Wayne Lockwood: How to Write a Marketing Budget Your CFO Will Enthusiastically Support

Does it feel like presenting your marketing budget to the CFO is like pulling teeth? Do they ask countless questions and fail to understand, rationalize, or translate your work into business value? If you want a less painful budgeting process, my best piece of advice is to build a budget that your CFO will understand and agree with from the get-go. Click To Tweet

Here are seven specific best practices to get there.

1. Ask for Organizational Goals up Front

I can’t tell you how many times I see marketing leaders develop a plan and budget without any context for the business or division’s overall goals. What are your revenue targets next year? How about net-new sales, margin, customer retention, and other key business metrics? How can you write a marketing plan and budget without knowing what everything is building towards? This step alone will help you align your priorities with those of your CFO and others.

2. Get Sales Buy-In First

Before taking your plan and budget to the CFO, run it by your sales counterparts. Make sure they understand how vital your plan is to help them hit their number next year as well. If you can go back to the CFO together, saying jointly that these efforts are required to hit and exceed sales goals, you’re in far better shape to justify and keep what you’re asking for.

3. Cut Unsuccessful Line Items From Last Year (and Explain Why)

If you keep everything from last year by default, it’s far too easy to assume that you’re just doing a “land grab” for more money. Even if you had a great year, I’m sure there were initiatives that didn’t pass muster or deliver the results you had hoped.

As a way of making your plan both more efficient and credible, cut any items that were unsuccessful, highlight that in your plan and clarify why. This will also serve to demonstrate the rationale you likely used to justify any additions to the plan for the coming year.

4. Organize By Business Objective (Instead of Marketing Function)

Most marketing budgets are organized in a way that lacks clarity for the CFO. Click To Tweet It may be easier for you and your team to manage input and areas by sorting them by your org chart or primary functions, but it’s far easier for the CFO and other members of the management team to justify your budget if its organized by business objective.

This won’t work for everything, but at minimum, you should be able to sort certain initiatives by sales, customer retention, etc.

5. Project Results Wherever Possible (Revenue, Not Just Spend)

Most marketing budgets focus entirely on costs. And even if you couch everything in terms of the overall business objectives they support, it’s far better to project precisely what results you expect from any new budget requests. Better yet, create a mini ROI calculator inside your budget so that any negative impact of cuts are clear.

6. Make Future Expenditures Contingent on Early Success

It’s tempting to ask for everything up front. But in today’s fast-moving markets, it’s also difficult to accurately predict what you’ll really need in the second half of next year.

Rather than propose a firm budget for the full calendar year, identify certain line items that are contingent on early success. This can be defined as success in early marketing objectives or success in overall business performance. But either way, this makes your “core” budget request more manageable and demonstrates that the bigger number won’t come into play unless it’s justified by performance.

7. Tie Staff Bonuses to Sales Performance, Not Marketing Tactic Completion

I’m not talking about commissions. Most marketing teams have bonuses built into their budgets already. But in most cases, they get paid if the marketing objectives or tasks are completed no matter how sales performs. This year, consider tying marketing bonuses to broader company performance. At minimum, tie your demand generation team’s bonus to sales opportunity growth and/or closed business. Tie the retention team’s bonus to churn reduction or growth of lifetime value.

If you want to be taken seriously as a profit center marketer, you need to separate your operational dashboard from your executive dashboard. Put another way, keep those operational metrics to yourself (and your marketing peers). When communicating marketing’s contribution and value back to (and up) the organization, focus on metrics that are already familiar to your CFO. This does not include “inside baseball” marketing acronyms. It does not include email open and click rates. It does not include retweets, social engagement, share of voice, web traffic, or even cost per lead detail.

Your CFO dashboard should focus on marketing contribution to sales pipeline, overall acquisition cost relative to lifetime value, impact of marketing efforts on increasing sales opportunity conversion rates, etc. Internally, within your marketing organization, feel free to focus on metrics that make your marketing better. Externally, to reinforce your team’s profit center focus, prioritize metrics with a direct line to revenue, a direct path to margin, metrics that are already in the CFO’s own dashboard.

This is more than just nomenclature and inter-office communication. This is about simplifying and aligning how marketing is perceived, evaluated, and prioritized within the organization. It’s about changing the very culture within marketing to focus, ultimately, on metrics that matter.

There are numerous ways this can be done, but I’d start with this:

When’s the last time you looked at your CFO’s dashboard? The metrics she prioritizes, the terms she uses, the levers she’s primarily concerned about?
How closely are your metrics aligned with those of the sales organization?
Even if you’re reporting on these metrics currently, are you cluttering the dashboard with activity-based and operational figures that distract people from what really matters, from what you’re truly focused on?

Make sure others in your organization understand the difference between your CFO’s dashboard and your internal marketing dashboards as well. It’s not that the internal dashboards aren’t important. They’re just a means until the real ends.

Want to hear more from me on how to create a budget your CFO will support? I’d love to tell you about it at my session at the annual Marketing Nation Summit. Let me know in the comments what budget successes you’ve had so far this year and what you’re looking to still improve upon.

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