Budget: how to calculate it, how to defend it to the CEO

A performance budget is not “how much are we willing to spend”, but “how much can we spend and stay profitable.” These are different questions with different answers. CEO asks the first - the performance marketer is obliged to answer the second: with formulas, rationale and scenarios. This chapter is about how to calculate the budget and how to protect him without emotional arguments.

"CAC ceiling" formula

The main calculation in performance is the ceiling on the cost of acquisition. Formula:

max CAC = LTV × margin × payback%

LTV - customer lifetime value
margin - the share of profit in revenue (0.3 = 30%)
payback% - what part of future profits are willing to return to attract
          (usually 0.3–0.5 for sustainable business)

Example: client LTV 24,000 ₽, margin 40%, payback 40%. Maximum CAC = 24,000 × 0.4 × 0.4 = 3,840 rubles. This is the “ceiling” - advertising above this figure begins to take away future profits. Target CAC is usually 60–70% of the ceiling to have a margin for errors and seasonality. LTV/CAC calculator automatically calculates the ratio.

Without LTV, this formula cannot be applied. If your business does not collect data about repeat purchases and the average lifespan of a customer - we first collect this data, then we run performance.

how much money do you need to test the channel?

Launching a new channel “for 10,000 rubles - see how it goes” is burning budget. Algorithms need volume to optimize. Minimum budget for channel test:

minimum test = target CPA × 30 conversions × 2 (stock)

example: CPA 1500 ₽ → test = 1500 × 30 × 2 = 90 000 ₽

If the budget for the channel test is less, the algorithm will not collect data, the campaign will not work into a stable state. It's better to spend 90,000 on one channel and get result than 30,000 for three channels and get three uninformative campaigns.

budget breakdown by funnel stages

Working budget layout - 60/30/10:

• 60% - main performance. Hot traffic (Direct search, retarget, look-alike). Channels with predictable CPA.
• 30% - scaling. Cold traffic (YAN, VK interests, Telegram channel placementss). Worst CPA, but necessary for growth.
• 10% - tests. New channels, new segments, experiments with formats. Without this article, you will be frozen in the current layout and will not see new growth points.

This is the base case. For a startup in the first months there is a different layout: 70% tests, 20% main, 10% scaling. For a mature business - 75/20/5. We adapt it to the stage.

how to calculate “how many leads we will get”

Reverse budget calculation: we start from the business goal and calculate the required budget.

goal: 50 paying clients per month
CR from lead to client: 20% → 250 leads needed
average CPL per channel: 600 ₽
budget = 250 × 600 = 150,000 ₽

check unit economy:
Client LTV 18,000 ₽, margin 35%
expected revenue: 50 × 18,000 = 900,000 ₽
budget 150,000 = 16.6% of revenue. ROAS = 600%.
profit before marketing: 900,000 × 0.35 = 315,000
profit after marketing: 315,000 − 150,000 = 165,000.
green zone.

defending the budget to the CEO

The main mistake of a marketer is to come with a request “give me another 200,000 rubles.” Correct approach - come with a model.

Budget protection structure:

1. The goal is revenue. “The Q3 goal is RUB 8,000,000 in revenue. Now We’re running at 5,500,000.”
2. Gap and reason. “The gap is 2.5 M. We need 140 more clients along the funnel. The current volume is 80. The deficit is 60 clients per quarter.”
3. Gap closing price. “60 clients × CAC 4,500 = 270,000 ₽ per quarter. This is +90 thousand per month to the current budget.”
4. Return on investment. “60 clients × average bill 20k = 1.2 M revenue. ROAS = 1,200,000 ÷ 270,000 = 444%.”
5. Risk and insurance. “If CPA increases by 30% (worst case scenario), ROAS is still 340%, we will close the gap by 75%. Without investment, we definitely won’t close.”

This type of defense works for any CEO, because it speaks his language: “you are investing.” X, get Y, risk Z.” Don’t “give money for VKontakte tests.”

dynamic budget redistribution

There are 4 weeks in a month. Once a week we watch:

• Which campaigns show a CPA below the target - increase the budget by 20–30%
• Which ones are 50%+ higher than the target - we reduce the budget or put it on pause
• Channels that do not provide conversions after 2-3 weeks - we turn them off completely, budget pour into leaders

This works if the budget has not “heated up” (the strategy has not yet been learned). If The campaign has just been launched - we give it at least 7 days without intervention.

seasonality and reserve for “hot months”

Never set a flat budget for 12 months. Most niches have seasonal peaks and troughs:

• E-com FMCG: peak in November-December (BlackFriday, New Year), minimum in July-August
• Education: peak in August-September (start of the school year), January (New Year's resolutions)
• Tourism: peak in March-May, August-September
• B2B services: decline in December-January, peak in March-May, September-November

Budget breakdown by seasonality - usually “±30% of the monthly average”, taking into account specific niche. During peak times you need money - you can save or test in the off-season new channels.

budget planning checklist

1. LTV was calculated based on cohorts of real customers.
2. The max CAC and target CAC were calculated.
3. Reverse calculation from the business goal is done.
4. The layout of the funnel stages is determined (60/30/10 or another).
5. The budget for testing channels is allocated separately.
6. Seasonality is taken into account in the annual plan.
7. A justification document for the CEO with numbers has been prepared.

Additional tool: unit economics calculator — brings together the entire funnel in one plate, shows where it “flows”.

in the next chapter

Chapter 13 - media plan and flying. Media plan template, how to break the year into flights, when to change your budget during the quarter and how to respond to seasonal peaks.