SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence

SaaS + Software
Quote in Market Research

Quote Info

In the first 3 years, these public SaaS companies spend between 80 to 120% of their revenue in sales and marketing (using venture dollars or other forms of capital to finance the business). By year 5, that ratio has fallen to about 50% where it remains for the life of the business.

Despite the divergent revenue ramps, the marketing and sales spend patterns for these companies resemble each other strongly and serve as good benchmarks for high-growth SaaS startups.

In case you’re curious, below is the “typical” revenue growth trajectory for these SaaS companies: $50M in year five, $100M in year ten.

Tomasz Tonguz

More SaaS + Software Stats

Less than 20% of new revenue came from existing customers in the form of up-sell and expansion sales

High-growth companies offer a return to shareholders 5 times greater than medium-growth companies

How To Make Pricing A Constant Process In Your Organization

SaaS organizations are now operating in over 100 countries

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

The average company gets 16% of new ACV sales from up-sells and expansions, though companies with revenue between $10MM-$40MM are relying more heavily on up-sell and expansions

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

The median SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

Growing faster has twice as much impact on share price as improving margins

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; which may have a dramatically negative effect on your company’s growth. Source: Mckinsey

More Market Research Stats

The average SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added

To establish a revenue or lead-commitment based on your funnel metrics and revenue-growth goals, work backward from the gross revenue amount that marketing is responsible for generating (generally around 40%)

Over the past five years, the Global Biotechnology industry has grown by 2.0% to reach revenue of $301bn in 2019.

Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing

Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less

If you are charging $500 per month, you can afford to spend up to 12x that amount (i.e. $6,000) on acquiring a new customer

86% of SaaS businesses treat “New Customer Acquisition” as their highest growth priority, both in terms of executive support and funding available

Investment in marketing automation tools is expected to reach $25 billion by the year 2023

Looking for SaaS focused services?
SaaS Website Design
SaaS SEO Agency
SaaS PPC