saascribe.com – Once your newly launched SaaS has started to get some consistent monthly recurring revenue, it’s time to scale your business. But how? What kind of strategy would make you stand out from the crowd and acquire new customers? How much money should you spend on your SaaS marketing?
How to Calculate a SaaS Marketing & Sales Budget
We know for a fact that marketing budgets vary a lot from a company to another. It can be anywhere from 10 to 40 percent of your forecast annual recurring revenue (ARR). However, one great method to understand the necessary investment more accurately—taken from Jason Lemkin of Storm Ventures (and discussed in more detail in this video)—is to frame marketing investments as a percentage of your revenue-growth goal. The benchmark Lemkin provides is to use 40 percent of your revenue-growth delta as a reasonable marketing spend.
For example,a company with $1.5 million in ARR that wants to get to $4 million in ARR would be looking at a growth delta of $2.5 million. Forty percent of this would mean a marketing budget of $1 million. It’s also said that when assessing customer acquisition cost, companies should aim for a 1:1 ratio of dollars invested in marketing and sales (CAC) for every $1 of recurring revenue generated over the first 12 months of that customer’s lifetime. This is certainly another important benchmark to keep in mind when assessing your marketing and sales spend as a whole compared to your growth goals.
More tips about how SaaS companies set their marketing spendings and how to use the info for your own business at saascribe.com