eCommerce Lifestyle
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$50K Dropshipping In 1 Month! What Is The Ad Budget?

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Episode 314

Podcast Description

If you’ve been following Drop Ship Lifestyle on social media for any amount of time you’re probably aware that we share students’ results almost every day.

We do this for a couple of reasons:

  1. To publicly congratulate our members who are doing the work and  getting results
  2. To show everyone out thinking about drop shipping that what we do and what we teach actually works!

We typically get 2 types of comments on these videos…

One is from people asking “what products are they selling?”

I don’t give out our students niches, but I did just share a new video with the Top 10 Niches For Dropshipping in 2022.  

You can watch that here:

https://youtu.be/SK4x3taAn14

The second question is from people asking “how much did it cost them to get those sales?”

That is the question I’ll be answering in today’s video.

Specifically, I will answer the question of how much it costs in advertising to generate $50k in sales.

To do this, I share:

  • What is ROAS?
  • What is blended ROAS?
  • What is the ad budget?
  • What traffic sources the ad budget is split across
  • How much of the budget goes to each advertising source
If you liked today’s show, please subscribe on iTunes to The eCommerce Lifestyle Podcast! The podcast is also available on all major podcast players including, Stitcher and Spotify.
Transcripts

So if you've been following Drop Ship Lifestyle on social media for pretty much any amount of time, you're probably used to us posting screenshots of members' results almost every day. Now we do this for a couple of reasons. The first is just to publicly congratulate and shout out our members on their hard work and their success. The other reason is to show everybody out there that's thinking about building a high ticket e-commerce business that yes, the stuff that we do and the stuff that we teach actually works.

And when we post screenshots like Katherine's right here, who is celebrating almost $50,000 in sales within her first 30 days of joining Drop Ship Lifestyle, we get a lot of questions in the comments. The most common question is, "What are they selling?" Now, I don't give away our students' specific niches, but what I will say is I recently just published a brand new video that shares the top 10 niches for dropshipping in 2022. So if it's product ideas you're looking for, I will link to that video in this description. You can check that out.

But what I want to cover is the second question that we get on these posts, and that is, "How much money did they have to spend to get that type of results?" So what I want to do is break that down and make it clear for everybody, whether you're already in business or thinking about getting into it, what your ad budget will look like if you yourself want to generate $50,000 in sales in 30 days.

So when it comes to how much to spend all on ads, for me personally, and for our team, we kind of work backwards here. So the first thing that we do is look at what our revenue goal is for the month. So specifically, what do we want to do in sales? And then we work backwards by using ROAS.

Now ROAS stands for return on ads spend, basically meaning what do you get back in revenue for the advertising dollars that you put in? Now, if you had a 1X return on ad spend, that would mean if you spent $1 on ads, that would generate $1 in revenue. If you spent $1 on ads and you generated $10 in revenue, that would mean you have a 10X return on ad spend, and so on and so on. And yes, this can be negative. If you spend $1 on ads and that generates 50 cents in revenue, that would be a .5X return on ad spend, that's somewhere you never want to be.

Now, when it comes to how to track return on ad spend, there are many ways to do it depending on how specific you want to get. And when it comes to scaling ad budgets and making sure your money is being best spent, it is important to track it at the ad level, meaning you know specifically on Google, for example, what the return on ad spend is for a specific ad within your entire account. But for the purposes of this video, this lesson, I'm going to share what we look at as a big picture overview month-to-month based on our goals because I think that's going to answer the question that we started with, which is: what do you have to spend to generate 50,000 a month in revenue?

So what we look at is what is known as blended ROAS. Now ROAS, again, is return on ad spend. And what blended means is if we add up all of our ad budgets across all the different platforms, then we look at our total revenue, what does that return on ad spend look like? Because that's really the most important thing, again, on a month-to-month basis. And then if that number's not matching what we want it to be or not beating what we want it to be, then we can really dive deep into everything to make sure, individually, the platforms get us the intended return on ad spend.

So what I want to do before I share how much money it takes to generate $50,000 in sales is show you where the money goes because it's not just one place. So what we'll do is break this up by different places that we get traffic from that, of course, then leads the sales that, in this case, would equate to the $50,000.

So the first one you're probably very familiar with by now if you are a member of Drop Ship Lifestyle, and that would be into Google Shopping ads. So part of our budget goes there every month, and of course, that leads to our Shopify store. Now we also do Bing Shopping ads, which again, you'll be familiar with if you're a member of my coaching program, The Drop Ship Blueprint.

Now, in addition to that, we also get organic traffic, the free traffic that comes primarily from Google, but also from Bing, sometimes social as well. Again, there's no ad budget there, but it's worth mentioning that when you're looking at blended return on ad spend, that includes the traffic you get for free. Again, it's great, it's extra money for you, but for the calculation we use here, we include that in our revenue.

Now, where else do we get traffic from? Well, on the front end, there are some more places. The one that I'll mention that most people can and should be doing are running banner ads on related sites. So I'll put banner ads here. And of course, that leads to our store. And primarily those will be front-end sources of traffic, where new traffic is coming from.

But what happens, people go to your store, they leave without buying, you want to get them back. The ways that we do that, again, primarily here are what we refer to as Facebook DPAs, that stands for dynamic product ads. These are the remarketing ads you see that typically look like a carousel. If you go to a website, don't buy, go to Facebook, you'll see them, they send you back. And also we rely on Google remarketing to, again, bring people back. So Google remarketing.

Now, in addition to that, one thing that we do in a big way is, when people are on our stores and they try to leave without buying, is we try to capture their email address so we can follow up with them and, ideally, close the sale. So I'm going to put email as well because that is another place where some of this 50,000 in revenue would come from.

Now again, some of these cost money, some of them don't. And what I'll do is kind of break down the traffic split, at least the way that we do it, but first let's answer the question we started with, which again is: what is the ad budget to get $50,000 in sales?

Now, before we get into the numbers that we use, just know it could be $0. There are plenty of companies that spend no money on ads whatsoever, they rely on virality, they rely on referral marketing, which there's no upfront cost for, they rely totally on organic traffic and, yes, you could do that and generate well more than $50,000 in sales with zero budget.

But again, as you might know if you follow this channel or my coaching program, that is I am a huge fan of paid ads. And especially on a new store like Katherine's, we want to see results coming in almost right away, we put money to work so we can generate the return on ad spend.

Now, the minimum that we look for, the minimum that is acceptable is 10X. So I'm just going to put here 10X ROAS. So the most we would spend to generate 50,000 in revenue would be, again, at a 10X revenue, $5,000. So 5k ad budget generate $50,000 in sales in that same month. Okay? So that's the answer to the question. But again, I think more importantly is where does that money go when we break it up amongst the most popular and most common ad platforms that we use.

So with our hypothetical $5,000 a month budget here for ads, what I would be doing is taking about 3.7k of that and putting it into Google Shopping ads. Now you can tell that is by far the bulk of our budget, but it's because I know Google Shopping for cold traffic, people that don't know us yet, this has the highest conversion rate and the best return on ad spend so we want the bulk of the money going there. And again, out of the $5,000 budget, for me, about 3.7k of it would be in Google Shopping.

So next we have Bing Shopping and Bing Shopping definitely works but it's nowhere near as scalable, at least not from anything I've been able to do with it, as Google Shopping, but that doesn't mean to sleep on it or to not use it. So out of the $5,000 budget to generate a minimum of $50,000 in sales, I would take about 500 of it and put that into my Bing Shopping campaign for that month.

Now, next traffic source, organic. Again, that's free, it doesn't cost us any money, but it's there and it's going to bring us sales and it's going to be profitable. But our cost there is $0.

Now, next we have banner ads. This is something, of course, I also teach in the Blueprint. These are things we typically start small with. Of course, like everything else, we track to see if they're profitable, but for a starting budget, we would be around 300 of our total $5,000 budget.

So if you look here for the front-end traffic, you'll see we have 3,700, 300, 0, 500, these add up to 4,500 and that's or reason. I've talked about this before so if you've been paying attention and following you know this, but we put about 90% of our monthly ad budget into front-end traffic and four and a half thousand is 90% of 5,000. So that is the front-end.

What goes now into remarketing? Well, we have $500 left to play with, that's 10% of our total budget, and what I do and what I would recommend you do is split that pretty evenly to start. You'll get data, see if you want to adjust budgets. But in this case, it would be about 250 a month into Facebook Dynamic Product ads for remarketing and about 250 into Google remarketing. And then email, we're not paying for email lists or anything like that so the cost there is $0 as well.

And again, with this setup, with these traffic sources, with this split end budget, I would expect the return on ad spend to way outpace the $50,000 in sales, but this is the minimum that would be acceptable. If it's under that, there's a problem.

And just to wrap this up and to clarify why I think it would be well above a 10X return on ad spend, that's because when you have smaller ad budgets, and to some people, you might be thinking, "$5,000 is a lot of money," and it is, that's true, but $5,000 in terms of advertising really isn't. When you spend smaller ad budgets, you can see much better returns on ad spends. This might be 20X, 30X, 40X, a 50X return on ad spend, but what happens as you scale up and up and up, you spend more and more and more as your business grows and you want to reach more people, then the results start to diminish and that's where you can get yourself into a 12X return on ad spend, or at a minimum, a 10X return on ad spend.

But to answer the question, again, that we started with, what does it cost to generate that $50,000 in monthly sales? It should be no more than $5,000 if your money is being spent to the right way. Of course, if you're selling the right products, and of course, if your store is optimized to convert. So if you want help with any of those things, my advice is to enroll in my program, The Drop Ship Blueprint. If you just want to get started for free and go more in-depth, I have a free training available that is three hours long where I cover pretty much everything you need to get started. You can learn more about that at DropShipWebinar.com, link in the description.

So as always, guys, I hope you got value. If you did, leave a like, click Subscribe, share this with somebody that needs to see it, and I will be back on Thursday for the next episode. I'll see you then.

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