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I'm a bit curious about the cost/revenue ratio. Is 12.5% considered a reasonable ratio? I just checked our spend, which includes not only hosting but other IT r

I'm a bit curious about the cost/revenue ratio. Is 12.5% considered a reasonable ratio? I just checked our spend, which includes not only hosting but other IT related spends (helpdesk, email, slack, email marketing service, etc). I think our spend is around the 3-4% mark compared to revenue. Now I'm not trying to show off or say we're doing things better. If anything, maybe this post can help me convince my cofounders that we should spend more on infrastructure hosting (there's lots of things we could improve). I'm mostly curious what's a typical ratio in other smallish startups.

mwcampbell 9y ago
Just curious, what kind of hosting are you using? Are you also on AWS, or something cheaper like DigitalOcean? Or bare metal?
- gingerlime 9y ago
  We're using mostly DO, but to be honest, I'm not sure moving to AWS or Google Cloud would shift the ratio considerably. It might double our hosting costs, but hosting probably isn't our biggest spend when looking at overall IT. To give an example, I think we spend a similar amount or even more on customer.io (email marketing automation) than we do on our entire hosting. You could argue that this cost is a marketing cost rather than technology though. But currently we still attribute it to IT.
meritt 9y ago
3 person company with revenue in the low seven-figures. Our AWS + IT spend is about 3.5% of revenue
augustflanagan 9y ago
Cronitor co-founder here. This is a great question! I would love to see others post some numbers here. As Shane mentioned in the post 12.5% has been a consistent number for us as we have scaled up over the past couple years. That said, at this point I suspect we will see this percentage decrease a bit going forward. I'm basing this on intuiting that we're a bit over provisioned at the moment and won't have to scale our infrastructure linearly with user growth over the next year or two. Of course, that remains to be seen... To add some more numbers to the conversation my full time job is CTO at a consumer facing tech company (Babylist.com) I just looked at our spending on IT/infrastructure for the last couple of months and it's around 1.5-2% of revenue.
- gingerlime 9y ago
  Thanks. I guess there are economies of scale / barrier of entry costs involved that should reduce this ratio over time. On a side note. When people talk about x-figures revenue, are they typically talking about x-figures monthly or yearly?
ryanmaynard 9y ago
I have a side project that seems stuck in the mid 6-figures. My 6 month avg spend for AWS is 4.62%. However, that percentage is not linear. It would jump a tier around .85mm

mwcampbell 9y ago

Just curious, what kind of hosting are you using? Are you also on AWS, or something cheaper like DigitalOcean? Or bare metal?

gingerlime 9y ago
We're using mostly DO, but to be honest, I'm not sure moving to AWS or Google Cloud would shift the ratio considerably. It might double our hosting costs, but hosting probably isn't our biggest spend when looking at overall IT. To give an example, I think we spend a similar amount or even more on customer.io (email marketing automation) than we do on our entire hosting. You could argue that this cost is a marketing cost rather than technology though. But currently we still attribute it to IT.

meritt 9y ago

3 person company with revenue in the low seven-figures. Our AWS + IT spend is about 3.5% of revenue

augustflanagan 9y ago

Cronitor co-founder here. This is a great question! I would love to see others post some numbers here. As Shane mentioned in the post 12.5% has been a consistent number for us as we have scaled up over the past couple years. That said, at this point I suspect we will see this percentage decrease a bit going forward. I'm basing this on intuiting that we're a bit over provisioned at the moment and won't have to scale our infrastructure linearly with user growth over the next year or two. Of course, that remains to be seen... To add some more numbers to the conversation my full time job is CTO at a consumer facing tech company (Babylist.com) I just looked at our spending on IT/infrastructure for the last couple of months and it's around 1.5-2% of revenue.

gingerlime 9y ago
Thanks. I guess there are economies of scale / barrier of entry costs involved that should reduce this ratio over time. On a side note. When people talk about x-figures revenue, are they typically talking about x-figures monthly or yearly?

ryanmaynard 9y ago

I have a side project that seems stuck in the mid 6-figures. My 6 month avg spend for AWS is 4.62%. However, that percentage is not linear. It would jump a tier around .85mm