Today we have a brand new article, Loom video, and slides on making ads profitable for your company.

Feel free to pass this along to your agency or Head of Growth/Marketing.

Yes, getting ads profitable and scaled is the holy grail for SaaS growth… (in addition to product + outbound).

The main difference between a $3M ARR SaaS firm and a $30M ARR SaaS firm is whether you get paid advertising to work profitably (with a fast enough payback window).

Once you’ve reached product-market-fit and have a product that customers are getting value out of and love — it’s time to start advertising and finding the channels that can scale up customer acquisition.

Below we provide an in-depth guide to setting up paid search ads, retargeting ads, matched audience ads, lookalike ads, boosted post ads, and review site ads.

If you enjoy killer content like this, apply to join the SaasRise community. We welcome all CEOs/Founders with $1M-$100M in ARR. We offer a two-week free trial.

Now let’s jump in to the video and the long-form article based on what I learned as CEO/Co-founder of iContact and helping rapidly growing SaaS firms like Instantly, Tatango, Clearstream, Seamless, and many others.

Video: Ads 101: Setup & Tracking

Here’s this week’s free video on how to set up your paid ads… feel free to pass it along to your Head of Growth / Marketing.

This Week’s Growth Article:
Making Paid Ads Profitable by Ryan Allis

Step One: Determine What a Customer is Worth

Yes SEO is helpful, outbound is critical (for B2B), tradeshows are wonderful, and affiliates are key. But nothing has the scale of paid advertising done right.

But before you turn on your ads, you need to understand what an average lead and average customer is worth to you.

Once you know your Monthly Average Revenue Per Account (ARPA) and Lifetime Value (LTV) you can determine your Target Customer Acquisition Cost (CAC).

Your Target CAC should be about 6 months of ARPA (aka 50% of ACV) or around 1/6th of your LTV. Find a good midpoint around those two numbers and make it clear to your team that your goal is to acquire incremental new customers for that number or less.

If you need help estimating your LTV, see our slides on unit economics or our free video on calculating CAC and LTV.

Once you’ve estimated your Target CAC and your Target CPL, it’s time to start marketing via paid advertising.

• Target CAC - How much you’re willing to spend in S&M costs to get an incremental new customer

• Target CPL - How much you’re willing to spend in S&M costs to get an incremental new lead

Ultimately your Target CPL should just be your Target CAC multiplied by your lead to customer conversion rate.

If you can generate customers for <6 months of ARPA (or <1/6th of LTV), you can rapidly scale your recurring revenue firm. 

Step Two: Select Your Ad Tracking Platform

Once you know your Target CAC and Target CPL, it’s now time to set up an ad tracking platform.

Install your tracking pixels for each platform and set up your custom conversions, then decide if you want to use a third party tracking tool for more accurate tracking.

You can use the existing ad managers or use a more accurate third-party tracking tool like Cometly, Hyros, or HockeyStack.

The issue with using the ad manager tracking alone is that they will often double count conversions. If you show retargeting ads on Google and Meta and LinkedIn for example, all three platforms will often take credit for the same conversion.

Tools like Cometly will dedupe these conversions, assign proper credit to the right sources based on your attribution settings, and feed back live conversion data via API to the ad networks — making the ad network targeting more accurate.

We like to use Cometly… here is a screenshot of our actual SaasRise Cometly dashboard, showing the results for our monthly ad spend across Meta, Google, Linkedin, Adroll, and Bing in real time.

Step Three: Start Your Ads Test

Once you’ve got your tracking system in place, then turn on your ads with an initial test budget… just enough to get a Cost Per Lead (CPL) per channel and ad type.

Test the following…

1. Retargeting ads - Meta, LinkedIn, Google Display, Adroll

2. Paid Search Ads - Google, Bing

3. Matched audience ads - Meta, LinkedIn, Google Display, Adroll

4. Lookalike/Predictive ads - Meta, LinkedIn, Google Display

5. Boosted post ads - LinkedIn (impressions goal within matched audience)

6. Review site ads - G2, Capterra, SoftwareAdvice, GetApp

Put in your weekly ad results into a spreadsheet like this (make a copy) and start increasing your budget in the channels that are giving CPLs under your Target CPL. Increase your budgets slowly around 10-15% per week.

If you’re getting junk leads, check your geographic targeting to ensure only your target countries are selected and make sure all the expansion options (Advantage+, Performance Max, etc.) are turned off.

Here are the various types of ad creatives you should utilize.

1. Testimonial Ads

2. Product Feature Ads

3. Case Study Ads

4. Founder Video Ads

5. Blog Post Ads

6. Free Trial / Demo Ads

You may want to subscribe to a Design-as-a-service platform like Design Pickle or Superside to get continual new ad creatives uploaded each month, leaving the best performers and replacing poor performers with new creatives monthly.

You can use this template to determine your test budget.

Step Four: Conversion Rate Optimize!

Conversion Rate Optimization is the practice of optimizing each of the steps in the funnel by a little bit each month, in order to achieve a big overall reduction in customer acquisition cost – allowing you to then spend more, win ad auctions, and create a virtuous cycle of growth and market dominance. 

You’ll want to optimize each of the three major parts of your funnel…

1. Ad CTR (optimize ads and audience targeting)

2. Visitor to Lead Conversion (optimize landing page

3. Lead to Customer Conversion (optimize sales process)

Small tweaks to each stage can make big differences!

For optimal results, be sure to send your traffic to a landing page (no nav / one CTA button) not your home page. You can create a landing page in Unbounce or ClickFunnels — or just replicate your current home page with no top navigation and a clear headline, subheadline, and big Call-to-Action (CTA) button.

You can review our slides on conversion rate optimization here and also watch our Loom video on CRO.

Step Five: Scale Up The Channels That Works

Once you’ve completed 2-3 months of optimization on your audience targeting, ad creatives, offer, landing pages, marketing automation sequences, and sales process — and know your CAC per channel — start scaling up ad spend on the channels that are producing the best results.

You can use a spreadsheet like these to assess your results by channel.

If it doesn’t work right away, keep at it. Getting ads to work profitable is the holy grail and the main difference between a SaaS firm with $3M in ARR vs. $30M in ARR.

If you want help with your paid ads, we have an ads agency for B2B SaaS firms and you can hire us. Learn more here.

Key Slides

Here are some the most important slides from the video…

Join Our Community of SaaS CEOs & Founders

Thanks for reading. We hope this guide has been helpful to you. Please take a moment to learn more about SaasRise, our community for SaaS CEOs and Founders. We welcome all CEOs and Founders with $1M-$100M in ARR to join us. We hold three masterminds each week for our members and provide an in-depth library of SaaS growth, fundraising, and exit resources. You can apply here.

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About The Author

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