$100M+ DTC ad creative formula

Building a performance creative system is extremely costly and time intensive.

Despite what all the X and LinkedIn gurus will tell you, nobody really knows what they’re doing. And there’s very limited high quality information available for free online. 

Most of the Founders and Operators I know with solid teams and workflows either hand-built theirs from scratch, slowly refining, or they copy and pasted directly from another successful person in their network.

Luckily you’re reading one of the best DTC resources on the planet. Written by a guy who builds these teams for a living. 😎

First let’s break down the cost.

Most of you reading have one of the following problems:

1. You’re not spending enough on OPEX

2. You’re spending too much on OPEX

(OPEX = operational expenses)

A healthy OPEX percent for an E-Commerce brand, on average, is around 10% - 20% of your gross topline revenue.

Example: $100k per month gross revenue, your OPEX should be around $10k - $20k.

Running lean is great, until it comes at the cost of your growth goals and capturing available marketshare. Conversely, bloating your OPEX puts a stranglehold on your margins, making you inflexible to opportunities or changes.

Your ad creative budget is directly proportional to how much room you have on OPEX.

A good rule of thumb is 15% - 25% of your total overhead in the early days (sub $10M)

Why so high you ask?

Because it’s the highest leverage variable you can invest in to grow the acquisition side of your brand. Right next to improving your website conversion rate and AOV.

Example… If you’re generating $250,000 per month in revenue, spending $100,000 on Ads (35%), with $43,750 on OPEX (17.5%), a reasonable ad creative budget is somewhere around $10,000 per month.

How you spend that $10,000 is up to you. But I’d avoid running into the “internal team’ trap.

This is where a brand owner or operator is obsessed with ‘company culture’, and makes poor financial decisions to ensure this value is upheld.

News flash… company culture doesn’t matter until you’re like a $10M+ brand. Not because it’s not important, but because there’s other things that are more important to take care of first. Build your castle before you hire your mercenaries. Not like you can hire A+ players with a $45k OPEX anyway.

To get more tangible, here’s what I would NOT do with a $10k/month creative budget:

1. Full-time anything that’s not overseas

2. Creative strategist (you are the strategist until you can afford to hire an A+ strategist AND give them resources they need to do a good job).

3. Reaching out to UGC creators and paying $250+/video + usage rights + hiring a video editor to create the ads from all the raw content

What I WOULD do with a $10k/month creative budget:

1. Full-time graphic designer video editor hybrid from PA (~$1.5k/month USD)

2. Software to manage, store, and organize your ad creative systems (~$200/month USD)

3. Software to analyze the performance of your ad creative in the ad account (~$800/month)

4. Done for you creative agency that specializes in one type of ad deliverable ($6k - $10k USD/month)

My suggestions change as you start to have more money to spend. Once you hit about $20k per month available for creative investment, you can start to build out a killer internal team.

But until then, play it safe and outsource as much as you can. Write the scripts yourself. Record Founder videos yourself. Manage your agency/designers yourself.

Run lean.

It’s more work, but it prevents you from burning cash.

P.S. – if you want the inside scoop on Founder content, check out my piece next week where I dive into how Miracle Brands Founder lead content drove insane scale on Meta and TikTok.

Alright, nuff said.

See you next week.