You're Not Overspending. You're Mis-Spending

TL;DR

If you’re asking whether you’re overspending on R&D, S&M, or CS, you’re probably asking the wrong question.

Benchmarking against peers is useful. It tells you when you’re out of bounds. But it won’t tell you whether your spend is actually moving the business forward.

In GovTech, the real issue is almost always mis-spend, not overspend. Teams invest by function instead of by constraint, then wonder why progress feels slow even when the ratios look “right.”

The practical test is simple: identify what’s actually limiting growth right now, and ask whether your largest spending decisions directly reduce that constraint. If adding or removing 10 percent of spend wouldn’t change outcomes in the next couple of quarters, you’re likely spending in the wrong place.

Benchmarks provide guardrails. Constraints should drive decisions.

Are we overspending in areas?

Every operator I know… including me many times… has asked some version of this, usually late at night or right before a board meeting:

Are we over-investing in R&D?
Is Sales too heavy for where we actually are?
Is Customer Success bloated, or is this just the tax of operating in a regulated market?

It may sound like a finance question. But it isn’t. It’s an operating question, and a challenging one, because GovTech breaks most of the clean SaaS math we all like to rely on.

I believe in benchmarking. I really do. Looking at companies with similar revenue and growth profiles is one of the fastest ways to reality-check our instincts. It keeps us from drifting too far into fantasy land. But benchmarking alone won’t answer the question we’re actually trying to answer.

Are we spending in a way that moves the business forward, or are we just throwing bodies and tools at systems gaps?

That difference matters a lot… more than most ratios.

In a clean commercial SaaS business, spend ratios usually tell a pretty coherent story. Revenue shows up on time. Sales cycles behave. Product changes ship and get used. Feedback loops are fairly short.

GovTech no worky that way. 😉

Revenue shows up late and in chunks. Sales cycles bleed across quarters and fiscal years. Compliance and security costs show up loooong before scale. A lot of R&D time disappears into work that never shows up on a roadmap. And growth often comes through acquisitions, not just organic motion.

You can have two companies with identical spend profiles and wildly different realities underneath. One is disciplined and constrained. The other is driiiiiifting.

On paper, they look the same.

Benchmarking helps for sure. It just doesn’t finish the job or give a complete picture.

Most leadership teams frame these conversations by function.

Are we spending too much on R&D?
Do we need more sales capacity?
Is G&A getting ahead of itself?

I’ve asked those questions myself. They’re reasonable. But they’re also incomplete.

The better question is “what’s actually limiting our growth right now?”

Not what we wish was limiting it. Not what sounds fixable with headcount. The real thing, man.

Sometimes it’s product capability. Sometimes it’s trust. Sometimes it’s procurement friction. Sometimes it’s customer adoption. Sometimes it’s cash timing. And sometimes it’s harder to pinpoint, like bad culture or bad leadership at the top.

Until that constraint is named, spend decisions tend to be reactive. Sales misses a quarter, so we hire more AEs. Deals slow down, so we build more features. The company feels more complex, so CS grows “to be safe.”

None of those moves are inherently wrong. They’re wrong when they’re disconnected from the things actually holding the business back.

I’ve found it more useful to think about spend as constraint removal, not functional optimization.

First and foremost, name the constraint. Honestly.

If deals stall because buyers don’t trust you yet, that’s not a sales capacity problem.
If customers struggle post-close because onboarding is painful, that’s not a demand problem.
If revenue lags because invoices get paid nine months later, that’s not a GTM problem at all.

This sounds obvious. In practice, it’s where teams be lyin’ to themselves.

Second, look at where the money is actually going.

Which spend directly reduces the constraint?
Which spend is adjacent but not decisive?
Which spend exists mostly because “we’re in GovTech, so we have to spend here”?

I’ve seen heavy R&D investment when the real bottleneck was poor product management. I’ve seen sales teams scale ahead of products that couldn’t survive broader deployment. I’ve seen CS bloat to fill gaps and inefficiencies in the product.

Benchmarks won’t catch any of that. You have to.

Third, watch for timing mismatches.

Some of the clearest signals that spend is out of whack have nothing to do with percentages.

Sales headcount growing faster than win rates.
R&D growing faster than deployment velocity.
IT & HR scaling ahead of regulatory or organizational complexity.

Those patterns show up well before a P&L looks broken. By the time the ratios scream at you, you’re already late.

Instead of arguing about whether Sales should be 35 percent or 45 percent of ARR, I’ve found asking this question far more useful:

If we added or removed 10 percent of spend here, would anything change in the next two quarters?

If the honest answer is no, you’re probably overspending. Even if benchmarks say you’re “in range.”

Ratios tell you how money is allocated.
Elasticity tells you whether that money is doing anything.

If Sales is 40 percent of ARR:

The way you tell is not by comparing it to a benchmark, but by asking:

If the honest answer is “probably not,” Sales spend isn’t elastic. You’re paying for motion, not progress.

Same with R&D.

If you add more engineers:

If nothing changes, the ratio doesn’t matter. The spend isn’t moving the constraint.

Benchmarks tell you whether you’re within guardrails.
Elasticity tells you whether your spend is actually effective.

Operators who focus only on ratios optimize for appearances.
Operators who focus on elasticity optimize for outcomes.

Benchmarks tell you when you’re out of bounds.
Constraints tell you when you’re out of alignment.

You need both.

Overspending and underspending aren’t permanent states. They change as the business changes. What’s appropriate at one revenue level can be reckless or insufficient six months later.

The goal isn’t perfect ratios. It’s making sure every major spend decision has a clear job to do, tied to the next obstacle the company has to clear.

When spend follows constraint instead of anxiety, the business gets calmer. Decisions get cleaner. And in GovTech, that discipline compounds faster than people expect.

That’s the difference between looking efficient on paper and actually building something that holds up.