Don’t invest in paid marketing for your SaaS until you read this
A few months ago a SaaS founder in a private mastermind asked me this question… when is the right time to start paid marketing for your SaaS?
And then on a strategy call with the Head of Marketing at a popular SaaS analytics company I got asked this follow-up question… how much monthly ad budget should you start with?
In this article I’m going to tell you how I think about both of these questions so you have a framework for growing your SaaS with paid marketing when it’s the right time.
When is the right time to start paid marketing for your SaaS?
This is a hard question for me to answer, because in my agency I haven’t worked with many smaller SaaS companies <$10M ARR.
But what I do know is that if you invest in paid advertising before you have product/market fit and a proven offer it will be extremely hard for your paid advertising to succeed.
You will have a message-to-market mismatch, so your ads will have a low CTR, causing your cost per click prices to be higher.
And any customers you do get may churn out fast, wasting your ad budget.
So the “right time” to get into paid marketing is when you have:
- a proven sales funnel
- an offer that converts
- happy customers that you know love your product
When you have those 3 things, it is then time to look at your funnel analytics and see which funnel is bringing you the highest amount of conversions.
You can then add gasoline to the fire, by driving paid traffic into the top of your funnel (that you know already works from all your inbound efforts).
It sounds deceptively simple, and it is, but most SaaS companies botch it up by trying to get too clever/complex by driving paid traffic to landing pages and funnels that have never been tested before.
Simple funnels and compelling offers is the key to massive SaaS sales.
Advanced campaigns are usually the last thing we set up at our agency. Basically, when we’re out of other options to scale we start looking for crafty campaigns.
OR if we’ve tried “simple” first and simple didn’t work.
When it comes time to start paid marketing for your SaaS be careful about listening to all the bells and whistles. You’d be surprised how far you can get with just solid fundamentals.
Now you have a framework for when to get started, the next question is…
How much monthly ad budget should you start with?
This is going to be dramatically different for every SaaS company, depending on your risk tolerance and marketing budget you have available.
At our agency we generally work with ad budgets $25k/mo+ to grow and scale leads for SaaS companies on any paid media channel the Marketing Director wants to scale on (or we identify the best channel).
But if you don’t have that level of marketing budget and a proven system to leverage new paid media channels to reduce your risk like we do, then as a general rule of thumb I would advise you start with a minimum of $3,000.
Why $3,000?
Because at the start of any paid marketing campaign there is a specific process you need to go through to get your campaign working.
Phase 1: Test
In the Test Phase you are basically buying data. You don’t know what ad targeting is going to work, so you bet your money on all the horses (in a structured way so you know what works and what doesn’t).
If you don’t spend enough ad budget in the Test Phase, then you won’t be able to buy enough data to make accurate optimization decisions in the Verify Phase.
You shouldn’t even start advertising if you can’t afford or don’t have the mindset to “buy data”.
Phase 2: Verify
Once you’ve kept the winners and eliminated the losers, you’ll have a pretty good idea now of what is working if your account structure has been setup the right way and you’ve been tracking your results against your target CPA.
Now you just need to prove your test results are valid (and it wasn’t a fluke due to the time of year, seasonality, etc).
Again, you want to stay consistent with your ad budget, so you keep your data clean and compare apples-to-apples.
Phase 3: Scale
Now you know what’s working you can start to increase your monthly ad budget and scale your campaign.
If you go through this 3 Phase System with a budget anything less than $3k/month ($100/day) then it will be very hard for you to grow and scale your paid marketing campaigns fast.
You could be waiting months to get enough statistically significant data.
Or even worse, you could make unintentional biased decisions based on insignificant data, so you eliminate ad targets that would have otherwise been profitable for your business.
Conclusion
You can launch your paid marketing without a proven sales funnel AND you can do it with less than $3k/mo.
But it will be like playing the slot machines.
You could be playing for years and years and never win big.
Or even worse… you might get lots of small wins, keep playing, but never get the real traction you need to truly grow and scale on paid channels.
There are always outliers who will say they are making 17,000% ROI with a $5/day ad budget.
But ask yourself this question… would you prefer to get five $100 SaaS signups per month at 17,000% ROI ($85k/mo) or five thousand $100 SaaS signups per month at 170% ROI ($850k/mo)?
ROI doesn’t matter if your goal is lead and sales volume.
A lot of people forget their goal and just focus on vanity metrics (yes, ROI can be a vanity metric too if your only making 5 sales per month).
Remember, most big SaaS companies have dedicated paid media budgets to grow their SaaS on paid channels.
They are a lot more than $3k/mo.
But if you need somewhere to start, that would be the minimum I advise.
If you can’t afford it, then keep working on your inbound funnel and organic traffic until you have the funds to do it right the first time.
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