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How much do SaaS companies spend on international marketing?
Hello! Thanks for your question about how much SaaS companies spend on international marketing. The most useful sources I found to answer your question are VTLDesign and Software & SaaS Financial Metrics and Key Benchmarks. The short version is that when SaaS companies spend 40% or more of their revenues on marketing and sales, they generally see better growth over the next year over those who invest less. Below you will find a deep dive of my findings.
METHODOLOGY
I and my colleague scoured the Internet for reports, articles, and studies to find solid data in regards to SaaS companies' spending on international marketing. While we were able to find many different marketing strategies for SaaS businesses from more recent publications, we needed to expand our search to an older source (2013) for data. This source was used because many newer sources cited this publication's number on SaaS marketing budgets as the industry standard.
MARKETING STRATEGIES
Although it was noted by Tomasz Tunguz that "SaaS companies invest between 80 and 120 percent of their revenue in sales and marketing," Jason Lemkin of Storm Ventures has discussed using "40 percent of your revenue-growth delta as a marketing spend." SaaScribe confirmed this with an analysis of public SaaS companies, where sales and marketing spending were compared to two-year growth rates of revenue. It was found that "each dollar spent on marketing and sales generated $2.20 over that time period—a lasting, positive investment."
When calculating a SaaS marketing and sales budget, most companies use anywhere from 10 to 40 percent of their forecast ARR. As mentioned above, Jason Lemkin suggests "framing marketing investments as a percentage of your revenue-growth goal." He provides a benchmark of 40 percent of your company's revenue-growth delta to be used as marketing spend.
MARKETING DATA
A Gartner Research study in 2014 stated that "companies spent on average 10.2% of their annual 2014 revenue on overall marketing, with 50% of companies planning to increase [in 2015] to an average of 10.4%.” However, SaaS companies who invest an average of 40% of their revenue into sales and marketing have seen the most growth. For example, Salesforce invested 53% of their revenue in 2014 and grew by 33% the following year. Yet another SaaS company, Constant Contact, invested 38% of their revenue in 2014 and saw a 16% growth over the previous year.
In a 2013 report from Intacct, it was found that "successful public SaaS companies are spending in the range of 45-55% of revenues on Sales and Marketing to continue to achieve high growth rates." Private SaaS companies with revenues over $20 million spent on average 41.3% of their revenue, and public SaaS companies with under $300 million in revenues spent on average 35% on marketing and sales. Individual companies ranged anywhere from 20% to 63% of their revenues.
CONCLUSION
To wrap it up, the most successful SaaS companies spend on average 40% of their revenues on marketing and sales, and those that do spend 40% or more generally see the most growth over the next year. Thanks for using Wonder! Please let us know if we can help with anything else!