In today’s episode of the eCommerce Lifestyle Podcast, Anton shares his answer to the question "I have about $5,000 reserved for advertising my store. How should I spend it?"
This is a must-listen for those who are thinking of starting their first dropshipping store, and for those who are already up and running.
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Whether you have $5,000, $50,000, $500,000, you should not be thinking about how to invest that into advertising for your drop shipping store.
What's of everybody, Anton Kraly here from dropshiplifestyle.com. If you're not familiar with myself or my company, we've been helping people build highly profitable, semi-automated online stores since way back in 2013. And I've been doing the same myself since 2007. Now, with Drop Ship Lifestyle, my coaching program, one of the things I do every month is host a coaching call for members. Ask me anything. We go for like three and a half hours. And I just try to answer as many questions as I can, provide the most value. Now, out of this list of questions, one of them just stood out to me. So I answered it right away, but I wanted to record this and basically answer it to the world, because the question is something that's so important, but it's also something that, if you don't know the answer to, could lead you to losing lots and lots of money. And this is especially true if you have a lot of money to lose.
So the question that came in was from somebody saying they have about $5,000 reserved for advertising their store and they wanted to know how they should best spend it. Now, this is the problem. Whether you have $5,000, $50,000, $500,000, you should not be thinking about how to invest that into advertising for your drop shipping store. That is a quick way to burn through cash that is not necessary to burn through. You want to keep your cash, you want to invest what gets you the best return. So my answer to him, my answer to you, is regardless of how much money you have, if it's above a thousand dollars, that specifically you want to invest into advertising a new drop shipping store, forget about all the extra money and take $1,000 of it and plan how to budget that. $1,000, because that is more than enough money to bring in a lot of high quality sales with high average order values, ones that will give you a sizeable net profit. And from there, and only from there, should you start reinvesting your profits into future advertising.
Don't take all this money you have and think, "I have a new store. Let's just start it off with a bang," and put all that money into high ad budget campaigns, because it will blow through it quicker than you can be profitable. And this is true for me too. Even now, after doing this for over a decade, when you start, you start small, so you can get that data and then decide where to spend more. Okay. So if you're listening to this, you're watching this, you have over a thousand dollars to budget, what I want you to do is again, take $1,000 to the side, and that is going to be your starting ad budget. Now, where does that money go? Well, what I do and what I encourage you to do, is take 90% of that and put it towards a specific ad type. Then take 10% of it and put it towards another ad type. So now we have $900 and what we're going to do with that is use it on what I call cold traffic. Front-end traffic. So that's 90% of your thousand. $900.
Now we're going to take the remaining 10%, that $100. And we're going to use that for warm traffic for remarketing. Okay. So now you have two pots of money, $900, $100 for advertising. Where does it go? How fast do you spend it? Well, my advice is break it up over a month. So $900 divided by an average of 30 days in a month means you're going to spend $30 a day of your budget on that cold traffic, that front-end traffic. And specifically, where that $30 a day is going to go is into Google Shopping ads and you're going to have this setup with the two tiered campaign approach, where you have your alpha campaign and you have your beta campaign. Now, from day one. Again, if you have that $1,000 first month budget, have it set up to spend $30 a day. You could do this as a shared budget. So you will not spend more than that. And so that the campaigns can get sufficient data.
Now, it's very possible that within two to three days, this is profitable for you and you're making money, but what if it's not and what if the return on ad spend is not as high as you want it to be? For example, let's say you spend $90 over three days and you get no sales. Well, what are you going to start doing then? Then you start diving into the campaigns, you look for optimizations, you add negative keywords, you change your bid per click, and you find opportunity within the campaign that's bringing in data. And I'll tell you, it is much easier to do this without blowing through money than if you set your daily budgets from day one at $200 or $300, simply because you have that money to invest. Again, just because you have it doesn't mean you should. And I personally don't invest it, even though I have it and I've been doing this so long. I start small because in the beginning it's about data. Okay. So now you have your other $100. Where does that portion of the $1,000 ad budget go? It should go into remarketing campaigns.
Remember, this is for warm traffic, people that are already familiar with your store and most likely were on your product pages. Maybe they even added products to the cart. Now, what we do for this traffic is typically start with only Facebook remarketing, because it's so powerful and the budget really isn't much. Again, less than four bucks a day. Now, if you want to get a little bit more creative or for some reason you can't use Facebook ads, you can also put this directly into Google remarketing and get similar results. Now, that's it. That's all you're going to do. And again, the way these campaigns are structured, if you set it up the way that I teach in the blueprint, you're going to be getting high quality traffic from day one, from your Google Shopping campaigns. And you're only going to be using that remarketing budget to bring these people back, who haven't bought yet. And if you do that, that $1,000 over 30 days is more than enough money to start building a very profitable business.
And for the person that asked me on the coaching call that had that $5,000 that were ready to invest in ads, never touch that other $4,000. Do whatever you want with it. Buy GameStop stock, go to Disney World, whatever. Don't just put it into the business because you think you should. Because what you want to do after these first 30 days, now that you have a whole bunch of data in your ad accounts, you see what products are selling. You see where you're most profitable. Now you can up your budgets, but the money that's being spent for these higher budgets comes from the profit you made from month one. So don't get ahead of yourself. And I'll tell you again, even for me, somebody that's been in this business a long time, somebody that's spent well into the eight figures in paid ads, I still do this myself. I want to kickstart things faster. I want more traction and I'll take my cash and I'll just put more of it into ads from day one. And all I'm really doing, I learned this lesson time and time again, is wasting budget. It's spending it faster. It's putting it all over the place and I'm just not making as much money as I could be. I'm not as profitable as I could be and I'm not getting the results that I could be.
So quick summary, if you have money to spend and invest in ads, that is great. You probably know I'm a huge fan of paid traffic. Put the money in the right places. Don't spend it just because you have it. It is most likely not going to get you the results you want faster. What's going to get you results, and I'm talking about actual money, net profit results, is spending that first $1,000 wisely, getting profitable, then reinvesting profits into ads and scaling from there. So as always guys, I hope you got value from this episode. If you did, you know what to do, give it a like, click subscribe. We have two new episodes every week. And if you're watching this or listening to this and you're not yet a member of my coaching program, go to dropshipwebinar.com, free training link down below. It is three hours long in in-depth free training and I make you a special offer there too for my flagship coaching program, the Drop Ship Blueprint. So check that out and I will see you on Thursday for the next episode.