When was the last time you asked your CFO to run a report of all marketing expenses?

For most leaders, it’s been a while. Now is the time to review your marketing financials.

Partnering with your CFO is the easiest way to get insight into the financial health of your business. Taking time to rigorously rationalize expenses will put you on a stronger footing for growth. And among all of the different silos in your business, your marketing function is the best place to start.

By working with your CFO to evaluate your marketing budget, set the proper benchmarks, and assign a cost or value to each one, you will align marketing with your overall strategic objectives. You’ll also ensure marketing remains properly resourced and clear priorities guide budget allocation.

Many successful businesses suffer from vestigial bad habits when it comes to marketing. As a business passes the peak of organic growth and makes the shift to marketing-led growth, it is crucial to look at your marketing practices with clear eyes. Typical “ad-hoc” approaches that worked before will undermine your efforts now.

Here’s how to get deeper insight into your marketing financials and systematize your approach:

1. Stop Labeling Everything “Marketing”

Not everything is marketing. That might seem obvious, but marketing often functions as a catch-all.

Time and time again, the Andrew & West team sees the same pattern. We analyze marketing expenditures for a successful, high-potential business only to discover tens of thousands of dollars tagged marketing that have no place being there. This includes expenses such as event management, gifting, and miscellaneous outreach.

Marketing is often seen as a “gray area” by business leaders. Their focus and priorities are elsewhere, so they may not have the rigorous definition of marketing a senior consultant in the field can offer. Understandable – but a source of confusion. And that confusion leads directly to waste that drags down your balance sheet.

In many organizations, marketing is entwined with sales. Efforts to get sales and marketing to collaborate are laudable, but they often blur lines that should be kept distinct. In the end, sales expenses get subsumed into the marketing budget, which makes it more difficult to distinguish the ROI unique to each function.

Another source of uncertainty is the shift to digital marketing. For the vast majority of small- and mid-sized enterprises, your next customer will learn about you online – not through traditional media placement and certainly not by visiting you in person. This fact can cause IT expenses to be misattributed to marketing.

The first step to optimize marketing financials is to ensure everything is categorized properly.

2. Cut and Reallocate Marketing Spend

Want to put marketing leaders on high alert? Just mention the words “budget cuts.”

That might be necessary sometimes – but it’s not necessarily what we mean here.

Once you’ve organized your marketing expenses, it’s time to categorize them.

It’s simple. There are only two major categories of marketing expenses:

• Necessary marketing expenses are the ones that can be clearly attributed to your growth plan.
• Unnecessary marketing expenses are untethered to your growth and can be cut or reallocated.

Think about the tough spending decisions you’ve had to make in recent months. Most of these are probably related to your evolving needs, especially if your organic growth has plateaued. You know a more aggressive approach to marketing is in the cards, for example, but you “just don’t have the budget” for a new hire.

Don’t look for ways to increase the budget – at least, not yet.

Instead, vigorously pursue those poorly rationalized expense areas. Divert that spending into the larger expense categories so you have the freedom to make bigger, more crucial strategic moves. The efficiency you capture as a result will bolster the effectiveness of your marketing department.

Plus, when those new hires step in, it will be easier for them to focus on the highest-leverage work.

3. Spend the Right Percentage of Gross

Sit back for a moment and ask yourself: “What percentage of my business’ gross revenue should I be spending on marketing?” Linking marketing budget with gross revenue is a proven way to keep your spending lean and targeted. However, it can take time to pivot to this way of thinking if it is new to you.

The best way to make the call is with an impartial expert perspective.

Having a conversation with an experienced fractional CMO is the best way to get your marketing budget on track in light of your company’s size, strategy, and growth prospects.

A brief engagement with a fractional CMO enables you to hit the ground running in a matter of weeks. That compares favorably to the months or years it can take to hire an in-house CMO, who’ll then build a team that needs even more time to get up to speed.

Savvy enterprise-level leaders realize they can’t rely exclusively on their sales teams to create business out of thin air. In many industries, the tools that effective outside sales professionals once relied on, such as a busy calendar of in-person events, have gradually been supplanted by more marketing-oriented opportunities.

Marketing teams have the capacity to equip sales teams with the collateral they need to make their case to leads. At the same time, sales pros are the first to encounter novel customer objections out in the field. By reporting these and other insights, they fuel the marketing deliverables that make a winning difference.

With that in mind, investing in your marketing budget is investing to support your sales team.

Every industry is different, and your specific gross revenue figures will make an impact. But we routinely find 5% to 7% of gross revenue is the range most businesses should fall into. It is not uncommon for smaller businesses to aim for a slightly higher figure while larger businesses can fully function at a lower percentage.

That budget should include the full scope of your marketing – from your marketing agency to your advertising to the salaries of your internal marketing personnel. Diligently managing the 5% to 7% figure becomes a whole lot easier when every line item that isn’t marketing is identified and re-categorized.

Make Sure Your Marketing Budget Is Functioning At Its Fullest

In all areas of business, the fastest way to get where you are going is to leverage expertise and insight from someone who has been there. This is especially true of marketing, which is increasing in complexity on an exponential basis. Brief, occasional engagements with a fractional CMO help you stay ahead of the curve.

If partnering with a fractional CMO is on your radar for the first time, one good way to leverage the opportunity is to collaborate on a clearly defined marketing budget. When your marketing financials are efficient, you have more avenues to uncover ROI, drill down to your audience’s unmet needs, and adapt to the changing marketplace.

Is it time for your organization to work with a fractional CMO with senior executive leadership experience?

Contact us to find out if we’re a good fit.