Jake Buckner
Author
Most marketers think of a budget as a fixed sum. You make a plan with the client, decide how much they’re willing to spend, and then try to hold to that number, judging success after the fact.
The problem is that marketing rarely works on a clean timeline. Results take time to materialize, and without the right tools, it’s difficult to understand how spend is translating into profit while a campaign is still running.
But what if budgeting wasn’t about committing to a fixed number upfront, and instead about managing risk based on real profit? Especially if you have the ability to connect ad spend directly to the profit it generates.
That’s the approach Lars Larsen at AdNudging tested with his client, Markberg, and it’s a strategy any team can apply when profitability is visible in real time through POAS® (Profit on Ad Spend).
Instead of asking, “How much should we spend?”, burn-rate budgeting reframes the discussion around risk:“What is the maximum acceptable loss we can incur while we test whether this can become profitable?”
If you want to apply burn-rate budgeting yourself, the process is simple:
1. Define an acceptable loss.
Agree with the client on the maximum cumulative loss they’re willing to incur while testing a campaign.
In the case of AdNudging and Markberg, that threshold was 5,000 DKK. As long as cumulative losses remained below that amount, the campaign could continue running, even if short-term performance fluctuated.
2. Track cumulative profitability in real time.
Monitor total profit and loss (continuously, not just daily performance) so you always know where you stand against the agreed threshold.
3. Optimize before the burn-rate is reached.
Test changes to ad copy, landing pages, offers, or targeting while there’s still room within the defined risk limit.
Of course, this approach only works when there’s no ambiguity around profitability. As Lars Larsen explains:
“Working with ProfitMetrics, we are never in doubt as to whether a campaign is profitable or not, and this makes a huge difference in terms of both campaign management, communication, and reporting.”
With profit tracked directly through POAS®, AdNudging had a clear view of cumulative performance at any given moment.
Below is an example of how cumulative profit and loss evolved under Markberg’s burn-rate budget.
You can see in this graph that burn-rate budgeting functions much like a stop-loss in investing. Every investment carries risk. A stop-loss is a way of managing that risk by defining, in advance, the point at which you accept that an investment hasn’t borne out.
Treating advertising spend as a short-term expense is shortsighted. Advertising is an investment in future growth. Burn-rate budgeting provides a structured way to manage that risk: allowing campaigns the time they need to succeed, while setting clear limits on downside exposure.
Traditionally, marketing budgets involve committing to a spend level upfront, then waiting to assess whether the investment paid off once enough data is available. In the meantime, short-term volatility can lead to premature cuts, even when a campaign may have long-term potential.
Burn-rate budgeting takes a different approach. Instead of optimizing for immediate results, the focus shifts to whether performance is improving over time and whether the underlying investment thesis remains sound. As long as cumulative losses stayed within the agreed limit, the campaign earned the right to keep running.
This reframes performance evaluation away from daily fluctuations. Rather than asking whether a campaign performed well on a given day, the focus shifts to whether it’s moving in the right direction overall.
Burn-rate budgeting changes how marketers think about spend. Instead of committing to a fixed budget and hoping the results justify it later, it treats advertising as an investment with clearly defined risk.
That approach only works when profitability is clear while campaigns are still running. By using POAS® to track cumulative profit and loss in real time, teams can confidently decide when to keep investing and when to stop.
It gives both agency and client a shared, objective way to decide what’s worth continuing.
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