The ultimate guide to SaaS budgeting
You’ve just landed your dream job in IT. Congratulations on making it through five rounds of interviews and countless job applications. But now, you’re being asked by the CFO for a budget – not just for IT – but for the SaaS apps you use.
The elephant in the room, as it were, is the SaaS budget. And it grows daily sometimes. Well, maybe now you’re thinking of The Little Shop of Horrors, but I digress.
Back to the elephant. Start tackling your SaaS budget by finding out the facts. What apps you you need, what apps do department heads want, and how does that factor into projected growth?
But isn’t it easy to make a Saas budget?
Making a budget may be easy – if it is arbitrary. The purpose of a budget is to help guide your spending choices in order to meet business goals. An effective budget is based on projected revenues and includes changes (both positive and negative) to the company structure, offerings, and human resources.
A SaaS budget is even more complicated since it’s a subset of the corporate budget. And, with outside forces like inflation affecting the bottom 11% of companies we surveyed reported layoffs.
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Inflation, higher interest rates, tight labor markets, and scrutinized budgets all took their toll. And from the previous year to this one, workplaces changed dramatically.”– 2024 State of SaaSOps Report
So, with a smaller staff and more scrutiny on IT, creating an effective SaaS budget is quite the feat. Additionally, various licensing structures also present challenges to the SaaS budget. You can’t just cut your SaaS budget by 20%, say, when the CFO says the company is shrinking by 20%.
Microsoft 365, the software formerly known as Microsoft Office, has a licensing structure that includes the number of seats per license, the number of installations, and more. It’s so complicated, they have several matrices. The published price for Office 365 plans, for example, ranges from $7.75 per user per month to $35.75 per user per month.
So the first step is to take an inventory of all of your organization’s employees and which apps they use. You also need to know who controls that employee’s budget. Are they in Marketing, Sales, or HR? To take this inventory the hard way, you could use a spreadsheet. But we have a suggested solution at the end.
Who controls the SaaS budget?
It’s easy to make the presumption that all IT falls under the IT budget. But we don’t live in a world that simple.
Sure, your organization has an IT department, that makes sense. So the question is, does each app’s cost fall under the IT budget? If it does, you have an easy road. If your organization is like many corporations (fractured and siloed), you have your work cut out for you.
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50% of tech budgets are outside of IT.” – Garret Gross
Much of this investigative, pre-budget work will involve scheduling meetings with department heads to get lists of the SaaS apps their department uses. You may need to make friends with the Executive Secretary to get that information, to be honest. Who doesn’t appreciate a fresh latte every now and then? Am I right?
You’ll also need to find out if multiple departments are using the same software. Is Sales paying for their own instance of HubSpot? You could consolidate the licensing if marketing also uses HubSpot.
Collaboration between department heads is important to not duplicate or – worse – negate license negotiations with SaaS vendors.
5 steps to SaaS budget success
Of course, it’s always good to see where the SaaS budget stands at the moment. Or, to be more clear, what the current spend is. In fact, even a cursory budget versus actual will give you an idea of the spend tolerance of your organization.
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Spend some time familiarizing yourself with the software you already pay for.”– BetterCloud
With that said, however, it isn’t wise to presume that the current spend a) meets the organization’s needs, b) is optimized, and c) doesn’t have overlap. Study the past but create the future that defines your career and the current business goals of your company.
List the Saas needs, find the SaaS wants, create an initial budget, revise that budget, and add in room for growth. That’s our five-point strategy for SaaS budget success.
List SaaS needs
The first step to SaaS budget success is to list the apps that your company cannot live without. We’re talking water, oxygen, and food here, people. You can’t work without [fill in the blank]. For this, you may need to take some surveys of department heads or you’ll have meetings booked until June of 2025. (When’s that budget due again?)
Start your inventory of needs with functions. Then list the current SaaS app that meets that function. Accountants need accounting software. Salespeople need a CRM. You get it.
This will help you find SaaS overlap. Need a spreadsheet? Will Google Workspace work or are you a Microsoft office? Need Peachtree accounting or will Xero do? With BetterCloud workflows, you can easily survey users and compile usage and sentiment data.
Find SaaS wants
Comparing budgets year-over-year seems like an apple-to-apple comparison – a greathack. But wait. Is the company structure the same as last year? Have there been any major changes in staffing? Have you acquired a company or been merged with one? Did you get a new CEO who has a new vision?
Those may seem like obvious changes and, in many ways, they are. Less visible internal changes like a new Head of Marketing, on the other hand, can dramatically change the SaaS wishlist for a department. And, it doesn’t have to be a difficult challenge; you just have to poll your peeps.
Maybe your budget needs to reflect a 20% decrease in spending but also the Head of Marketing wants to switch to Google Workspace from Office 365. That’s a win-win in the making.
Create initial budget
There’s no procrastinating now. You’re in the initial budget stage. You can use last year’s budget as a template, but don’t forget to look at licensing structures, number of employees, and levels. This is a spreadsheet made in – well, you know where.
Some well-educated guesses may be in order here. Start with the current SaaS spend. That will give you the starting space. Now you need to take an inventory. How many seats do you have and how many are being used?
Are you only relying upon an internal intranet for communications? Or do you chat with your teammates in Slack? How is feedback being collected, and more importantly, where is that feedback being stored? Is that feedback being taken into account and analyzed? These are opportunities for cost savings and changes that will cull SaaS sprawl.
Revise initial budget
After the initial SaaS budget is created, get with department heads and have that conversation. If your company is large enough, this task may be taken on by the C-Suite and/or the accounting staff. The bottom line is that you need feedback to get buy-in.
Department heads know what they need in order to meet their own goals. And, that’s the key. Company-wide goals that are engineered to support the main business goal makes for a cohesive approach. The use-it-or-lose-it mentality toward budgeting only creates waste. And, you have to remember the job of a budget – to create a realistic projection of spend against revenue.
Add room for growth
Adding room for growth isn’t just adding 10% on every line of the revised Saas budget. You also need to understand where the growth will happen and which apps will be affected. So, your mission is to understand how the company projections affect each department’s SaaS needs.
Knowing the overall business goals for your company, nonprofit, or school will help you build room for Growth in your SaaS budget. If the goal is to increase revenue by 10%, how will your budget need to flex? Adding another STEM-focused kindergarten class? You’ll need more seats in your Canvas app.
When you focus on the pricing structure of the SaaS apps you need and compare them with the business goals, you’ll be able to put that projection into your budget. You’ll be the hero for the C-Suite and, if you’re a publicly-traded company, stockholders will rejoice.
Bonus! Determine spend by employee
Better than all of the bits and bobs and budgetary analysis is the spend by employee. And you could take an average, of course, but that’s not truly the same. Modern companies and their department heads want a more accurate –or shall we say better? – labor burden number to help them make human resource decisions.
Make well-informed decisions, easily, from a dashboard. That’s how you hack the SaaS budget.
A SaaS budget should be easier
Think a SaaS budget should be easier? It is with BetterCloud. BetterCloud is so much more than just a SaaS dashboard. With our pre-built, no-code workflows you can be part of the modern SaaS solution. Be part of the $35B in SaaS budget that is currently being managed by BetterCloud for 2 million employees and over 90,000 apps.
Even better, BetterCloud also automates employee onboarding & offboarding, license reclamation, spend management, application access, and entitlement.
Eliminate thousands of hours of manual IT work and thousands of dollars in wasted time with BetterCloud.
What are you waiting for?
