Marketing and Cash Flow

How to Cash Flow your Marketing

Estimated reading time: 5 min

Finance people see marketing activities differently.  They may be blocking spend that you perceive essential.  To understand the Chief Finance Officer’s perspective on marketing, we decided to interview expert CFO Trish Love about how she makes decisions to spend money on Marketing.

Marketing Activities versus Cash Flow

Trish has an 8 step process she uses to appraise marketing budgets and to prioritise spend. She explains “these steps are not sequential but there is a loose logic I follow.”

  1. Budget the Activities In – both the time and money.  As a CFO you must have a budget before you commit spend.  If you mentally allow for some cash to grow the business – later you can refine the spend detail.
  2. Budget for contingencies – there WILL be some.  If it’s in your budget it’s easier to make a decision – if it is not in a budget it needs a higher benchmark of certainty in order to justify the spend commitment. We have 90 day planning and strategy cycle.  And so the next step is whatever you think the budget is going to be, double it.  Do this for money and also often for time budgets.  For contingencies – there will be some. Things to remember: contingencies happen.  If you are wrong about the $10k budget and right about $5k spend then you’ve got $5k more profit but your budget was conservative.
  3. Take a “can’t afford to get it wrong” approach – have measurable results. You can’t afford frivolous spend – your CFO will ask for measurable results as often as possible.  Not all these will be very refined e.g. it can be difficult for some campaigns to map directly to winning a customer.  As a CFO, I take this approach as often as I can without being overly focused on it.
  4. Consider alternatives – choose wisely via expert advice.  This is part of your decision making process.  Review your options – what are the best high level strategy? the best tactics? who should deliver? when? should this be internal or external?  All these give a flow chart or mind map to demonstrate your decision making pathway.  In my experience, while drawing these together a natural path illuminates.  You can see which route is best.  An example I had recently was a review where I could see we may not be able to afford $20k but we can get 80% of it done for $8k.  This told me that this path is be the better one for our business.
  5. Plan – time in your calendars, money in your budgets. This is self-explanatory – book marketing meetings and time to do the work as a regular diary event.
  6. Prioritise – time, money, outcomes.  To illustrate this, let me ask you a question. “If you took advice from a marketing expert one day and each day you took their advice you got $5k revenues in return. Then how many days of the week would you meet your marketing expert?  If the results from marketing is cash flow positive why wouldn’t you do more of it?”  I find business decision makers choose not to do marketing because of a lack of trust, a lack of competency, a lack of time or a lack of know-how.  If you to spend the first $500 to make $1,000 or to spend $1k to make $2k… the “scaffold-up” method of spend and results is one approach for a small business.  This enables you to afford marketing as you grow.   My advice to marketing people who are pitching for more budget is this:  you have to bake the marketing cake with all the ingredients – if you miss out the baking powder and eggs, you’re blown. the cake won’t work without key parts – your marketing expert should help explain this to you.  This conversation tends to get people stuck.  You are in a situation is when it’s so obvious to the expert but they forget to frame the outcomes in a way that resonates with the business owner.  It’s the advisor’s role to have that conversation.  CEOs in NZ are money- and time-conscious so know what the deliverables are – scaffold up.  Systems, general operations, finance, marketing – are the 4 area of a business.  Then remember to give each of the 4 turn about for budget and attention.
  7. Sequence – also in parallel and cross pollenating effects.  Once we’ve got the plan now put in the ongoing sequence….I look for the easiest way to do things.  Do a marketing activity once and use it 3 separate times.  The sequence has to be carefully thought through so you can do work in parallel with cross pollenating effects.  Do a newsletter – look for different vantage points for the reader depending on which part of your business is writing the article.  How will it resonate?
  8. Some activities are not negotiable – decide what these are and hold the boundaries – too easy to let them slip otherwise.   You need to know what these are.  Make a conscious decision if you have an inverted pyramid you must know how far way down you can go before you run out of money… each strata reflects a different activity and cash.  Know which you can do before you run out of money and time.  Decide to hold the boundaries of the things which are critical; don’t let them slip.  If something is insidious you may not notice.  If it’s intentional it still may slip but you know it’s happening.  Agree up front what is in this bucket.

 Getting along and working effectively for the good of the business is the outcome we all seek.  So there you go.  I hope this summary helps marketing folks to understand finance folks and vice versa.

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