How to create your first SaaS Marketing Budget

In the first week of most engagements I do with SaaS Company CEOs, the inevitable question comes up:

What to budget for Marketing?

There are multiple guidelines that people usually fall back on, ranging from % of ARR to one-time, fixed budgets for some of the fundamentals (like getting a website in place).
 

Every situation is different. Here is how I typically approach this:

  1. Spend responsibly  - Don't spend money unless you can manage the things you spend it on. For example, don't spend money on Search Advertising if you cannot afford someone with the right expertise who can manage this spend with the right focus.
     
  2. Build a foundation - Only start things that you can sustain. When you launch a new website, make sure you can keep it fresh and have thought about providing a great experience and service to the visitors. Don't launch an event, a blog, or a series of webinars unless you can keep it going at whatever pace is sustainable for you.
     
  3. Look bigger then you are - Don't sacrifice quality just to be able to do more. As a fast-growing startup, you want to look bigger than you really are. This starts with credibility, consistency, and predictability.
     
  4. Know what you want - The reason guidelines that use a percentage of revenue have broad ranges (some say 6% to 20% of ARR) is that some startups have a mandate to capture share fast (and that's why they got a big Series A funding check), while others are expected to get to profitability as soon as possible. This will drive your marketing budget % allocation.
     
  5. Don't cut corners - For example:
    • Your team should not start with Paid Advertising or Content Marketing unless you have a solid infrastructure to nurture and follow up with prospects as they start hitting your site.
    • Don't run campaigns unless you can do A/B tests.
    • Don't promote content that is not good enough to drive engagement from your audience.
    • Don't hire young, high energy marketing team members unless you know what they should be working on, and you can provide the right coaching.

After considering the above ideas, it is helpful to use a template to get your first budget in place. This is only a starting point, and it will change over time. 

 

Get a free budget planning template
 

Fill out the form below and we'll send you an easy to use spreadsheet. The sheet includes guidance to set your Marketing Budget $ amount based on:

  • All budget categories we typically encounter for SaaS Companies
  • % of ARR given your market share vs. profitability focus
  • What growth stage your SaaS Company is at
  • The maturity of your sales and marketing funnel

Free Budget Template

Focus
Estimate Annual Recurring Revenue
$
Date
Date
When did you get your first paying customer?

 

There is a sequence of investing in certain areas depending on how mature your marketing function is. Our B2B SaaS Planning Templates help with making sure you optimize the order of your investments to maximize budget impact. More here.

 

Example Playbook that optimizes the ROI of Marketing Budget allocation