There are many ways to measure SaaS sales & marketing efficiency. One of the simplest is to look at new revenue booked over a given time period divided by sales & marketing spend during the period (New Rev/S&M). While the sales & marketing expense in a period may not necessarily be attributable to a given period’s booked revenue due to long sales cycles, it’s still a good measure especially when looking at the trend.
In order to know what a good level of New Rev/S&M is, we looked at the sales & marketing efficiency of the last 68 SaaS IPO’s going back to MongoDB’s IPO in October 2017. This data comes from their S1 filing which is a prospectus issued before going public.
As you can see, on median the SaaS businesses have sales & marketing efficiency of $0.66 in the year they filed their S1 to go public. In other words, they generated $0.66 of new revenue for each $1.00 of sales & marketing spend. A couple other observations:
The average is higher. Note that while the median may be $0.66, the average is $0.95. The average SaaS company generated $295mm of revenue at IPO while on median, revenue was $177mm. The higher sales efficiency at the average may indicate larger companies do have some economies of scale over smaller ones.
The last 20 have been exceptionally productive. The last 20 IPO’s averaged $1.05 cents. MeridianLink and Infusion were exceptionally productive at $4.98 and $2.07 respectively.
Given that the median is $0.66, shoot for that figure or get as close to it as you can and you’ll be in great company.