SaaS Talk™ with the Metrics Brothers - Strategies, Insights, & Metrics for B2B SaaS Executive Leaders Sales/Marketing Expense Ratio
Feb 28, 2025
Discover the intriguing dynamics of the Sales/Marketing Expense Ratio in B2B SaaS. Learn why the right balance between sales and marketing is essential for success. Find out what a 2:1 ratio signifies and how it affects growth and customer acquisition costs. The hosts discuss public and private company trends, along with key metrics like CAC. They also emphasize the importance of collaboration between sales and marketing leaders for optimizing budget allocations. Get ready for insightful strategies to enhance financial health and drive business growth!
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CAC Ratio vs. S&M % of Revenue
- Sales and marketing as a percentage of revenue is easily benchmarked but less effective than the CAC ratio.
- CAC ratio better reflects efficiency by focusing on new ARR, aligning input (expenses) with output (new revenue).
Sales-to-Marketing Expense Ratio
- The sales-to-marketing expense ratio, calculated by dividing sales expenses by marketing expenses, offers valuable insights.
- Expressing this ratio as sales as a percentage of total sales and marketing can be less intuitive.
The Importance of the Ratio
- Dave Kellogg presents a case study where a company's sales and marketing spend decreased slightly, but the ratio of sales to marketing expenses increased significantly.
- This highlights the importance of tracking the ratio, as subtle shifts in individual expenses can have large impacts on overall balance.