This article is a summary from No Best Practices email newsletter written by Alex Greifeld and can subscribe here
Ever wondered how much you need to spend on meta ads to get your eCommerce business off the ground?
Key Questions to consider when deciding your Meta Ad budget:
What is the minimum daily budget do I need to give the campaign a chance at success?
How much do I need to spend to determine if product-market-channel fit is possible?
Should I pursue outside financing, and if so, how?
(1)
Many brands are stuck spending only $10-$50 a day on ads, but that won’t get you very far. If you want to start seeing real results, you need a solid budget that matches your business goals and Average Order Value (AOV).
Without the right spend, you’re just wasting time and money.
Solution:
To give your ads a fair chance, set your daily budget to at least 2-3 times your AOV.
For example, if your AOV is $150, and ROAS is 2.5x aim for $150-$200 a day. This ensures you get at least one conversion per day.
Once you see consistent results, scale up your budget by 20% every few days until you’re getting 50 conversions per week. This will help Meta optimize your ads and improve your Return on Ad Spend (ROAS).
Scaling too fast can hurt your campaign. If performance starts to drop, dial the budget back by 20% every few days. And remember, if an ad creative spends $500 and doesn’t convert, it’s time to pivot.
(2)
Testing ads can feel endless, but bootstrapped brands don’t have time or money for infinite testing. Instead, you need two clear limits: (1) how much to spend on each ad creative and (2) how much to spend to validate product-market-channel fit (PMCF).
Solution:
For ad creatives, spend up to $500 or 5-6x your Average Order Value (AOV) before deciding if the ad works.
For PMCF, set a testing budget—say $5,000—and adjust your offers and creatives until you see traction. If not, switch channels or products.
Don’t over-invest in inventory before validating PMCF. Start small, and test smart!
If you are really tight on budget to validate PMCF, run test ads on a product that doesn't exist and if you get traction refund orders to customers. Then you can start investing money in an actual product (under a new name of course to avoid customer frustration).
(3)
DEBT IS CHEAPER THAN EQUITY
But most entrepreneurs are shocked by the high interest rates from direct-to-consumer (DTC) lenders. That’s because you’re not seeing the full risk calculation. Consumer investments are risky—macro factors can turn a winning product into a loser overnight.
Solution:
You won’t achieve sustainable growth until you’ve built 8-10 years of customer retention. Instead of scaling quickly, focus on making your first orders margin-profitable. Only consider debt for long lead-time inventory purchases. Before borrowing, examine your costs—can you reduce COGS or increase prices?
Avoid outside financing unless you’re willing to risk it all. If you wouldn’t put it on your personal credit card, don’t borrow for it!