Virtually all finance departments produce monthly reporting and analysis packages to aid business leaders when making key decisions. The question we have to ask ourselves: Are these reports and metrics creating true value and business insight? Are we looking at the right metrics or is it all just useless data? To address this we will look to an unlikely source but as the Grateful Dead’s song Scarlet Begonias states: “Once in a while you get shown the light in the strangest of places if you look at it right”
It's no secret that Marketing and Finance departments have a longstanding love & hate relationship…meaning they love to hate each other. Finance views Marketing Directors as free spenders without concrete proof of value and Marketing sees Finance Leaders as simple bean counters that only care about the bottom line. So it was interesting to see Brian Halligan, founder and CEO of Hubspot, an innovator in marketing transformation and inbound marketing, be one of the keynote speakers at the CFO Roundtable technology conference this past Thursday at Bentley University.
What was even more amazing was how this marketing leader captivated the attention of 200 Boston area CFO’s for over an hour. This was partly attributable to his unorthodox stories about marketing tips from his book, Marketing Lessons from the Grateful Dead. (He divulged that the Scarlet Begonias quote above is one of his personal favorites from years of following the legendary band while at UVM). He then kept the attention of the room with bold statements like “The best marketing people are the ones with no experience,” which received a laugh from all in attendance. While this all made it an interesting start to the day, the talk really resonated with the CMC team in attendance when he brought up the subject of key metrics.
Halligan spoke about key metrics in a way that made this group sit up and take notice and the point is one we have been touting to our customers for some time as well:
If you are only looking at the P&L, balance sheet and statements of cash flows for your business, you don’t have an accurate picture of what the future will hold or if you are heading in the right direction. You must look at the key underlying drivers of business growth. As it relates to sales and marketing, Halligan pointed out the 4 key metrics all Subscription oriented businesses should be tracking:
- Cost of Customer Acquisition – How much do you spend to gain a new client.
- Lifetime Customer Value – How much are they worth to you over their life-cycle as a client.
- ROI on Cost of Customer Acquisition – What is the return on the investment to acquire a client.
- Time to Payback on Cost of Customer Acquisition – How long does it take you to recoup you’re investment made to gain a new client.
The idea being that if you are tracking these metrics by product or business line, you actually have all the information to effectively identify trouble areas early and reallocate resources to higher return products and services before you miss your financial projections. It is CMC’s belief as well that reporting and analysis best practices require that financial analysis of business results must include key drivers and non-financial metrics to present a complete picture. Further, it is these non-traditional metrics and drivers that provide the true insight into operations that are key to a business being able to accurately predict their future.
Who knew marketing wisdom could show financial leaders the light…I guess we just needed to look at it right.
Does this resonate with you? Is your financial reporting generating value and insight? If you would like more information on key metrics for your industry or reporting best practices, please contact us for more information.