SaaS Capital surveyed 1,000 B2B startups of varying sizes to find out just how much today they are spending in sales and marketing in this new era of efficiency. That full report here:
The answer? About the same as before 🙂 In fact, the median amount spent on sales is up from a year before. It’s not just Marc Benioff hiring more sales execs in the AI era.
Startups that are scaling are spending about:
- 15% of Revenue on Sales — and 18% for higher growth start-ups
- 10% of Revenue on Marketing (and trending up)
- 7% on Customer Success (trending down)
You can see this goes up as startups costs $5m ARR, and then stays fairly flat. Engineering and G&A come down after $20m ARR … but not sales and marketing. Nor has sales & marketing ever really come down as you scale.
The reality is even in the age of AI, to acquire more customers, you have to keep spending more. And as you saturate a market and increase your market share, finding that incremental customer often gets harder, not easier. Despite the boost you get from building a brand.
And yes, venture-backed start-ups spend far more in sales & marketing than bootstrapped ones. About twice as much:
VC-backed start-ups spend:
- 89% more on sales
- 100% more on marketing
- 71% more on R&D, and
- 14% more on customer success.
At least in the early days, you absolutely are at a sales & marketing disadvantage being bootstrapped. This is the data to back it up:)
And public B2B companies are even less efficient — not more.
If you’ve never looked at sales and marketing efficiency for public SaaS companies, this might surprise you. Surely costs must come down here once you become a market leader?
Nope. It gets even harder to find that incremental customer. Jamin Ball has a great summary here:
You can see public SaaS companies aren’t getting any more efficient, either, and in fact generally have a higher CAC than most startups.
Why? First, with their large existing bases, they can afford it. Renewals become a cash generating engine. Second, again, finding someone who … isn’t already a Salesforce customer just becomes that much harder.
In the end, most of us spend everything we can on sales & marketing as a percentage of revenue.
Startups spend as much as they can, in general, with their limited cash reach. And public B2B companies spend as much as they can to still maintain their target profitability margins.
15% of your ARR on sales and 10% on marketing is a good yardstick to spend. And probably 20% and 15% if you are growing quickly.
The well-funded often spend more.
