How to Justify Development Spend

Ever been asked by a board member "So when is the product done?" or, what they really mean, "When is this spend over and we get to enjoy much higher margins"?

Usually those questions come from smart board members who might have relevant target industry experience but are new to SaaS (for example they have a professional services background or are from the customer base).

My answer has always been some tactful form of "the product is never done, the spend will never go away, and if we force either to become true then customers will flee and the product will quickly die." In other words, if we want higher margins we need to grow our revenue not kill the product by curtailing investment.

These anecdotes aside, this is still a valid question for a CEO to be asked by a Board or CFO. As a SaaS Product Leader, I've frequently been asked by CEOs (who have been asked by their board) to help justify development spend.

Here are the best approaches to use that might save you some time (pick those that are most applicable):

1. Tie Spend to Revenue Impact

Show how development will:

• Unlock new revenue (new Products/add-ons, integrations, enterprise features).

• Increase deal conversion (features blocking sales).

• Reduce churn (critical customer-voiced gaps or UX issues).

• Enable price increases (through premium features or value delivery).

  
  

2. Quantify Cost Savings or Efficiency Gains

Frame development as a lever to:

• Reduce support volume (self-serve, better UX).

• Lower onboarding costs (fewer manual CS hours).

• Accelerate future development (refactoring, component libraries).

3. Justify as Platform Investment for Scale

Some spend won't produce immediate ROI but:

• Enables faster future feature delivery.

• Avoids future rework or technical bottlenecks.

• Prepares the product for scale or compliance (e.g., RBAC, data localization, security).

Use a "you pay now or you pay more later" framing with timeline visuals. Also consider valuation!

4. Benchmark Using SaaS R&D % of Revenue

Company Type	R&D Spend (% of Revenue)
Early-stage SaaS (VC-funded)	40–60%
Growth-stage SaaS	20–35%
Public mid-market SaaS	15–25%
Efficient, scaled SaaS	10–15%

Use the above to help frame your ask:

“Our R&D spend is at 22% of revenue, in line with peer companies at our stage. This initiative keeps us on track while driving long-term growth levers.”

5. Anchor to Strategic Goals & Milestones

Tie dev spend to OKRs, board priorities, or clear business outcomes:

• “This supports our shift to enterprise readiness.”

• “This allows us to expand in the mid market.”

• “This is required to launch usage-based pricing.”

6. Show Discipline Through Phased Investment

For high-risk or high-cost development:

• Propose a phase 1 MVP or pilot.

• Share clear milestones and exit criteria.

• Define success metrics before scaling.

What to Avoid

• Justifying with “engineering wants it” or “technical debt” alone.

• Abstract UX benefits with no business tie-in.

• Ignoring benchmarks—CFOs will compare you to peers.

  
  

TL;DR for CEOs

To justify development spend:

• Speak in business terms: revenue, savings, scale, risk reduction.

• Use SaaS benchmarks to show discipline and context.

• Frame big bets as small, testable stages.