We spend 50% on R&D and take zero profit. Here’s why.

You’re bootstrapping a SaaS and making revenue. Now you have to decide where every dollar goes.

Most advice says put 20% into R&D and 30% into marketing, then take some profit. We spend 50% on R&D and 5% on marketing. I take zero profit personally.

Every agency owner thinks this is crazy, but there’s no universal right answer to cost allocation. Your structure should match what you’re building and how you’re competing.

Here’s our breakdown, why it works for us, and how to figure out yours.

Ken AI is both a cold email agency and the software that powers it. Most cold email agencies pay vendors for infrastructure (email platforms, AI tools, data sources, automation software). We build our own tools and use them to fulfill for clients.

All these external subscriptions eat up to 30% of revenue. When we invest in R&D, we’re not just building a product to sell someday. We’re building the operational infrastructure our agency runs on right now.

The agency generates revenue and funds product development. The product makes the agency more efficient and competitive. This is vertical integration, and it completely changes cost allocation.

If you’re building something unrelated to your operations, our structure won’t work. But if you’re building tools you actually use, the math changes.

Let me be clear upfront. This allocation is kind of insane. By all business logic, you shouldn’t spend half your revenue on R&D unless you’re a research lab.

This probably also isn’t sustainable long-term. But it works for us right now because of vertical integration.

This goes into building the infrastructure that powers our agency. Email systems, AI personalization, data sourcing, automation. Everything we’d otherwise pay vendors for.

This replaces 30% we’d pay vendors plus 20% normal R&D. Our margins would be 50% lower if we paid for external tools.

We’re competing on product. Last time we won through delivery and results. Next time I want to win with product experience, and that takes years of investment.

This includes what we don’t build ourselves. Project management , communication, analytics, all the tools that keep operations running.

Includes sales, support, management, core operations team.

Way below the typical 30%. Our agency is our marketing. We do cold email for clients, get results, they refer others. Every client sees the product working.

Office, legal, accounting, miscellaneous.

Almost two years of R&D. I take zero profit personally, just living costs. Competitors are raising millions while we self-fund with hundreds of thousands.

The trade-offs are real. You grow slower because you’re spending 5% on marketing instead of the typical 30%. You take on higher risk if the product doesn’t work after years of investment.

You’re looking at a long timeline before any external revenue comes in. And there’s constant pressure to keep operations profitable because that’s funding everything.

But you gain things that matter. You own your infrastructure instead of paying vendors 30% of revenue forever.

You get efficiency gains today from what you’re building, not someday when the product launches. And you keep complete control without investors telling you what to do.

Five questions with actual percentages:

Growth and market share? Spend 30-40% on marketing and sales, 15-25% on R&D.

Product quality? Spend 30-50% on R&D, 15-25% on marketing.

Service and support? Spend 25-35% on team, 20-30% on marketing, 15-20% on R&D.

We compete on product, so 50% R&D. But that only works because we use what we build.

Raised money? Spend 35-45% on marketing, 20-30% on R&D. Investors expect growth.

Bootstrapped with revenue? Spend 25-35% on R&D, 20-30% on marketing. More flexibility.

Bootstrapped without revenue? Spend 40-50% on marketing, 15-20% on R&D. You need validation fast.

We’re bootstrapped with revenue, so we can spend years on R&D without pressure.

Need revenue in 6-12 months? Spend 35-45% on marketing, 15-20% on R&D.

Can wait 1-2 years? Spend 25-35% on marketing, 25-35% on R&D.

Can wait 2-3+ years? Spend 15-25% on marketing, 35-50% on R&D.

We can wait because operations are profitable and I don’t need much personally.

Build tools you use? You can spend 40-50% on R&D because you get immediate operational ROI.

Building for external customers only? Spend 30-40% on marketing, 20-30% on R&D. You need validation faster.

We’re vertically integrated, so R&D pays off in operations immediately.

If you need 20% profit to survive, set that aside first. You’re working with the remaining 80% to allocate across R&D, marketing, and operations.

If you can get by on 10-15% profit, you have 85-90% to work with. That gives you room for heavier R&D or marketing investment.

If you can take zero profit like me, you have maximum flexibility. That’s how we spend 50% on R&D. I can take zero because I’m 19 with low costs. Most people can’t.

Don’t copy our structure. Figure out yours. Ask those five questions. Your answers determine allocation.

The mistake is following generic advice without thinking about your situation. Run the math, match allocation to strategy, commit for at least a year. Switching every six months means you never execute anything.

We’ve been betting on R&D for two years with no external product ROI yet, but the product is coming together. If I’d switched after six months, we’d have nothing.

The key question is this. Are you building something you also use? If yes, heavy R&D might make sense. If no, you probably need more on marketing to validate demand.

People ask why I don’t raise. I could probably raise a couple million easily. But when you raise, you optimize for growth metrics and investor timelines.

When you bootstrap, you optimize for building something good on your timeline. I’d rather own 100% of something I built slowly than 60% of something built with other people’s money.

Whatever structure you choose, watch burn rate. We spend 60% on R&D but operations are profitable, so net burn is manageable. Make sure you have 12-18 months runway.

Give your allocation two years before evaluating. We’re almost there with no external product ROI yet, but things are coming together. If I’d switched after six months, we’d have nothing to show.

I could take profit. Buy a car, put down on a house. Instead I take zero and reinvest everything. Is this smart? I don’t know. But I have one shot at building something that lasts.

If I take profit now, Ken stays an agency. If I reinvest for years, we might build something that competes with funded startups. Maybe it’s stupid or maybe I’ll regret it. But I’d rather try and fail than wonder.

Are you building something you also use? That’s the key question. If yes, you can invest heavier in R&D because you get immediate operational ROI.

If no, you need more on marketing to validate demand. Figure out your answer, then match your allocation to it.

Cristian Frunze - Founder @Ken AI

P.S. What’s your cost breakdown? Are you spending based on strategy or what feels right? Hit reply. I’m collecting these to see patterns.