Why Revenue-Based Marketing Budgets Still Make Sense—Even in a SaaS World

In today’s SaaS-centric universe, there’s no shortage of voices championing the gospel of ARR-based budgeting. And sure, ARR (Annual Recurring Revenue) is a handy metric—especially when you're scaling a subscription-based business. But here’s the thing: revenue-based marketing budgets aren’t a relic of the past. They’re a strategic choice that provides clarity, balance, and resilience.

Let’s break down why tying your marketing budget to total revenue might just be the smartest play you can make.

Revenue Tells the Full Story

ARR is future-focused. Revenue reflects reality.

ARR focuses on subscription income and often overlooks aspects such as onboarding fees, professional services, upsells, or one-time product purchases. Revenue, on the other hand, captures all of it.

Marketing isn’t just about landing new logos—it’s about nurturing customer relationships, driving engagement, and expanding accounts. Total revenue reflects the entire customer lifecycle, making it a better north star for marketing investment.

You Spend Real Money, Not Forecasts

ARR is a promise. Revenue is cash in the bank.

For startups and growth-stage companies, spending based on projected income is risky. Revenue-based budgeting keeps you grounded. It ties your spending to what’s been earned—not just what you hope to earn.

Not Everyone Lives in the Subscription World

Many hybrid and services-based businesses don’t run on recurring revenue. Tying marketing budgets to ARR just doesn’t work for them. Using total revenue as your baseline levels the playing field across different business models and creates consistency in planning.

It’s a Hedge Against Volatility

ARR can be a shaky foundation in early-stage or high-churn businesses. It creates a false sense of security. Revenue-based budgeting, on the other hand, forces you to stay honest and plan more conservatively—especially in unpredictable markets.

It Syncs with How Execs Measure Marketing ROI

Most leadership teams look at Return on Marketing Investment (ROMI) in terms of revenue generated—not ARR. So if your success metrics are tied to total revenue, your budget should be too. Simple as that.

Marketing Percentage Based on Revenue Summary Table

When ARR-Based Budgets Do Make Sense

Of course, there are exceptions. ARR-based budgeting is the right move when:

• ✅ You’re a pure-play SaaS business
• ✅ Your strategy is all-in on acquisition and retention
• ✅ Your revenue is highly predictable and contract-based

In these cases, aligning marketing spend with CAC (Customer Acquisition Cost) and LTV (Lifetime Value) can sharpen your growth engine.

ARR-Based Spend Benchmarks

If ARR is your budgeting model, here’s what smart allocation can look like:

Final Word: Match Budget Model to Strategy

ARR-based budgeting is best when you're focused on scaling users. Revenue-based budgeting is better when your goal is to drive value across the full customer lifecycle.

In short:

🔄 ARR = acquisition focus
🌱 Revenue = relationship focus

Ask yourself: Where do we want marketing to make an impact this year?
If your answer goes beyond just net-new customers, revenue might be your best budget anchor.