It's time to set realistic marketing budgets if you want to scale at speed

The ugly truth about GTM marketing budgets

Want to know how much you need to set aside for marketing if you're looking to scale a Tech SaaS? The answer is a lot more than you think. While typical marketing budgets are around 11% of revenue for an established business, you have to remember that brand awareness, the most intangible but valuable, accounts for the majority of marketing success. Post pandemic, budgets haven't recovered to pre-pandemic levels and are unlikely to do so as inflation has hit hard and recession looms large, so currently sit at about 9%.

On average Tech SaaS start ups rarely generate more than £250k in their first year of trading and typically this is because marketing budgets are set far too low. Often this is down to underfunding of start ups, bootstrapping or a general unawareness of what exactly is required to gain brand traction. Sometimes it can be because owners are busy going out and speaking to prospective buyers and there is so much to do in your first months and years as a start up. You've got to prove the concept, but that might not be possible if you're not building the awareness.

The bare truth is that if you want to scale at speed, such as to grow by 2 million ARR in year 1, you have to invest in your marketing budget and invest heavily. The components of those budget are fairly straight forward for your initial Go To Market (GTM) budget. You're looking to build brand awareness and fast. One of the ways to do this, and the most expensive is through spending on advertising as that will be the quickest way to gain attention. Advertising will not be your only marketing activity, but if you think you can sell a business on social media engagement alone, you have to add time and patience to your list and to revisit that ARR target revenue. Next up on your list should be events, sponsorship opportunities and partnerships, to help bolster your revenue. Then there is thought leadership, PR and a tonne of content.

How much should my budget be?

Example - if you are looking to grow by £2million ARR with zero brand awareness in year 1, you have to set aside between 25 - 30% of desired revenue and marketing talent to build and execute the marketing plan. The activities you choose to drive those conversions will involve a series of well executed lead generation funnels which will deliver Marketing Qualified Leads (MQLs) to your sales teams. You are starting on the back foot with zero brand recognition or awareness. People buy businesses and the people in them and they need to know, like and trust your brand.

However, what might soften this blow is that with digital marketing, skilled marketers and control and review, you will be able to keep an eye on how successful your marketing is. You can also track what is working, and what isn't. Continuously improve your marketing and continue to reinvest on those activities that are driving the most conversions. You must give this time and depending on the size and value of the product, time for it to sell in also.

Defining your marketing success

In order to scale at speed you need to have both a sales and marketing function, even if it is one person for each, who are able to collaborate and work together. The main focus of the marketing lead is to generate MQLs to hand over to the BDE or sales function to start those direct conversations. The teams need to be able to work in conjunction with each other. The value proposition has to be crystal clear and you must, at all costs, develop messaging that talks to your buying personas. So when looking to build those teams focus in on how your marketing lead has build collaborative relationships with sales. Evidence of building sales tool box for them to use to sell in, will illustrate how they can work with a sales focus in mind.

Other ways to grow

Partnerships are a good area for SaaS businesses to develop their solution. If you understand the business you are targeting, you can partner with complimentary services to ensure that you offer up a broader proposition to your customers. This makes you more attractive to buyers as an end to end solution is really attractive to them. You can share resources with the partnership and identify key clients to approach and market to. If you're a HR tech SaaS platform, your preferred partners might be businesses that offer apprenticeship services, employer branding specialists, or HR consultants. You might also consider some training or L&D partnerships depending on the types of SaaS you are.

Got a question? Drop us a note here hello@rad-marketing.co.uk follow #snackablemarketing on LinkedIn for tips, ideas and suggestions.