Ad Spend & Budgeting

How Facebook charges you

Facebook advertising works on an auction model. Every time Facebook has an opportunity to show an ad to a user, it runs an instant auction among all the advertisers targeting that person. The winner gets the impression.

You don't directly bid in this auction — instead, you set a budget and a campaign objective, and Facebook's algorithm manages the bidding to get you the most results for your spend.

You're charged in one of two ways depending on your objective:

• Cost per 1,000 impressions (CPM): You pay for every 1,000 times your ad is shown, regardless of whether anyone clicks. Most awareness and reach campaigns work this way.
• Cost per click (CPC): You only pay when someone clicks your ad. Used for campaigns driving traffic to a website or offer.

Your card is charged daily (or when you hit your payment threshold), not in one lump sum at the end of the campaign.

Daily budget vs. lifetime budget

When you create a campaign, you choose how to set your budget:

• Daily budget: The maximum you'll spend per day. Facebook will spread your ad throughout the day and stop when the limit is reached. If you set $10/day, you'll spend approximately $300/month.
• Lifetime budget: A total amount for the entire campaign duration. Facebook spreads spend across the full run based on when performance is likely to be highest.

For most local businesses starting out, daily budget is simpler and easier to control. You can pause or adjust at any time, so you don't have to commit to a specific amount upfront.

What most local businesses actually spend

These are monthly equivalents: $5/day = ~$150/month. $15/day = ~$450/month. $50/day = ~$1,500/month.

For context: a quarter-page newspaper ad in a local publication might cost $300–$600 for a single run. A direct mail campaign to 5,000 households costs $2,000–$4,000. Facebook gives you more reach, more targeting precision, and more measurability for the same budget.

How to think about ROI

Before you start, answer two questions:

1. What is one new customer worth to you?

This is your customer lifetime value (LTV). It's not just the first visit — it's the total revenue from that customer over time.

A simple way to calculate it: average ticket × average visits per year × average years as a customer.

For a law office where a new client brings in a $2,000 matter and has a reasonable chance of returning for future work, LTV might be $4,000–$8,000. Even a modest Facebook campaign that costs $300/month and brings in two new clients is an excellent return on investment.

For a coffee shop where the average customer spends $8 per visit and comes in twice a week, a loyal regular is worth roughly $800/year. Spending $50 to acquire one is a great investment.

2. What conversion rate are you expecting?

Work backwards from your budget. If you spend $200/month reaching 5,000 people and expect a 1% click rate (50 clicks) and a 20% in-store conversion (10 visits), you're paying $20/visit. Is that worth it for your business?

If your answer is "yes, because those visitors are likely to become regulars," then spend. If your answer is "no, my ticket size doesn't support that acquisition cost," then you need either a higher average ticket, a better conversion rate, or a lower cost per click.

The recommended starting point

If you've never run Facebook ads before:

1. 1
   Start with $10/day

   Small enough to limit risk while you learn. Big enough to get meaningful data.

2. 2
   Target one or two specific block groups

   Use TerritoryIQ's heatmap to pick a neighborhood with high opportunity. Don't spread your budget thin across your entire trade area.

3. 3
   Run it for 30 days

   Facebook's algorithm needs time to learn and optimize. Two weeks is a data point. Thirty days is a pattern.

4. 4
   Evaluate and adjust

   Did you see new faces? Any uptick in that neighborhood? Did anyone mention seeing your ad? Use what you learned to decide whether to scale, shift neighborhoods, or adjust your creative.