🎅 B2B Marketing budget season – a directional SaaS tip based on two questions:

❓ What marketing investment is needed to deliver $1 of ARR in a SaaS business?

💰 How do I, for example, plan to budget in increments of $100k to generate $7.5M in pipeline and $1.5M in closed/won?

𝐂𝐨𝐬𝐭 𝐨𝐟 𝐚𝐜𝐪𝐮𝐢𝐫𝐢𝐧𝐠 𝐚 𝐜𝐮𝐬𝐭𝐨𝐦𝐞𝐫 (CAC) 𝐚𝐧𝐝 𝐌𝐚𝐫𝐤𝐞𝐭𝐢𝐧𝐠 𝐄𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐜𝐲 𝐑𝐚𝐭𝐢𝐨𝐬

Assuming you are SaaS and likely tracking CAC, companies invest on average $0.30 across sales and marketing to generate $1 of recurring revenue, with top performers being the most efficient at $0.20 per $1 of ARR (seed stage excluded).

Marketing Efficiency Ratio (MER) measures how effectively your marketing investment (headcount AND programs) translates into pipeline. A common MER benchmark is a 3:1 ratio of dollars spent to pipe creation. Given the goal of generating $7.5M in pipeline and $1.5M in closed/won ARR:

So if your CAC to ARR ratio is 1:3, you’d need to invest approximately $500,000 to generate $1.5M in ARR.

For the MER, if you’re aiming for a 3:1 ratio, to generate a $7.5M pipeline, you would need to invest around $2.5M.

Keep in mind that these ratios might not hold true as you’re still figuring out product market fit. And If you’re working in increments of $100k, you can adjust these numbers proportionately. But this range should help quickly calibrate if you are headed in the right direction.

🤔 What directional budgeting advice would you give in times like these?