Marketing teams should scale alongside new business revenue. As the company generates new business, the marketing budget gets bigger and the team scales accordingly.
Companies often think about go-to-market (GTM) spend in terms of payback periods - if we put a dollar into the business today, how long will it take to get that dollar back in terms of revenue. For example, if we spent $15m on GTM in 2019 and generated $15m new business ARR in 2019 that would be a 12 month payback period. A 12 month payback is considered great for most SaaS businesses.
When you combine the idea of payback periods along with industry benchmarks for marketing spend you start to get a picture of what marketing budgets look like as you scale. According to Keybanc, SaaS companies spend between 15% and 50% of their go-to-market budget on marketing.
When you map out this percentage spend against payback periods, you start to get a sense of what your marketing budget at different revenue targets should look like.
The mix is largely determined by the sales motion. Generally, Self-serve SMB businesses require more marketing spend whereas enterprise sales heavy businesses require less marketing.
From here you can start to get a sense of what you can afford and how big your marketing team could be at each point in scale. Generally, marketing teams (full-time-employees) account for 35-40% of your marketing budget.
Another helpful datapoint comes from Insight Partners, where they provide benchmarks for new logo bookings per marketing employee (FTE).
As companies target bigger customers, individual marketers are able to support more revenue scaling from $498k/FTE to $1,238k/FTE. Bigger ACV companies typically have smaller marketing teams as the go-to-market strategy is more outbound sales led, rather than through digital growth marketing tactics.
By taking these benchmarks and extrapolating them against new business targets, you start to get a clear picture of what your marketing team should look like over time.
So for example, if I want to generate $9m in new business this year, and most of my customers pay me $50k each, then i’ll want to have a marketing team of around 11 people, but if i mainly focus on SMB customer then i’ll likely need a team of 18 people.
Of course, benchmarks and extrapolations only tell part of the story. Some companies index higher on programs vs. people. The exact mix depends on what you’ve found to work for your business in the past and what you want to experiment with in the future. Additionally, your capital position will naturally change your level of investment.
From personal experience, I found the above benchmarks to be a bit inflated to how we’ve built the team at Lattice. Historically, we’ve tended to operate a lean team of generalists, hire more contractors and indexed towards more program spend. But as we’ve added more specialization on the team, the numbers start to even out towards the above benchmarks.
Regardless, understanding the relationship between new business targets, size of customer contracts, and go-to-market motion will help you to determine the size of your marketing team as the business grows.