How much SaaS revenue your marketing spend should generate

One of our SaaS portfolio companies recently shared their favorite metric to measure sales & marketing efficiency. Specifically, they look at new revenue booked over a given time period divided by sales & marketing spend during that period (New Rev/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 New Rev/S&M is, we decided to take a look at the sales & marketing efficiency of 83 publicly traded SaaS companies at the time they went public. This data comes from their S1 filing which is a prospectus issued before going public.

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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 $0.66 the year prior. In other words, they generated $0.64 of new revenue for each $1.00 of sales & marketing spend. That’s quite good given that on median, these SaaS businesses have net dollar retention of 107% at the time of going public meaning they keep and grow the prior year’s revenue. In other words the $0.64 grows to $0.68 next year, $0.73 in the 2nd year, etc. If that growing revenue stream only cost you $1.00, over time you’ll build an excellent, profitable business.

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.

Visit us at blossomstreetventures.com

co-founder at Blossom Street Ventures

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