2022 Spending Benchmarks for Private B2B SaaS Companies

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 2022, 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 16%, down 11% 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 10%, up 11% 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%, down 9% from the previous year.

What percentage of revenue do SaaS companies spend on Cost of Goods Sold (excluding Customer Support/Success)?

• 5% on Hosting
• 5% on DevOps
• 9% on Pro Services CoGS
• 5% on Other CoGS

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 22%, down 12% 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 15%, down 25% from the previous year.

SaaS Spending by Company Funding

As discussed in 2022 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 30% per year, whereas companies that have raised venture capital with at least $1 million in ARR are growing at 41% 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.

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 44% more on marketing, 61% more on R & D, and 70% more on general and administrative costs while spending 100% 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 and funding sources, we compare companies growing above their respective median growth vs. those growing below their respective median.

The difference between higher-growth bootstrapped companies and lower-growth bootstrapped companies is subtle. Higher-growth bootstrapped companies spend 22% less on G&A while spending 10% more on sales and 33% more on 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 45% more on sales and 50% as much on marketing vs. lower growth equity-backed companies. The higher-growth equity-backed companies also spend approximately 50% more on R&D and 18% more 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.

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:

• 5% on Hosting Costs
• 20% on DevOps Costs
• 10% on Pro Services CoGS
• 5% on Other CoGS
• 10% on Customer Support/Success
• 10% on Selling Costs
• 10% on Marketing Costs
• 20% on Research and Development
• 10% on General and Administrative

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