Advertising has become more important to businesses since online marketing became a major aspect of business growth.
In terms of social media advertising, Facebook ranks first with its over 2 billion monthly active users. This makes it an important asset when it comes to online advertising.
Have you thought about how much impact the new 7.5% VAT on Facebook ads will have on your business?
This blog post answers questions like why am I paying for VAT? What does VAT mean? Why am I paying for VAT in Nigeria? What is the effect of the new Facebook VAT policy?
Let’s dive right into it!
What is VAT?
VAT is an abbreviation that stands for Value Added Tax. VAT is the amount of money paid every time an item increases in value from each production stage to when it gets to the end-user.
Don’t worry, you don’t need a degree in economics to understand this.
Look at VAT in practical terms:
A textile producer sells a clothing material to a wholesaler for ₦20,000 plus a 10% VAT of ₦2000.
The wholesaler sells this material to a retailer for ₦40,000 plus a VAT of ₦4,000 but will only pay ₦2000 to the government as VAT. (Minus the VAT paid to the producer).
The retailer sells the same material to consumers for ₦60,000 plus a VAT of ₦6,000 but only pays …
Yes, ₦2000 too (₦6,000 – ₦4,000).
I knew you could do this!
What Is The Effect Of The Added Vat On My Nigerian Business?
Many have proposed that this is a further attempt by the Federal government of Nigeria to infringe on our right to freedom of speech after moves such as the social media bill and the Twitter ban.
But there is no pointer to this as there were no changes to Facebook’s advertising policy other than the additional 7.5% VAT. In fact, Facebook charges VAT in a lot of other countries.
In Monetary Terms, What Does The VAT Charge Mean For My Business?
This new development means that for every thousand naira you spend on Facebook advertising, you pay ₦75 extra.
While this might be negligible for small budget ads, it means a whole lot if you are running big budget ads.
Look at an example:
Ifeanyi’s beauty shop spends ₦1,200,000 ($2,400) on facebook and Instagram advertising every year.
If they’ll continue to do that in 2021, they’ll be needing an extra ₦90,000 ($180).
Some workers in Nigeria don’t earn that much in a month.
This will definitely reduce the number of social media adverts that small businesses run, negatively affecting their customer acquisition and sales.
What Can I Do To Reduce This Burden On Me & My Business?
- Plan For It:
If you had N100,000 for a Facebook advert, you will just need to calculate 7.5% of that and less that from the actual figures you will be pressing into your facebook ads dashboard. This means, the actual budget in your Facebook campaigns will be N92,500.
How We Can Help: We have designed an easy to use Facebook ads budget planner, join the DABGS business coaching platform and get it for free. www.dabgs.com
- Master Facebook Ads:
If you have run any form of online ad or any marketing at all, you would agree that having a big budget doesn’t always equal more results.
If a total novice runs a Facebook ad with $1,000 and a more experienced person runs it with $200, most times the second experienced person will get more results. Simply because, they know the ‘back doors’. This means, you are probably losing more than the VAT if you have been messing around on Facebook or Instagram ads.
How We Can Help: We have a beginners 30 days challenge that gets you from total beginner to a good standing with driving sales for your business online. Access this for free when you join the DABGS Business Coaching PLatform. Find out more info at www.dabgs.com.
- Be Strategic About Your Approach:
With N100,000 you could run facebook ads ‘begging’ people to come buy your product or book your service, or your use that same N100,000 to provide free value, get a LOT of people to get that free value, then find ways to turn those that got the free value into customers, either through EMAIL Marketing, One on One calls, or through other means.
Of course you will have more people taking your free value, and even if they don’t buy the offer you are selling to them right now, you have the chance of keeping in contact with them for future purchases without spending a dime on Facebook Ads.
Before you jump up and start using this strategy, note that this doesn’t work for everyone, you need to find what works for you based on the peculiarity of your business or circumstance.
How We Can Help: On the DABGS Business Coaching Platform, we have built a section called ‘Strategy Playbook’, this contains different possible strategies, both those that will cost you money and those that won’t cost you a dime. Join the DABGS community at www.dabgs.com and get access now
4. Explore Other Advertising and Customer Acquisition Channels:
There are a lot of other channels you can get sales with, some will cost you some money (e.g Twitter ads, Influencer marketing), some won’t cost you any money (e.g Google My Business, Marketplaces).
How We Can Help: On the DABGS Business Coaching Platform you will find simple to understand guides on how to leverage other channels to acquire customers for your business.
What Is DABGS.com?
We are here for you! We understand that getting high-class help can be very expensive, and you are just trying to grow your business.
We are an online business coaching platform for small businesses to get access to a consultant 24/7, guides and strategies you can implement quickly, templates that will save you countless times and off-course expert advice and guidance (like the one you just read) on how to approach each area of your business.
Find out more at www.dabgs.com.