Ecom CFO Notebook - growth budgeting and how much to spend

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What if the thing holding back growth isn't strategy, but how much you decide to invest?

There’s a very simply framework I used with one of our clients last week on how to think about investing in growth.

He runs an incredible $30M brand and they crushed last year with 18% EBITDA. He has big goals to double revenue in 2026, but he knows this can’t happen without a step-change growth lever.

So he’s decided to launch a new hero product and explore expansion into retail this year(strategies aligned with his Core Focus).

Neither option is free.

And he asked me, “How should I think about budgeting for both initiatives”?

The most common approach is viewing each initiative in a vacuum. Sit down and price out every line item. Design agency, inventory buys, retail consultant, etc. Add it all up and get a number. And this should be done.

But this is giving the man the fish, not teaching him how.

I prefer starting with a principle can apply more broadly, regardless of size, scale, year, or initiative.

The Principle

The whole thing is a very simple (but not easy) circular loop:

Start with current EBITDA → Invest % of that EBITDA → Get back to original EBITDA %.

That's it. Take an intentional percentage of your EBITDA, invest it in growth, and drive back to your original profitability. Then you do it again.

This framework gives you a mental model to stay solvent while making meaningful bets—not over-investing, not under-investing.

Hypothetical example:

Your current EBITDA is 10%

Now drop it to 5%.

That difference is your growth budget.

So if you're doing $10M in revenue:

• 10% EBITDA = $1.0M

• 5% EBITDA = $500k

• Difference = $500K growth budget

That $500K is what you have to work with.

That's your R&D budget, your hero product launch budget, your retail expansion budget, your big trade show, your “do whatever to grow” budget.

Does it get more complicated than this? Sure it does. But this gives you a definitive number to start from - the bet itself is a founder decision.

Finding the right number

The idea is that you’re making rational bets on growth initiatives in way that is intentional and sustainable.

You’re not betting it all on black. And you’re also making a meaningful commitment to the growth initiative - ie. not half assing it.

I’ve seen brands drop to 0% EBITDA to give themselves a $300k growth budget. This is when I hear “I’m investing everything back into the business”.

I’ve seen brands be too stingy and not invest enough in growth or cut the budget at the first sign of failure.

The second is worse. But both are risky.

We know that most of what you test won't work.

The hero product might flop. Retail will take twice as long and cost twice as much. The person you planned to hire in Q1 won’t be hired until Q3, and you'll go through three people before you find the right one.

That's the game. You're going to test a bunch of stuff. Some will work. Most won't.

The exact number you choose is ultimately up to you, and only you.

Our best clients (95% percentile) are maintaining 12.5% to 15% EBITDA while still investing heavily in their growth initiatives.

Even at 10%, you still have meaningful profit and wiggle room if things go sideways. 

At 5%, you're getting closer to the sun, and it doesn’t take much to find yourself negative for the year.

The game is about staying alive and finding that number which is aggressive enough to make meaningful moves, but conservative enough to survive.

A few things to keep in mind…

This only applies to profitable businesses

If the business is at 0% profitability, this framework doesn't apply. There's no growth budget to allocate.

Getting back to profitability first means focusing on contribution margin by either cutting expenses or pausing new initiatives until there's room to test. 

Because at 0%, there's no wiggle room. It has to work or you're SOL.

What to do in Year 2 of this strategy

Let's say the business drops from 15% to 10% and spends $500K testing hero product and retail in Year 1. Some of it works and some of it doesn't, but revenue increases.

The goal for Year 2 is to fight back to the original 15% EBITDA in Year 1 on the stuff that worked and kill what didn't. That profit cushion needs to be back before testing the next big thing.

Then if there's an appetite to test something new, run the same framework again.

Don't use debt to fund growth.

If the P&L can't support the investment on its own, the initiative usually isn't ready yet. Going into debt to test a hero product or retail expansion is a death spiral waiting to happen.

Debt should service profitable operations such as inventory for products that already work and ads for channels that already convert. 

Stage-gate if you need to

One more tool: remember you don't have to commit all the dollars at once.

The money doesn't all get spent day one.

So you have flexibility to say "if we haven't reached XYZ milestone, I'm not going to unlock the next tranche of the growth budget."

This isn't ideal—it can hamstring your ability to actually make the initiative successful. But if you don't have a strong enough balance sheet or P&L to allocate that many dollars upfront, taking it in stages is another approach.

–

The question isn't whether you should invest in growth.

It's how you think about betting without putting the whole business at risk.

Give this framework a try and come up with your definitive number to invest in growth this year. I’d love to hear what you come up with!

— Sam

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