In episode #338 of SaaS Metrics School, Ben explains how to quickly sanity-check your sales and marketing forecast for the upcoming year using one high-signal SaaS metric: the Cost of ARR. As founders and CFOs finalize budgets, Ben shows how mismatches between projected bookings and planned go-to-market spend can reveal unrealistic assumptions before they turn into missed targets.

Using simple examples, Ben walks through how the Cost of ARR connects sales and marketing spend, net new ARR bookings, and historical performance—making it one of the most effective tools for validating SaaS and AI company forecasts during budget season.

What You’ll Learn

• How to use the Cost of ARR to validate your sales and marketing budget
• The relationship between sales and marketing spend and net new ARR bookings
• How to identify unrealistic growth assumptions in your forecast
• The difference between blended the Cost of ARR, Cost of New ARR, and Cost of Expansion ARR
• Why historical performance should anchor forward-looking forecasts
• How benchmarking by ACV and sales motion improves forecast accuracy

Why It Matters

• Sales and marketing forecasts often fail because spend and bookings assumptions are disconnected
• Cost of ARR provides a mechanical reality check before committing to a budget
• Overly aggressive ARR targets can be identified early and corrected
• Underspending on go-to-market becomes visible when bookings expectations are too conservative
• Benchmarking against peers helps validate whether forecast assumptions are realistic
• Strong financial modeling and forecasting discipline improves board and investor confidence

Resources Mentioned

Cost of ARR metric framework: https://www.thesaascfo.com/saas-cac-ratio/

Benchmarking data from Ray Rike at Benchmarkit.ai

Concepts from SaaS FP&A forecasting and go-to-market efficiency analysis: https://www.thesaasacademy.com/the-saas-metrics-foundation