The answer to this is really highly dependent upon the type of business, but even more so the developmental stage of your business. 50% is very, very high except in the earliest startup stage. In startup you have to develop the product before you have revenues, so the development numbers can be quite skewed early on. 20% is probably low if you really are considering all sales and marketing expenses, including salaries.

Phil Morettini
PJM Consulting
Moretti on Management Blog
http://twitter.com/TechnologyGuy
+1 858 792 1062

Bruce, when I was talking about 50% being very high I was referring to his number on the development department, not sales & marketing....

Phil Morettini
PJM Consulting
Moretti on Management Blog
http://twitter.com/TechnologyGuy
+1 858 792 1062

In my experience there are two kinds of products. One that is sales oriented (big ticket items) that require a white shirt and red tie kind of person to close the deal. Then, there's the marketing oriented product. One where you can close the deal over the phone with astute sale professionals.

I am going to try to compare the two expense ratios below.

Sales Oriented Product:
Admin = 11%
R&D = 20%
Tech Support = 15%
Sales = 40%
Marketing = 15%


Marketing oriented product:
Admin = 11%
R&D = 20%
Tech Support = 15%
Sales = 15%
Marketing = 40%

Ok, so my point here is that the nature of the product profile should drive our expense Ratios. Note that the expense ratios for sale and marketing are reversed. For a marketing oriented product you spend more on marketing. For a sales oriented product you spend more on sales. Simple enough.

I once joined a company where the old product line was geared toward mainframe computers. So, the sales process relied on white shirts and red ties chasing every mainframe computer in the country .... merely thousands of them.

My mission was to introduce a PC based product. The president of the company had his successful sales oriented model and tried to duplicate the Sales Oriented model for the PC market place. In effect he had hired the expensive white shirts and red ties to chase down millions of PCs. Yikes!

Nope, that's marketing's job. Get the phone to ring and then my sales guys can close the deal. In effect, the president had set up a situation where we were spending both the 40% on the Sales Expense AND another 40% on marketing to get the phone to ring.

A little math can tell you that that is no fun.

It was no fun re-organizing that sales team to correct his mistake. Too bad he didn't hire me earlier.