What do you spend the most on as an early stage SaaS startup?
Cem Bulut
37 replies
Hello all! As a pre-Series A SaaS startup, what should you allocate the most of your budget?
Is it best to focus on Marketing, Community or should Product Development be the first priority at this scale?
Do you have any benchmarks such as 20% of your total spending would go to Marketing at this level?
Thanks!
Replies
Ali Naqi Shaheen@ali_shaheen
WorkHub
I think you should focus on both things side by side. You can have interview sessions with potential customers to spread the word about your product and put extra effort into making your product the best fit for the market.
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Magnetiq
@ali_shaheen Thank you for the response! Product and marketing totally have a two-way communication. We try to make the best use of the customer insights by interview sessions, happy to know we're on the right track there. What do you think of the role and ideal weight of performance marketing in these early stages?
Hey Cem, I echo Alex's advice. When working in an early-stage startup, we focused on both marketing and product development at the same time. Marketing didn't really exist at this point, we spent a lot of our time on interviewing potential customers to work out what our message-market fit would be... way before product-market fit. We also mapped out their experience to understand their anxieties/triggers - this was then fed back into the product development side of things.
Spend wise, I'd say 20% was a fair break down. Within this 60% was brand, 30% was product marketing, and 10% performance marketing.
Magnetiq
@gingerbeer84 Thank you for the insights! I understand that you initially used Marketing to fine tune the product so it also feeds product development. Also it has been very insightful for me that you prioritize brand and product marketing over performance at this rate. I'd think performance would get a higher share to attain fast growth, but on second thought, it's not very wise to raise a building without laying a solid foundation.
Research AI
Hi Cem. Do you have a sales team and are you doing any outbound outreach?
Magnetiq
@mavlonbek_muratov Currently we do not have a sales team but we are doing some outbound outreach as well as working on partnerships
Ping pong tables and beanbags :D
Jokes aside, as an early stage SaaS (soon to launch on Product Hunt BTW) we focused and keep focusing mostly on finding and increasing product market fit.
For sure, that entails a lot of product and product experiments, but also a few small marketing experiments.
I'm of the idea that before you invest heavily on top of the funnel you need to make sure your funnel isn't too leaky.
For us there isn't really a rule of thumb we are following (e.g., a fixed percentage a month), rather we stay close to the data and keep iterating, when something works, we double down, as much on the product as we do in marketing.
Magnetiq
@david_tedaldi1 Ping pong tables and beanbags sound much more fun 😁 But data and agility seems to be critical while external benchmarks should not be seen as laws. That's a good point, thank you!
Hi Cem,
I'd ask myself which focus can unlock the most (sustainable) growth for you.
If your churn is super high, don't invest in marketing and instead focus completely on Product Development. At this point, most new users would simply churn away.
Once you get closer to PMF and the retention rates improve considerably, invest more heavily into marketing as this will unlock more growth than just Product Development.
Magnetiq
@phil_schwengel Thanks for your response! We might be exposed to the pressure to show instant growth at the early stages but putting sustainability of growth first might be a healthier approach to succeed in the long term. Sometimes it's difficult to balance these in practice.
@cem_bulut Completely agree with what you said. It can be hard to balance this in reality.
Just want to mention LTV here:
100 users that love your product and will keep using it for 1 year is worth more than signing up 500 new users of which most churn after a month.
Marketing (and research), then Product Development. Don't build unless you have buyers ready
Magnetiq
@remotebranch Thanks! Insights from new buyers will feed the Product Development indeed, but do you think the product needs strong landing features to attract the initial buyers first, and then marketing should be prioritized over product development?
@cem_bulut Yes exactly, but I would start by marketing a waitlist that outlines the benefits customers are buying before even building out the initial features.
As a heavy technical founder, I admit I've spent far too much (nearly all) of my time on the product and very little on marketing.
I think it depends on who you have on your team, and what is highest priority at your stage.
I think there is a time for heads-down product focus, and sometimes that is still what I get the most hourly ROI from, but it's easy to fall into the trap of procrastinating on the important sales/marketing work just because you're not great with it.
My goal is to spend 60% on sales and marketing, and 40% on product, moving forward. :)
Magnetiq
@frontlyapp Product will never be "perfect" so it might be true that you should put your product out there and improve it on the way, as far as you manage to retain your customers at hand, right?
People.
Magnetiq
@brittany_ferrero Definitely. How would you shape your organization's focus then? Would you first invest in talent acquisition on development?
60% product + 15% employee satisfaction/rewards + 25% growth and brand. This is intentional because we want to unlock virality at a certain stage. For that to happen, we want to use pull instead of push marketing.
Magnetiq
@arunachawla People is definitely an important part of the equation. In terms of product/growth balance, this seems reasonable to avoid spending your money with low ROI and lose potential customers. Thank you!
@cem_bulut 100%. I think it's critical to test at this stage instead of running after vanity metrics. Once you find what works, hit the pedal :)
We're pre-series A and I'd say we're about 60/40 product-to-marketing. We're also PLG, so focusing on product obviously should the be the priority, and marketing comes as a close second highly focused on acquisition and then re-engagement.
Magnetiq
@stephanie_totty Thank you for your response! So even though you adopt PLG strategy and focus primarily on the product, marketing takes a great share of the budget as well.
@cem_bulut For sure. Gotta have users for a product to be successful ;)
Product, product, and then product! All three times in close loop with (potential/) customers.
Before anything else you have to have something to sell!
AI Link Manager
@mavlonbek_muratov Unfortunately, you can't prioritize one over the other.
Depending upon your stage of the product, this would vary. Perfect your product in the current form, market aggressively, build for the next phase of growth, market again and so on.
However, if you have resources, I would recommend spending equal bandwidth on both and running the workstreams together.
AI Link Manager
@cem_bulut Agree with you :)
Magnetiq
@gauravgoyal_gg It's a never-ending iteration to improve & ship it and then market it. Since sustainable growth would come from product's competence, I would think product development might be one step ahead in the early stages. On the other hand, the need for user feedback might balance it.
For us we split marketing and product development 50/50, we need to speak to enough customers to know what to build and what not to build. I'd say this is a good approach until you know you have product market fit!
Magnetiq
@alex_vidon_ai This seems like a reasonable approach, since the product is not quite done yet although you need to reach customers both for growth and the insights to improve. Thanks for sharing!
I think Product Dev is most critical at the earlier stage, especially as you are working toward product/market fit. Marketing is important of course, but marketing a product before it has strong traction with a core group of users may not be the best use of funds.
Magnetiq
@dan_lacivita If you have high churn, it's like trying to fill a leaking bucket.
@cem_bulut Well said..agree 100%!
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