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Digging into those other costs is informative as well, the numbers for 2018: Pre-opening location expenses $350MM Growth and new market development exp
by femto113 7y ago
Digging into those other costs is informative as well, the numbers for 2018:
Pre-opening location expenses $350MM
Growth and new market development expenses $475MM
Sales and marketing expenses $370MM
One could make some sort of argument that the first two categories are long-term investments, but the last one really stands out to me: they spent $37 on sales and marketing for every $25 they "earned".
- danieltillett 7y agoBut I am sure they have great parties.
- zaroth 7y agoTheir sales and marketing was $370m/$1350m or 27% of revenue. Is that in line with industry norms? I think it makes little sense to express Sales & Marketing expense as a percentage of Net Income... You could express it in terms of New Revenue Growth, to get a feel for customer acquisition cost, and then look at churn to get a feel for lifetime value and payback periods... if you wanted to analyze them like a "SaaS" type business.
- femto113 7y agoWhat industry are we talking about? Most commercial real estate used for offices spends almost nothing on marketing (they put a sign in the window perhaps). I don't think SaaS is at all relevant. Typical SaaS gross margins are upwards of 60%. WeWork's gross margins are under 10%. Edit: found a source[1] that states "5% of broker’s cut is standard" for commercial real estate marketing expenses, with a broker getting about half of the commission which is around 2.5%. Even if you went with 10% of a 10% commission rate that would only be 1% of the total. [1] https://www.calicomarketing.com/commercial-real-estate-budget-marketing/budgeting-marketing-listings/ https://www.calicomarketing.com/commercial-real-estate-budge...
- dillondoyle 7y agoMaybe that 'sales and marketing' figure includes discounts on rent to gain new tenants?