What percentage of revenue should you allocate for R&D for established SaaS companies?


2

Assuming you have a SaaS company that is already generating over $1M per year in gross revenue, how much of that should you allocate towards R&B and product development?

In the early stages, startups usually throw most of their money at developing their product. But as the product and company matures, the balance of scale tilts towards customer acquisition instead.

Products Development Saas Revenue

asked Jun 12 '14 at 18:41
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Nellie Lee
12 points

2 Answers


2

I'm not aware of any official recommendation or even a rule of thumb. The amount that works best will change depending on your company, events in the marketplace (new competitors), and things happening within your company. Sensing the market and knowing when to pull which levers and how hard to pull is the crux of being a CEO. There's no magic formula to follow. And the truth is, even the good ones get it wrong more often than they'd like to admit.

One thing I can say is don't ever stop innovating. The moment you say, "The product is basically done. Let's just turn our focus to getting and retaining customers now," is the moment your company dies.

answered Jun 15 '14 at 18:35
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rbwhitaker
3,455 points

1

There is no "industry standard" way of such allocations. As a founder, you have to decide which actions would have the biggest impact on factors that matter to you the most (be it growth, revenue, etc).

So I would suggest first prioritizing which factors are most important for you to improve. And then do things that have the most impact on them.

Do keep customer retention in mind. It's easy to focus entirely on getting new customers, while forgetting to keep the existing ones happy. In my experience, it's easier to retain a customer than to get a new one (and more profitable in the long run).

answered Jun 15 '14 at 18:41
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Chrissie Gray
1,067 points

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