How to determine the right budget size for my SaaS marketing plan?

SaaS marketing can be expensive. Many SaaS vendors’ CMOs need help answering a basic question about the rationality behind their marketing budget size. You can guess the most popular answer… Yes, it “happened historically.”

So, what if the budget is limited? How big is the SaaS Demand Generation budget needed? What are the best practices? Which benchmarks you can use to assess your marketing spending?

I am going to cover the most common SaaS Marketing budget and ROI maximization questions here. You can follow the next suggested steps to set your Marketing SaaS budget.

1. Assess Your Current Financial Position

Start by evaluating your available resources:

• Calculate your Annual Recurring Revenue (ARR)
• Review your overall operating expenses
• Consider your company’s growth stage and goals

2. Use Industry Benchmarks as a Starting?Point

• Most SaaS businesses invest 30–40% of their ARR in marketing
• Smaller companies might allocate around 10–25% of revenue to marketing
• Larger SaaS companies often spend closer to 40% on marketing

3. Analyze Key?Metrics

Focus on crucial SaaS metrics to inform your budget decision:

• Calculate your Customer Lifetime Value (LTV)
• Determine your Customer Acquisition Cost (CAC)
• Aim for an LTV: CAC ratio of at least 3:1

4. Consider Your Growth?Goals

Align your budget with your company’s objectives:

• Maintenance of current growth: allocate around 10% of revenue
• Aggressive growth: consider allocating up to 25% or more

5. Evaluate Marketing Channels

Research potential marketing channels and their costs:

• Content marketing and SEO
• Pay-per-click advertising
• Email marketing
• Social media marketing
• Webinars and Podcasts
• Live Events
• Formal customer/partner referral program
• Partner Program Marketing
• Freemium licensing conversion

6. Start with a Minimum Viable?Budget

If you’re just beginning, consider a starting point:

• Allocate at least $3,000-$5,000 per month for a mix of PPC and SEO

7. Tailor to Your Business?Model

Customize your budget based on your specific SaaS product and target audience:

• B2B products typically spend 9.6% on marketing
• B2C products often allocate up to 19.5%

8. Allow for Flexibility. Measure and re-evaluate your approach every?quarter

Remember that your marketing budget should be dynamic:

• Set aside funds for A/B testing and optimization
• Be prepared to adjust based on performance metrics

By following these steps and continuously analyzing your results, you can determine and refine the right budget for your SaaS marketing efforts. Remember that the ideal budget will vary based on your unique circumstances and may change as your company grows.

Happy selling and stay tuned for more SaaS Sales and Marketing insights!