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Spending Benchmarks for Private B2B SaaS Companies

November 18, 2021

SaaS Capital conducts a survey of private, B2B SaaS company metrics in the first quarter of each year. Our 10th annual survey, completed in March 2021, saw more than 1,500 SaaS companies respond. This post summarizes benchmarking data around the topic of spending. Survey takers were asked, “What percentage of revenue is currently spent on the following? (Percentages should total less than 100 if your company is profitable, and more than 100 if it is not.)” Here are the top-line results for companies with at least $1 million in annual recurring revenue (ARR).

What percentage of revenue do SaaS companies spend on sales?

  • The median percent of annual recurring revenue spent on selling costs is 18%, down 10% from the previous year.

What percentage of revenue do SaaS companies spend on marketing?

  • The median percent of annual recurring revenue spent on marketing is 9%, down 10% from the previous year.

What percentage of revenue do SaaS companies spend on customer support and customer success?

  • The median percent of annual recurring revenue spent on customer support and customer success is 11%, up 10% from the previous year.

What percentage of revenue do SaaS companies spend on Cost of Goods Sold?

  • The median percent of annual recurring revenue spent on Cost of Goods Sold (excluding Customer Support/Success) is 15%, unchanged from the previous year.

What percentage of revenue do SaaS companies spend on research and development?

  • The median percent of annual recurring revenue spent on research and development is 25%, unchanged from the previous year.

What percentage of revenue do SaaS companies spend on general and administrative costs?

  • The median percent of annual recurring revenue spent on general and administrative costs is 20%, up 18% from the previous year.

SaaS Spending by Company Funding

As discussed in 2021 Private SaaS Company Growth Rate Benchmarks, equity-backed funding is generally correlated with growth. It may not be a causal relationship, but there has been a historical relationship. On median, bootstrapped companies with at least $1 million in ARR report growing at 22% per year, whereas companies that have raised venture capital with at least $1 million in ARR are growing at 32% annually. The chart below shows median spend benchmarks, as a percent of ARR, for equity-backed companies and bootstrapped companies with at least $1 million in ARR.

SaaS Spending by Company Funding 2021

The obvious takeaway is that bootstrapped companies are spending less (and are profitable), while equity-backed companies are operating at a loss to support a goal such as growth. The most dramatic differences include equity-backed companies spending approximately 40% more on marketing, R & D, and general and administrative costs while spending 82% more on sales.

The increased spending by equity-backed companies on sales, marketing, and R&D is somewhat expected. The difference in general and administrative costs is noteworthy. One possible explanation for why equity-backed companies spend more is the need for a robust administrative and finance team to support reporting requirements to investors, including regular board meetings and audits.

Drilling down on growth, we compare companies growing above the median growth vs. those growing below the median.

SaaS Spending by Growth Rates 2021

The difference between higher growth bootstrapped companies and lower growth bootstrapped companies is subtle. Higher growth bootstrapped companies spend approximately 25% less on CoGS costs while spending approximately 50% more on marketing.

The reduced spend on CoGS is significant as it represents inherent and intrinsic “free” growth from higher gross margins. In other words, higher gross margin companies naturally get “free” higher growth, or at least have “extra” cents per every dollar of revenue to spend elsewhere (i.e., sales, marketing, or R&D).

The difference between higher growth equity-backed companies and lower growth equity-backed companies is more pronounced.  Higher growth equity-backed companies spend approximately 30% more on sales and approximately 55% as much on marketing vs. lower growth equity-backed companies. The higher growth equity-backed companies spend approximately 10% less on general and administrative costs.

SaaS Spending by ARR Levels

For benchmarking purposes, another metric by which to compare your business to your peers is by revenue scale.

SaaS Spending by Company Size 2021

The chart above breaks spending levels down by company size. For example, a typical B2B company with $3 Million to $5 Million in ARR spends the following as a median percent of ARR:

  • 19% on General and Administrative
  • 26% on Research and Development
  • 10% on Marketing Costs
  • 20% on Selling Costs
  • 11% on Customer Support/Success
  • 12% on Cost of Goods Sold (excl. Support/Success)

The charts above plus additional data are available in the summary report below.

Spending Benchmarks for Private B2B SaaS Companies

Nick Perry

SaaS Capital® pioneered alternative lending to SaaS. Since 2007 we have spoken to thousands of companies, reviewed hundreds of financials, and funded 80+ companies. We can make quick decisions. The typical time from first “hello” to funding is just 5 weeks. Learn more about our philosophy.

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