When we work with B2B SaaS startups, one of the first questions we hear is,
“how much do we need to spend on ads?”
And that’s a dang good question considering how loaded the question is.
There are so many variables to consider that if an agency just instantly gets back to you with a number without probing, then run the other way.
There is never a one size fits all approach with ads and unfortunately there are tons of high level marketing professionals that approach each client and campaign the same.
In this blog post, we will break down the questions that we ask to our prospects and clients regarding advertising spend - and how we use the answers to formulate a rough and realistic outline for advertising spend that they will need to hit their goals.
So let’s jump in.
Step 1: Determine the Client’s Desired Growth
Determine how many net new customers that the client wants during your service agreement and also get an understanding of what the Average Customer Value (ACV) is.
If the client doesn’t have these values, that is alright - it just means that we will likely need to be more lean when starting out that way we can ensure we are spending on advertising platforms profitably.
Step 2: Find out the “Good” Things About Your Prospect’s Marketing
We like to ask the following questions. Any answers in the affirmative receive a value of 1, whereas any other response of maybe or no receives no value.
- Have you reached MVP or PMF?
- Do you have established beacheads?
- Have you confirmed, and can you reach your ICP?
- Is your ACV/ARPU healthy and profitable without marketing help right now?
- Do you have 10 paying customers?
- Do you still have your first paying customer?
- Do your accounts provide references and referrals?
- You do not have high customer churn, right?
- Have outside investors put faith in your company by providing growth capital?
- Has a 3rd party, influential analyst, started covering you?
Step 3: Find out the “Bad" Things About Your Prospect’s Marketing
Next, we need to determine some things about the prospect’s market. Generally speaking, any answer with a negative response (no) receives a value of 1.
These are the questions we generally ask:
- Are you in a mature market? (Think Crossing the Chasm)
- Is your TAM substantial enough to reach on many different platforms that you could list right now?
- Has your first customer in your segment praised your solution?
- Is there a market analyst/marketplace category that your product fits into? (For example, Gartner Magic Quadrant, Forrester Wave, Capterra/G2/Crowd/Software Advice categories).
- You aren't encountering competitors when selling to your prospects, right?
- You haven't lost deals to the competition, right?
- Is there a high monthly search volume for the top 5 high intent keywords?
- Are these terms indexed on Google yet?
- The average ppc isn't high, right?
Since this is the opposite from above, let’s clear things up with an example.
If the prospect responded “no” to “Has your first customer in your segment praised your solution?” then add 1 to this section. Do the same for every other no in this section.
Step 4: How quickly is the prospect trying to achieve these results?
On a scale from 1-5 meaning 1 is normal speed whereas 5 is I want those results by the end of the quarter.
For example, a 5 means that the client is willing to spend at an initial unprofitable rate to achieve mass market penetration and grow fast. This in turn means that they generally want to spend 5x what they would spend at a profitable value of 1.
Step 5: How many assets does the client already have?
In this section, we will assign values for each of the fixed costs a B2B SaaS company generally needs to conduct top tier marketing campaigns.
Some things that we consider are:
- Established ICP and personas
- Created value proposition and messaging based on your superpowers
- Modern brand with visual style guide
- Strong website
- Implemented marketing automation tools like CRM's and analytics
- Developed content to support all funnel phases
- Basic sales materials to support conversion of leads
- Published customer testimonials
- Paid Advertising
- Landing pages
We establish a fixed price for each of these and will tack these onto our marketing budget calculation later on.
Step 6: Calculate
At this point, we have all the info we need to develop a rough marketing budget and plan.
We use the custom values from steps 1-5 to size up our proposed marketing budget for our B2B SaaS clients.
Generally speaking, clients are a lot more receptive to these proposals because we have taken a thorough look at the company’s current marketing situation and are providing a very realistic viewpoint on how much spend is needed to hit the results they are looking for.
Company’s or prospects that think spending $10k on one platform will get them to profitability from prior engineering and other business costs is most of the time unrealistic and not usually a client we like to work with.
Client’s that understand that there are fixed costs, as well as ongoing costs that don’t necessarily yield profitable results for the first couple of months are the realistic clients that understand that it isn’t all about ads to get a company to profitability. There are many moving pieces that will get them there.
Ads are like adding fuel to a fire - whereas SEO and branding are liking building a fire with flint and steel.
Ads get you there faster - but if you don’t have an established inbound marketing machine first then when you spend marketing dollars on ads - you may be going the wrong direction fast.
Working with an experienced inbound marketing agency that specializes in B2B SaaS marketing is one of the best investments you can make.
Shoot us an email if you are interested in how we can help you - as well as receive a free marketing spend proposal for your B2B SaaS startup.
To your success,
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