IN THIS ARTICLE
Wondering how much marketing budget you need for your SaaS go-to-market? Here's what you need to keep in mind when planning investments.
Every year, thought leaders, influencers, and advisory firms like Gartner present SaaS marketing spend benchmarks.
These present similar outcomes - every SaaS company is striving to drive more demand for their product.
What comes out is that marketing leaders need to spend more than is available:
71% of CMOs believe they lack sufficient budget to fully execute their strategy.
Gartner, "The 2024 CMO Spend Survey"
Stats like this do little to help SaaS start-ups plot their budgets, let alone answer the question they really care about: how much should I spend on marketing?
The cost of marketing isn't a closely kept secret - as we shared here - but what's not so widely known is how you can build budgets to maximize marketing spend.
Let's answer that question.
What Is A Typical Marketing Budget?
The first step is to look at what a common marketing budget is.
Marketing budgets are set several months before the financial year starts. If you're pre-revenue, it's likely that you'll be creating a budget as part of investment cases.
You'll be asked to create a list of spend across the year containing investments for, but not limited to:
- Sales leads
- Content development
- Website development
- Graphical design
- Software, e.g. CRMs, email marketing, prospecting tools
- Branded merch and stationery
- Events
While it's easy to be tempted into building a budget that only covers the first item - sales leads - you have to approach the full SaaS marketing funnel to get to that point.
With only so much money available to market your product, it's critical to pull together a budget that not only invests the right amounts, but even more so at the right time.
This is what frames the six things you need to consider when building the budget. Let's get started!
Finance Set Budgeting Guardrails
Your budget has to be based in reality, and that's going to come from the P&L.
CFOs are conscious of every dollar that's spent, and it's your job to support that.
Your prior year's performance and the margin will determine what's given as a starting point.
You should approach your budget with a sense of the returns from marketing initiatives.
CFOs want to be able to understand:
- How your demand generation spend has translated into sales leads
- What's increasing lead velocity in the sales pipe
- How events contributed to the won MRR in the year
- When the leads came in
- What campaigns contributed to creating what leads
- Where leads are coming from (geography and industry)
- Which leads have strong customer lifetime value and who churned
With this information you can begin to create a working theory on how you've performed last year, and then look towards how the market is performing.
Align Budget To Market Development Stage
Geoffrey Moore's "Crossing The Chasm" remains as important today as it was when its first edition released in 1991. That's because Moore maps out the way that markets - consumers - evolve. From those innovators and early adopters who love new tech through to the laggards that use tech because they have no option, it's essential to SaaS marketing.
Knowing where you are in your market (or category) is going to give you a sense of what needs to be in your budget.
Early Adopter Stage
If you know that you're still in the early adopter phase - where hands on, founder-led sales rules - then less is needed on driving leads, and more will be needed on brand awareness and enabling customers to become your champion.
Early Majority Stage
If you're seeing sales slow and you're not getting more consistent, larger deals coming in, you're in the chasm between early adopter and early majority.
Crossing that is where budgets need to be shaped around activities to help you connect your early adopters with a larger audience. That'll mean more demand generation spend, events, tools like G2, and more.
Where To Get This Information
You'll get the answers to all of these questions by working with your finance, sales, and customer success teams. Externally, you can look at Gartner's Hype Cycle for indicators of emerging categories. You'll also get to some form of conclusion by looking at the marketing funnel.
Having this means you'll then be in a strong place to look at what skills and resources you have and where you may need to invest to win your market.
Build Around Internal Skills
Underlying the list of investment choices based on your last year's performance and market development stage is what's at your disposal to get to market.
Your marketing team cannot be a Swiss army knife and give you what you need to achieve your goals. That's why you need to look long and hard at your internal skills by using a tool like VRIO.
From this assessment, you'll have a number of options to consider:
- Hiring a full-time employee who can cover a skills gap - for example, if you can see that your content and email marketing drives leads, but you struggle for time to cover this effectively, an Inbound Marketing lead would be a shrewd hire
- Bringing on-board tech to improve productivity around paid ads - for example using HotJar and Opteo to track website behavior, optimize content, and then spend your PPC budget more effectively with AI's help
- If you've built a large database of contacts who show buying signals, but aren't converting - using a Marketing Development Rep on a fractional basis would help increase leads
Don't hurt your plans by not budgeting around your skill gaps, these are a must have.
Surface The Must, Nice, and Could Haves
"Anyone can spend more."
As tough a pill to swallow that is, it's true. Leadership teams don't want to see a budget made from fantasy. A way to shape the narrative around your budgets is by making it very clear what is must have and nice to have. That makes it real.
To do that, introduce three categories of marketing spend into the budget.
- Lights On
This is the spend that is critical to the brand and the product being found. At its simplest, that means things like:
- Website hosting and development
- CRM
- Marketing Automation System
- Reporting tools
- SEO tools
- Design tools
- Sales prospecting tools
- Agencies / fractional hires - Showtime
This is where you get your brand and product's name out there by running campaigns, attending events, and much more. That means things like:
- Paid ads
- Link-building
- Digital PR
- Events
- Partner marketing development - Initiatives
This is where you get to present options on investments to support innovation, research, and sales-led campaigns. This can include:
- Sales-led campaigns
- Primary research
- Podcast guesting
- Merch
- Training
The golden rule is that you should split spend this way:
Lights On - 35%
Showtime - 50%
Initiatives - 15%
Doing so gives you the freedom to present options.
Present An À La Carte Budget
By going through these steps, you'll be well placed to give options to your sales and success teams, and leadership group.
That means giving options around the three strands of your budget, tied to the goals that you've been set and split by - slightly missing target, hitting target, and going beyond target.
Keep it simple and to a bullet point level. The goal is to present different investment options and different outcomes, all the while leaving enough wiggle room to adapt should it be needed.
Set And Review Each Quarter
As you present and revise your budget, you should keep to a quarterly set-and-review cycle that gives you the flexibility to change your budget should you need it.
When it comes to purchasing the items in your budget, try to think about the benefits of fixed-cost, month to month, and different payment options. Support the business by creating a cash-flow sensitive budget.
With this set-and-review approach, you can project and commit to investing in different initiatives, which is highly appreciated by other revenue team members, and enables your business to adapt to changes in the buying environment.
Don't fall into the trap of setting the budget and leaving it be. While finance will do the same, keep track of your budgeted and actual spend, and report that back.
Do You Need A Sample Marketing Budget Plan?
The biggest budget challenge that marketing team's face today isn't the amount of dollars they have. The issue is that we haven't approached budgeting in the right way.
That requires a fresh take, like this, and to lead the way for adaptive budgets.
Marketing is too often seen as a cost center. With these six considerations, you'll be able to approach budgeting in an entirely new, pragmatic, and responsible way.
To keep the momentum, be sure to download a copy of our free sample marketing budget plan - ready to customize within Excel.
Want to talk about budgeting and your plan? Talk to me anytime, here.
