Sales and Marketing Team Budget

I know this is the VC forum, but figured you all have worked on similar S&M budgets for earlier stage businesses and might have some insights. 

I'm working with a small analytics business ($10-15m revenue, $3-5m EBITDA, historically growing about 15-20% YoY) where the founder has never had a formal sales and marketing function. I'm working to put together a budget for this and had a few questions:

  • What would you assume you pay from both a salary / bonus / commission for a head of sales for the organization? What would be a reasonable sales quota for that individual and what is a reasonable ramp time? 
  • What is the salary / bonus / commission for a BDR and an AE? What would be reasonable sales quotas for those individuals and ramp time? 
  • How do you forecast non-labor S&M expense? What are major non-labor S&M expenses that you assume? 

To date the business has primarily just grown through the CEO's relationships and has material customer concentration as a result. He wants to build out this function primarily to diversify his customer base. 

 

Based on the most helpful WSO content, when constructing a sales and marketing (S&M) budget for a small analytics business, there are several factors to consider for the head of sales position:

  • Compensation: The compensation for a head of sales typically includes a base salary, a bonus structure, and potential commissions. The exact figures can vary widely depending on the industry, company size, and region. For a company with $10-15 million in revenue, you might expect a base salary in the low six figures, with bonuses and commissions that could significantly increase total earnings if sales targets are met.

  • Sales Quota: A reasonable sales quota for a head of sales would be aligned with the company's growth targets and historical performance. Given the company's historical growth of 15-20% YoY, the quota should reflect an achievable yet challenging target that supports this growth trajectory.

  • Ramp Time: The ramp-up time for a head of sales can range from 3 to 6 months, during which they would be expected to learn the product, market, and establish initial sales strategies.

For Business Development Representatives (BDRs) and Account Executives (AEs):

  • Compensation: BDRs and AEs will typically have a lower base salary than a head of sales, complemented by a commission structure. BDRs might have a higher base salary with a lower commission rate as their role is often more focused on lead generation, while AEs might have a lower base salary with higher commissions due to their direct role in closing deals.

  • Sales Quotas and Ramp Time: Quotas for BDRs and AEs should be set based on the average sales cycle length and deal size for the business. Ramp time for these roles is usually around 1-3 months, depending on the complexity of the sales process and the industry.

Forecasting non-labor S&M expenses involves:

  • Major Non-Labor S&M Expenses: These can include advertising costs, marketing materials, CRM and sales enablement tools, travel and entertainment expenses for client meetings, trade show attendance, and digital marketing campaigns.

  • Forecasting: To forecast these expenses, historical spending can be a guide, adjusted for planned changes in strategy or market conditions. It's also important to consider the return on investment for each type of expense and to align spending with expected revenue growth.

Remember, diversifying the customer base is a strategic move, and the S&M budget should be designed to support this goal effectively. It's crucial to track the performance of the S&M efforts and adjust the budget as needed to ensure the best use of resources for business growth.

Sources: Leverage and success, Basic Guide Ramping Up On A Company With Public Information Part Two, Ask You Anything: Learning about Sales, Breaking Into Commercial Real Estate, Is Management Consulting just a glorified Audit?

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

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