Great SaaS businesses generate $0.64 per $1 of S&M

One of our SaaS portfolio companies recently shared their favorite metric to measure sales & marketing efficiency. Specifically, they look at new contracts booked over a given time period divided by sales & marketing spend during that period (ACV/S&M). It’s one of many ways to measure sales & marketing efficiency, but it may be the most important and easiest to calculate.

In order to know what a good level of ACV/S&M is, we decided to take a look at the sales & marketing efficiency of 78 publicly traded SaaS companies at the time they went public. Since on median, these businesses went public at their Series D round (9 years in), the metrics below show sales & marketing efficiency at the Series D and close to the Series C rounds since we show ACV/S&M in the year of the S1 filing and the year prior.

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As you can see, on median the SaaS businesses have sales & marketing efficiency of $0.64 in the year they filed their S1 to go public and the year prior. In other words, they generated $0.64 of new revenue for each $1.00 of marketing spend after their Series C and Series D rounds. That’s quite good given that on median, these SaaS businesses have net dollar retention of 104% at the time of going public meaning they actually grow their existing contracts every year.

The average sales & marketing efficiency is a little higher at $0.93 in the year of IPO, with a wide range of $0.06 (terrible) and $7.50 (phenomenal). Given that the median is $0.64, shoot for that figure or get as close to it as you can, and you’ll be in great company.

Written by

co-founder at Blossom Street Ventures

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