of products; it's a complete solution to their anxiety.

This is where frameworks like "Before-After-Bridge" become so powerful for your ad messaging:

An agency that understands this will help you develop and test these kinds of powerful offers and messaging angles, which will do far more for your ROAS than simply optimising your campaign budget.

Where do you find a good agency? (And how to spot a bad one)

Now we get to your specific questions. Forget generic freelance websites for this kind of work. While you might find someone cheap, you're unlikely to find the strategic partner you need. You'll get what you pay for: a button-pusher, not a business-builder.

Instead, look for agencies or freelancers with proven expertise. Here’s what to look for:

• Relevant Case Studies: They should be able to show you results from businesses similar to yours (in niche or in size). Don't just look at the final ROAS; look at the story. Did they identify a core problem and solve it? For instance, one of our clients, a subscription box company, saw a 1000% ROAS after we refined their strategy. For another, an eCommerce store just launching, we generated 1500 leads at only $0.29 each. You want to see that level of detail and proven success.
• A Strategic Approach: On your initial call, if they jump straight into talking about ad formats and campaign types without first asking you deep questions about your LTV, your customer's 'nightmare', and your offer, they are not the right fit. They should be trying to understand your business, not just sell you their service.
• Transparency: They should be upfront about their process, how they report results, and their fees. If it feels murky, walk away.
• Honesty: The biggest red flag is a guarantee. No one can guarantee results in paid advertising. It's an unpredictable enviroment. An expert will talk about a process of testing and optimisation, not promise you a 5x ROAS in 30 days.

The best agencies get clients through referrals and their reputation. You can find them by looking at who successfull brands in your space are working with, asking in business communities, or looking for experts who share valuable content (like this letter).

You'll need to decide what to invest...

This brings us to the final, and often most difficult, question: cost. Is it feasible for a very small business?

Honestly, it depends. Good agencies are not cheap, because you are paying for years of expertise, strategic thinking, and the potential to unlock significant growth. For a good, UK-based freelancer or small agency, you should expect to pay a monthly management fee (retainer) of anywhere from £1,000 to £3,000+, on top of your ad spend.

This might sound like a lot, but you have to frame it as an investment, not a cost. This is where your LTV calculation becomes your most powerful tool. If you know your LTV is £150 and your target CAC is £50, the agency's job is to acquire customers profitably within that £50 limit.

Let's say you pay an agency £1,500/month and have an ad budget of £2,000/month (total investment: £3,500). If they can acquire 80 new customers for you at a CAC of £43.75 each, you've spent your budget and acquired customers profitably. Those 80 customers are worth £12,000 in lifetime value (80 x £150). You've turned a £3,500 investment into £12,000 of future profit. The math works.

A cheap £500/month agency might get you a slightly better ROAS than you have now, but they're unlikely to have the strategic skill to scale profitably. You'll end up churning through them and wasting both time and money. It's a false economy.

This is the main advice I have for you:

Before you even speak to an agency, you need to do your homework. I've detailed my main recommendations for you below. Getting clarity on these points will not only help you run better ads yourself, but it will also mean you can have a much more productive conversation with any potential partner.

Hiring an agency can be a transformative step for a small business, but only if you hire the right one for the right reasons. It's not about outsourcing a task you don't like; it's about bringing in strategic expertise to help you solve the fundamental challenges of customer acquisition. The work I've outlined above is exactly what we do with clients before we even think about launching a campaign.

It takes time and effort, but it shortcuts years of expensive trial and error. If you'd like a professional pair of eyes to help you work through these steps for your specific business, we offer a free, no-obligation initial strategy consultation. We can review your current setup and give you some actionable advice you can implement right away, whether you decide to work with us or not.

Hope this helps!

Regards,

Team @ Lukas Holschuh