Marketing’s Weekly Dose of the Truth

Ken Magill

About Us

Getting to 'Yes!' from the CFO

By Jack Sinclair

In most organizations the chief financial officer is the one you need to convince when you want to spend a significant amount of money. I am not talking about a decision to buy some more Google key words or a new computer. I mean expensive decisions such as investing in email marketing automation or committing a lot of money to an advertising campaign.

Often these projects do not have neat paths demonstrating ROI.  But instinctively you know what is a good investment.

If there is a lot of money involved and you have no ROI case it will be tough to get the CFO to say yes.  But here's the thing: The CFO wants to say yes. They want to make significant investments that can have a positive impact on the business.

A major part of their job is to manage the balance sheet so the business has enough capital to make great investments. But capital can be expensive. They need to understand the impact any major investment will have before they are on board. So how do get the CFO to yes when the ROI on the marketing investment you are proposing is not easy to measure?

First, remember that you can show return in two ways: you can make money or you can save money. So that means the most important thing you can do is detail the process the investment is going to impact step by step so you can show where money will be made or saved.

If you can quantify the impact your investment will have with metrics that are understood in your organization, all the better. But even if you can't, you should take the time to discuss the major areas of improvements and make some economic assumptions.

Avoid saying things like “you can’t measure brand marketing ROI” or “this is a pay to play investment”.  Do the work on where you think the investment is going to make a difference. 

Take the example of a marketing automation software investment.  You believe the investment will increase the amount of qualified leads by better identifying product fit and will better nurture those leads with more targeted communication.

One approach would be to make an assumption of the percentage of improvement on your monthly lead flow to get to the number of increased qualified leads per month, then multiply that by your average lead/close rate and your average deal size. This will give you the revenue impact the investment could have on a monthly basis.

Additionally, you could assume that improved targeting will increase the lead/close rate by some percentage. Factoring this in will further bolster your revenue impact. Let's try some sample numbers.

You assume that you can increase your 1,000 monthly leads by 10% and improve your lead/close rate from 10 percent to 11 percent.  And your average deal size is $1,000.

1,000 x 10% = 100 extra leads. 
100 x 11%= 11 closes. 
11 x $1,000 = $11,000 per month

Then the discussion becomes focused around how reasonable the improvement assumptions are.  You and the CFO can discuss why you think 10 percent is a reasonable estimate of the increased lead flow.You can talk about why you believe it will improve the close rate. The discussion of specific assumptions can be much easier than using general talking points.

If your CFO just needs you to justify the investment, you can approach the analysis in terms of breakeven point. In the example above you have to answer the question of how many more leads you need per month to pay for the software investment.

Assume that the software in the example costs $24,000 per year or $2,000 per month. You could say something like "as long as I increase my monthly leads by 2 percent the investment pays for itself."  The discussion then becomes how likely you are to achieve a 2 percent improvement as well as what your hopes are for the investment to give some color on the upside potential.

This exercise demonstrates to the CFO that you have given real consideration to where and specifically how much impact the investment needs to have. It also gives you a framework to revisit after the fact to assess if the investment was a good one.

If you are in a situation where you are competing for capital, you will need to focus on what you think the real impact will be rather than just the breakeven point. This will help the CFO allocate capital effectively across all possible investments.

Remember: The CFO wants to say yes. It's up to you to make it easy!

About the Author
Jack Sinclair is the CFO of deliverability and security concern Return Path. He writes the Online Entrepreneur with his colleagues Matt Blumberg and George Bilbrey.  Together they cover how to approach the business of email marketing, thoughts on the future of email and other digital technologies, and more general articles on company-building in the online industry – all from the perspective of an entrepreneur. 


Show: Newest | Oldest

Post a Comment
Your Name:
Please type the letters in the image above

Terms: Feel free to be as big a jerk as you want, but don't attack anyone other than me personally. And don't criticize people or companies other than me anonymously. Got something crappy to say? Say it under your real name. Anonymous potshots and personal attacks aimed at me, however, are fine.