I often meet companies whose revenue is stalled and they wonder why. What many of them don't realize is that they're not spending enough money on Sales and Marketing. This slide deck looks at 5 important metrics for a software company. If you want a detailed set of metics, contact me as I've got a full set of industry metics in Excel.

1. 5 Software Industry
Benchmarks
November 2014
material minds

2. 1 Public Software Companies
We
studied
public
so.ware
companies
from
$10
million
to
$100
billion
in
revenue.
340
Companies in
the study
Public Software
Companies

3. They
run
the
gamut
from
growing
profitable
firms
to
ones
on
the
decline

4. The ones under $100
million were only able to
grow at 10%
2 Revenue Growth
Public Software
Companies
Forget
the
losers,
the
ones
that
grew,
actually
grew
at
18%
last
year.
8%
Average
Growth

5. Your
growth
rate
depends
on
Sales
and
Marke?ng
Quar?le
S&M
as
a
%
of
Revenue
Revenue
Growth
Top
quarAle
55%
45%
2nd
quarAle
33%
20%
3rd
quarAle
27%
11%
BoIom
quarAle
25%
5%

6. High
growth
means
more
capital

7. If
you
grow
fast,
be
prepared
to
lose
money

8. How
about
the
big
guys?

9. The
op?mal
rate
of
growth
for
profitability
is
8%
-­‐
12%
as
this
produces
profit
of
10%
of
revenue.

10. 3 Revenue per Employee
Public Software
Companies
For
companies
under
$100
million
revenue,
the
average
was
$240,000
$331,000
Average
Revenue per
Employee

11. Revenue
per
Employee
directly
impacts
profits

12. And
also
impacts
Return
on
Equity

13. The
threshold
Revenue
per
Employee
seems
to
be
$350,000.
What
should
you
aim
for?

14. How
about
the
big
guys?

15. 4 Sales and Marketing Spending
Public Software
Companies
And
that
computes
to
54%
of
Gross
Profit.
34%
Sales and
marketing as a %
of revenue

16. How
much
you
spend
on
S&M
?es
directly
to
growth
in
revenue

17. But
spending
too
much
or
too
liVle
is
disastrous
For
op?mal
profitability
you
should
be
spending
27%
of
revenue
on
sales
and
marke?ng

18. The
average
firm
is
spending
2.4
?mes
as
much
on
Sales
and
Marke?ng
as
they
do
on
Research
and
Development
Sales
and
Marke?ng
is
much
bigger
than
R&D

19. How
about
the
big
guys?

20. 5 Capital Required
But
if
you’re
profitable
that
drops
to
154%
235%
Equity as a %
of Revenue
Public Software
Companies

21. The
faster
you
grow,
the
more
capital
you
need

22. How
about
the
big
guys?

23. material minds
Helping companies
execute strategy better by
connecting strategy with
the daily action of all
employees.
Charles Plant
416 458 4850
cplant (at)
materialminds.com
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