1) The Actual Spend vs Budget Report
Saran: One report that we look at is the Actual vs Budget, I want to hear from you how you use the data for your decision support, say within the quarter.
Amanda: We have to track our spend versus our budget within the quarter. We want to ensure that we’re doing all the right things to keep finance happy and staying within our allotted budget.
One thing that is a step down from that is ensuring that by channel, the money is being spent productively, so, within our overarching budget, I can move money from one channel to another based on our ROI metrics. If I have a goal ROI of 3X and I’m already nailing that metric in one channel for the quarter, I may need to move that money to a different channel that is underperforming for the quarter.
So that is one ongoing area throughout the quarter that we’re in constant communication with finance about. Just to make sure that we’re getting the most bang for our buck.
Saran: Yes, we love to get the most bang for our buck and we don’t like surprises.
2) Historical ROI Metrics to Allocate Budget to Channels
Saran: Speaking of ROI, we just got done with our annual budget cycle. How do you use your historical analysis or data to determine how to allocate the budget to each of the channels?
Amanda: Once we get our company goals and have an understanding of how much everything costs at every stage in our funnel and the conversion metrics associated, I can work backward and determine the amount of money for each channel. To determine that I also look at our historical ROI quarter over quarter. For example, I may predict that a certain channel would have a certain ROI and we blew it out of the water. I then know I can ask for less money in that channel and more money in a different channel in order to even things out a little bit.
We definitely leverage finance to look at our historical spend data and align that with our performance data in our funnel to determine how much money we need.
3) Customer Acquisition Cost (CAC)
Saran: For the SaaS audience, at Host, one of the metrics that we look at closely and on a regular basis is CAC or customer acquisition costs, which is basically your total sales and marketing expenses divided by new Annual Recurring Revenue (ARR).
The goal for the company is to have your CAC go down over time, meaning you have more new ARR generated vs. your total spend. How do you look at that?
Amanda: From the marketing perspective we track to a CAC number and while I don’t have the same purview that Saran has, where he’s looking at all of the spend for sales and marketing, I do know that I can control cost by staying within a certain cost range per stage of the funnel.
I have a few numbers that I track:
- Net new leads
- Cost per marketing qualified lead (MQL)
- Cost per opportunity
I know that if I stay within a certain range for each of these at each stage of the funnel that I will likely be aligned to what the company’s CAC goal. So I can control my little bit and then report back to finance on where we’re at for the quarter and ensure that we’re on the same page.
What format should these finance reports be in for marketing?
Saran: So lastly, I work in finance and I love numbers and you also love data and numbers. How do we work together and collaborate and communicate, so that we can help grow our company together?
Amanda: I love numbers too, but I’m a classic marketer and I also like charts and graphs and pretty colors. Finance can gravitate more towards cell-based data where it’s very raw data. If I can have, for example, spend quarter over quarter delivered to me in a dashboard format or a chart format I can quickly look at that and gather the insights that I need at a glance.
If that can’t be provided then the next most important thing is to ensure that we’re working from one source of truth so we’re getting access to that data in real time. This allows us all to be on the same page, we all know where we’re at and there are no surprises at the end of the quarter.
Like we said, finance doesn’t like surprises and marketing doesn’t like facing finance when there are surprises.
Saran: Yes, real-time is a key word here, we want to be able to make proactive decisions rather than reactive, and be able to move money around within a quarter is really key in managing money in a budget conscious way.
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