MS=10E – Sales Vs. Engineering Ratio in Tech Startups

For every $ spent on Engineering, spend 10 on marketing and sales.   

What should be the ratio of sales to Engineering? As high as possible. 10:1 is plausible. For every $1 of effort in making the product, there should be $10 in selling it. Includes founder’s time, software purchase, and external resources. This is true for SaaS and Consumer companies.

A lot of focus in Tech startups is on getting the product right, hence expanding the product or engineering team is the most intuitive thing to do. Yet, a lot of startups that are successful have a not-so-beautiful product, with not many fancy features., JustDial, Indiamart, Makemytrip and many such have been sales first company. Their competitors might have “better” products to showcase, but they still won.

Selling is important to make the product. Selling gives a constant feedback loop to your product that engineering can utilise.

Imagine a software product as a research project. Once you have cracked the right work flow, it is easy for anyone to copy it. So even if you find something small, run with it and sell it. Would you want to keep funding a research project forever?

Another way to figure this out is to look at your Key metric. Does it change with 1 more engineer or 1 more marketing/salesperson?

But what about “great product is the best marketing”? Great product drives good retention, repeat and referral. You still need marketing to fill the top of the funnel and sales to nudge the bottom of the funnel.

Why do startups have a hard time doing this?
1. Because they are too shy (introvert) to understand enough about sales.
2. Head count wise it sounds a lot. In an avg. SaaS organisation an engineer is paid 3X of a sales executive.
3. Spending more ads requires orchestration of support and sales team also. Marketing spend cannot be increased without the support of a fast recruitment and training team.

If you still have a tough time justifying this, think of engineering and product as Capex (to set up a factory). Marketing and sales spend is the Opex (for raw material). If the factory is setup, keep adding more raw material.

What is your MS:E ratio?

*I use marketing and sales interchangeably because a lot of low-ticket size DIY SaaS companies only have marketing teams.

Leave a Reply

Your email address will not be published. Required fields are marked *