How Much Should You Invest in Sales and Marketing as a Percentage of Revenue?

Tony Hughes

Warren Buffett (main picture) is investor extraordinaire and focusses on key metrics that drive profitable growth. He inspired me to dig deeper into WiseTech, a cloud Software as a Service (SaaS) provider for the global freight and logistics industry. They listed on the Australian stock exchange in 2016 and their share price has more than doubled in the last 12 months. They are growing year-on-year at 50% and approximately $150 million revenue with profit running at above 35% (EBIT/DA). 99% of their revenue 'recurring' (SaaS) and less than 1% customer churn. These are all very impressive numbers but here is the jaw-dropper...

They invest only 14% of revenue and have only 12% of their people working in sales and marketing.

WiseTech operates in 125+ countries and has 6,000+ customers. Here are some relevant benchmark companies for comparison in the illustration below (courtesy of Graham Hawkins and his book, The Future of The Sales Profession). Salesforce and NetSuite are the most relevant with WiseTech added to this illustration by me with Graham's permission.

With the exception of WiseTech, data in the above graph was sourced from Bloomberg.compublished on May 18, 2016 in an article by Dina Bass titled: This $5 Billion Software Company Has No Sales Staff. She delivered commentary on Atlassian which means their 19% spend is all on marketing rather than sales (article here).

I invested in WiseTech when they listed publicly on the stock exchange so I have a vested interest here. I also have Salesforce as one of my clients whom I regard as running the best sales and marketing machine on the planet. Both sell B2B, create exceptional software for users, provide modern scalable architecture, embrace AI and deploy securely on high scale cloud infrastructure. They both provide excellent levels of support and account management.

"But holy bottom line Batman... 14% compared with 49% for S&M spend with companies effectively in the same industry! Which company is getting it wrong?"

I'm a curious guy so I recently interviewed Richard White (pictured below), CEO of WiseTech to dig deeper into whether it is genius or foolishness to invest so little in the sales and marketing effort. Here are his responses to some of my questions.

TH: What's the secret to your growth given the relatively low investment in sales and marketing?

RW: We are completely focused on building the best global logistics platform on the planet and with a business model that removes all possible friction with customers and our salespeople. No vapourware or undeliverable promises and no upfront fees. We invest in bringing the customer on board and have no lock-in contract, so the attrition rate we quote is without long term contracts or subscription pre-payments. We also bill monthly in arrears so customers only pay once they are deriving value. Our product actually sells itself once our sales team has been able to expose the product to customers. Proof of this is the fact that many cohorts of existing customers are increasing their usage with us at the rate of up to 1.5% compound growth per month without anyone selling to them. We provide free test systems for every customer and every customer has access to every module and function in their production environment. They control their own licensing and simply pay in arrears as they begin to use additional capability.

The other point is that we've designed our incentive (commission) plan for our salespeople in a way that creates alignment with the customer and our company. It's all about long-term customer success with everyone pulling together, so sales staff get a small share of newly signed customers for the first 36 months. We hire the best people and support them with quality resources. Most importantly, there is incredibly strong intrinsic value in our software solution for our target market and compelling product/market fit. Our sales and marketing efforts, therefore, don't need to compensate for any shortcomings. When you truly understand your market, and have customers and independent, global group of certified consulting service providers that advocate for you, then the sales and marketing process is much easier. Word of mouth and a positive reputation does more than any amount of sales and marketing spend could achieve.

TH: How do you support 'buyer's journey' with a relatively low level of sales and marketing spend?

RW: We have more than 400 short use-case videos available to our sales staff and the customers in the sale process and we make our comprehensive online learning tools and certifications programs transparently available all customers and their staff and prospects can also gain full access to our as well as customers. With our existing customers working for us as market advocates, and with independent consultants all over the world recommending us because of their real world experience with many successful implementations; we simply focus on educating and aligning with potential clients rather than pushing or 'pitching' to them. They can see the value and we remove their risk. We seem to spend more time educating prospects and planning go lives with recently signed customers rather than selling and persuading.

TH: How do you combat competitors who make huge investments in sales and marketing to create perceptions of market and product solution leadership?

RW: Its pretty hard to market yourself to brand recognition. Brand is almost always a creation of customer experience, with small abouts of marketing creating initial interactions. Customers speaking to the product power and quality is 100 times more valuable that advertising, social media or cold calling. We know that they love the fact that we invest a large and increasing amount each year in constantly improving and innovating the product rather than diverting funds unnecessarily to marketing efforts which do almost nothing for them as an existing customer.

TH: Do you worry that you are under-investing in sales and marketing?

RW: I look to evidence and facts rather than feelings. As CEO, I need to invest our customer and shareholder money where it provides the greatest return. I believe that creating the very best product and working environment for our staff results in a compelling market offering. We're not interested in spin or creating a facade. Product capability and market fit are more important than salesmanship. A product that returns real value to customers by being very complete and that can dramatically increase customer productivity repays customers many times the usage cost. A high-quality product that is high in functional and highly productive and expert staff that know how to keep building more and more power and productivity in, are more important than marketing, and we've now hit the tipping point where our market momentum is driven by our brand, reputation, network effect and the huge content driven sales, marketing and training libraries that we have developed.

TH: You recently announced foothold acquisitions in Germany, Italy and Brazil. Does this change your sales and marketing spend?

Yes it does, as we move into new foreign language markets such as Germany, Italy and Brazil, we will have to increase our content driven marketing spend in those languages and locales, thus, we expect some increase in our content driven marketing spend especially in the short term, to build that local capability. This is largely offset by increased efficiency in sales and marketing in our developed English speaking markets. But it's not trivial either, think of having every training, marketing and sales document and your entire local sales and marketing team in German, Italian, Brazilian etc. We will remain highly sales and marketing cost efficient, but as always, we need to be flexible and invest hard with new countries and languages.

As I drove home after interviewing Richard, I couldn't help but think that this could be the best SaaS company on the planet. I think Atlassian just got bumped to #2 in terms of next generation SaaS business models where growth becomes algorithmically hyper-profitable because the nexus is broken between the cost of customer acquisition and revenue per client. Add to this the fact that they have cured 'the cancer of customer churn' and it's a very impressive operation. No spikes in revenues, just predictable growth without having to pay huge sales and marketing costs. Wisetech jettisoned professional services and consulting revenues and built a loyal global work force of motivated consultants that work only for their customers as part of building their model but that's a story for another article.

How do you decide what the right level of investment is in sales and marketing and does it provide the right return on investment? Who is 'best practice' in your eyes? Please let me know in the comments.

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Tony Hughes is ranked as the #1 influencer on professional selling in Asia-Pacific and is a keynote speaker and best selling author. This article was originally published on LinkedIn where you can also follow Tony's award-winning blog. Also, visit Tony's keynote speaker website at or his sales methodology website at


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