SaaS Spend as a Percent of Revenue in 2023

Sammy Abdullah
3 min readJun 12, 2024


Recently we did a blog showing expense categories in SaaS as a percent of revenue at the time of IPO. Those categories are COGS, R&D, S&M, and G&A. For this blog we did the same expense category analysis but this time we did it as of 2023 and 2022, as opposed to the time of IPO. Below we show the data for every SaaS company that has IPO’d since 2017 (if you see a “ — -“, that means the business was acquired sometime between 2017 and 2022, so no data is available).

Observations are below.

65 IPO’s since 2017. The data set includes 62 companies in 2023 and 65 companies in 2022. Three were acquired between 2023 and 2022. Note that all the data below will discuss medians only, not averages.

COGS. In 2023, COGS was 25% of revenue and in 2022 it was 27%. These are big mature companies with scale, so the data in our view debunks the myth that COGS should be 20% of revenue for a SaaS company. That’s just not realistic.

Sales & Marketing. In 2023 S&M was 40% of revenue and in 2022 it was 46%. The percentage decline makes sense to us as 2023 was a year in which SaaS companies really emphasized efficiency over growth.

Research & Development. In 2023, R&D was 25% of revenue and in 2022 it was 27%. R&D is a ‘black box’ whereby ROI is very hard to measure. So in our view R&D spend shouldn’t be over 30% of revenue for any SaaS company that is beyond the Series A.

General and Administrative. G&A was 21% of revenue in 2023 and 23% in 2022. Obviously this number is to be kept as low as possible at all times.

Improved profitability. In 2023, SaaS operating losses were 15% of revenue versus 28% in 2022. That’s a remarkable improvement, however it is coming at the expense of growth which can be very dangerous for valuation.

While these SaaS companies are large and mature, the data is a great guide to where Series A+ SaaS companies should be on their spend as a percent of revenue.

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