Chapter 4 – Budgeting

John and Alex felt the need for a change of scenery after their deep dive into channel selection. They decided to plan a weekend road trip. They packed their stuff, set up the GPS, and piled into John’s aging sedan. 

But the trip didn’t go as smoothly as planned. The car broke down in a small town, leaving them stranded. The only mechanic in the city handed them a huge bill. As they sat in a nearby diner, counting their remaining cash, John realized, “We should have planned our budget well before starting the trip.” 

This unexpected detour highlighted a critical lesson for their next task: budgeting for their ads. Just as with their road trip, success in advertising would depend on making the most of their resources. As they planned a more cost-effective route home, John and Alex knew it was time to apply that same thinking to their ad spend, ensuring every dollar was spent wisely on the journey ahead.

Recap from Chapter 1  Running ads is pricey. Determine a minimum budget. It helps you plan and ensure that you have enough data to make calculated decisions—which is the cornerstone of a well-executed ad strategy.

Costs – 3 budget buckets [PPP – People, Program, Platform]

1. People

Having the right people is the most critical aspect of running successful ads. Without the right team in place, no amount of ad spend can guarantee success.

Key Roles You Need

• Paid Media Specialist: Manages the ad platforms and ensures the campaigns are optimized for performance.
• Copywriter: Crafts compelling ad copy that resonates with the target audience.
• Designer: Creates visually appealing ad creatives that capture attention.
• Strategist: Develops the overall ad strategy, often played by the paid media specialist or another team member.
• Marketing Operations (MarkOps): Sets up and manages tracking systems, integrates tools with CRM, and handles the technical backend.
• RevOps: Set up the tech, ensuring everything from tracking to reporting runs well. 
• Product Marketers: Create campaigns and resources like case studies and promotional materials.
• Developers: Create landing pages and ensuring smooth technical integration. 

Additional Considerations

In many companies, people often wear multiple hats. Roles like designers, RevOps, and developers are shared across teams, while ad strategists are often taken up by managers. And that’s okay—do what you need to for your scale. Just make sure all these roles are covered.

However, running ads without the right expertise can fuck up your budget. Many companies run ads for 8+ months, and by the end of the campaign, they don’t even know what worked and what didn’t. There are always gaps and misses. That’s where the right team comes in. 

Whether you hire internally or bring in a SaaS PPC agency—investing in the right experts is key.

Costs Associated with People

People costs can be a significant portion of your budget, sometimes even exceeding ad spend itself (yep, that’s not ideal at all!). 

So, what are your options? You can either build an in-house team or bring in an agency, each with its own set of costs.

1. In-house Team

Building an in-house team involves significant costs, including salaries and benefits. If you’re thinking about hiring a paid media specialist, SaaS copywriter, senior designer, and head of demand generation, you’re looking at a minimum of $23,000 per month. Here’s how it breaks down:

1. 1 paid media (Salary: Around $10,000/month in India and around ₹1,20,000/ month in the US)
2. 1 SaaS copywriter (Salary: Around $5400/month in India and around ₹80,000 in the US)
3. 0.4 Sr. designer (Salary: $8500/month in India and around ₹1,00,000/month in the US)
4. 0.33 Head of demand gen (Salary: Around $12500/ month in India and around ₹2,10,000/month in the US)

Total salary equivalent:

$23,000/ month in India and around ₹3,10,000/month in the US (Apart from benefits, management, training and hiring costs)

2. Agency

Hiring a SaaS PPC agency might cost anywhere from $4,000 to $15,000 per month, depending on the level of service and expertise required.

Core Idea: It’s recommended to allocate 10% to 25% of your total ad budget to people. The ideal allocation is around 15%. 

2. Program (Ad spend)

Your ad spend is where the bulk of your budget should go. This is the money you pay to platforms like Google, LinkedIn, Facebook, or any other channels you use to reach your ICP. 

1. Scaling What Works: Once you’ve identified a successful ad campaign, you should focus on scaling it. This means putting more money into campaigns that are already generating a solid return, ensuring that they continue to drive results.
2. Experimentation: Before you can scale, you need to experiment. A significant portion of your budget should go into testing different ad types, audiences, and messages. The goal is to identify what works before you invest heavily in scaling. The cost of experimentation varies, but it’s incredibly important to have a clear understanding of your funnel and the metrics that indicate profitability.

P.S – We have a whole new chapter on experimentation coming next!

Budget Allocation

If you’re starting out, most of your ad spend will go into experiments. As you gather data and refine your strategy, the balance should shift towards scaling successful campaigns. Ensure you allocate enough budget to run multiple experiments and draw meaningful conclusions.

Ideally, you need a minimum amount of $52,800 to run 5 experiments over 3-5 months. 

RECAP Let’s say you plan to test: 4 keyword sets on Google and 2 conversion flows on Google2 audiences on LinkedIn and 2 messages on LinkedIn This totals to 4 x 2 = 8 experiments on Google.And2 x 2 = 4 experiments on LinkedIn Assuming an experiment costs $4000 on Google and $3000 on LinkedIn, you require a total budget of: 8 x $4000 + 4 x $3000 = $44,000 Add a buffer of ~20% for optimizations. I.e. $52,800. If you spend this over three months, your monthly ad spend budget will be  $52,800 / 3 = $17,600.

Different Scenarios and Considerations when Allocating Budgets

Stage 1. Kick-off [Never Run Ads before]

When you’re new to running ads, you should focus on experimenting and budgeting effectively. Here’s a step-by-step approach:

1. Define and Budget for Experiments: Start by setting clear objectives for your ad experiments. Decide what types of ads you want to test, such as different formats, channels, or target audiences. Allocate a specific budget for these experiments, separate from your main ad spend.
2. Determine Cost per Experiment: Estimate the cost for each experiment, including ad spend, creative development, and any associated costs. This helps manage your budget and set realistic expectations.
3. Allocate Funds Based on Cost: Distribute your budget according to the estimated costs of each planned experiment. 
4. Prepare for Negative ROI: Understand that not all experiments will be successful. Some may initially result in negative ROI, which is a normal part of the learning process. Use these outcomes to refine your strategies.
5. Refine Strategies: Analyze the results of your experiments to adjust your strategies and budget allocations. This iterative process helps optimize your ad spend and improve performance.

Tip: Set aside enough money to run 4-5 experiments. This will give you a better understanding of what works and what doesn’t.

Stage 2: Scaling [Messy Middle]

The next stage is called “chaotic” because it is a challenging period of growth where things are not as simple or predictable as in the other two stages. The results from ad campaigns can be highly inconsistent. What works in one scenario might not work in another.

Unlike the first scenario, where you might be experimenting and learning, this phase requires continuous experimentation. You need to continuously explore new avenues for ads beyond the most common channels.

Focus on the below strategies and figure out the right mix based on your circumstances. 

1. Account Expansion: Focus on upselling and cross-selling to existing customers. 
2. Account Activation: Run ads to activate new accounts and ensure they are engaged. 
3. Reactivation: Use ads to re-engage inactive users. Inactive users are those who signed up but haven’t used your product recently.
4. Increase Sales Velocity: Speed up the sales process by nurturing leads. 

Guidelines: The messy middle can vary widely for different companies. Be flexible and open to exploring various strategies. Avoid overspending and focus on what works best for your specific situation. Continue experimenting and be willing to try new approaches.

Stage 3. Predictability [Ran Successful Campaigns]

At this stage, you can predict the amount of pipeline (leads, conversions, etc.) that your ads will generate. The results are more consistent, and you have a clear understanding of what to expect from your campaigns.

The strategies during this phase can vary depending on the specific circumstances of your business. Let me show you what a sample ad budgets split looks like in this scenario:

3. Platform (Tools)

When it comes to tools for ads, the range can go from 0 to a fortune. Whether you’re just dipping your toes into ads or you’re swimming with the big fish—the amount you spend on tools can vary wildly. 

Start with $0

Let’s say you’re just getting started. You can pretty much run your ads for free. Platforms like Google, LinkedIn, or Facebook are pretty generous—they’ll charge you for the ads only and won’t nickel-and-dime you for using their systems. So, at the very beginning, you can kick off your campaigns with zero dollars spent on fancy tools. 

Most other tools you’ll use can also be free. For example, Google Tag Manager, HubSpot form & Microsoft Clarity.

Scale as You Grow

But as your ad strategy matures and your team grows, you might find yourself in need of more sophisticated tools. This is where things can start to get interesting (and expensive). 

Need better ad reporting to impress your boss? Yep, there’s a tool for that too. 

Want to build better funnels? You guessed it—tools, tools, and more tools.

Want to dive into Account-based marketing? You can buy tools to build target account lists, or to target more granularly, or even to report on this specifically.

So, the crux here is as you scale, you can add more tools for testing, reporting, attribution, etc. 

Keep Costs in Check

The good news is that you don’t need to blow your budget on tools. Sure, you could end up shelling out close to $50-60k a year if you really go wild. But let’s be real: for most businesses, a fraction of that will do the job just fine. 

If you’re just starting out, spending close to zero on tools isn’t just possible—it’s smart. And even as you grow, you might find that sticking to the basics is all you need to keep your campaigns running smoothly.

The key is to only invest in tools that genuinely add value to your ad strategy. You don’t want to be that company that spends more on tools than the ads themselves.

But Ishaan, what do you suggest I consider buying?

Obviously, it depends. But this isn’t a book where I leave it at that.

So, here’s what most companies we work with invest in, which my team usually recommends.

#1 Something to improve your funnel.

Examples:

1. Demo call request form (simple)
2. Direct scheduler (Like HubSpot or Calendly calendar)
3. 2-step demo form + scheduler (Like RevenueHero or ChiliPiper)
4. Pre-recorded demo webinars: eWebinar
5. Interactive Demo: Like Navattic or Storylane
6. Free trial, then self-serve paid signup
7. Freemium then self-serve sign-up
8. Freemium then sales led sign-up based on product usage
9. Sales-guided Free trial, aka Proof Of Concept (POC)

Why?

Improving your funnel is one of the easiest ways to increase conversion rates & reduce drop rates. Sometimes it’s the thing stopping you from getting to a point where ads really work. They are also not ads-specific optimization. So optimizing this improves all of your marketing.

#2 Something to build lists

Examples:

1. Buying lists: Apollo.io, Crunchbase, LinkedIn Sales Navigator, Zoominfo, Lusha
2. Scraping lists: Apify, Octoparse
3. Enriching lists: Wappalyzer, Clay

Why?

LinkedIn ads targeting is best when you make company-level lists with native job title filters. Not a lot of ppl know about this but you also get great ABM-style data if you make company level lists. We’ll discuss more on this later.

#3 Something for deanonymization

Examples:

1. Company level: Factors.ai (Worldwide)
2. Person level: R!B2B (US only)

Why?

This tactic works great for about 40% of the companies (which is a pretty high success rate) that implement it. The tactic is simple – convert ppl who havent filled any forms yet into a buyer using these tools + some workflows.

TL;DR

Successful ad campaigns require three key cost areas:

1. People – Building the right team or hiring an agency is crucial but costly. Allocate 10-25% of your ad budget to people.
2. Program (Ad Spend) – Ad spend is where the bulk of the budget goes, with an initial focus on experimentation before scaling. 
3. Platform (Tools) – Start with free tools and scale as needed. Invest in tools only if they improve your funnel or strategy without overspending.