What is your valuation creation story?
I grew up in Saint John, New Brunswick, and it snows a lot in the winter. When I was 12, I had a newspaper route. The newspaper route started with 30 newspapers, and after some decent growth in the neighbourhood, I left it around 120 newspapers seven years later. When I started, I realized my revenue model was mainly based on generating tips from customers. Each new customer didn’t add much to my take-home pay – it was all about the tips!
In my first year, around the holidays, I spent $75 and got a 50-pack of holiday cards. I stuffed a card in each newspaper and went about my regular delivery. After the holidays were over, I ended up seeing an extra $50 in seasonal tips. While the $50 sounded good, I quickly realized my ROI on the cards was -33% as I paid $75 for the package. I lost money!
Fast forward to the next year, I decided to spend $100 on a 50-pack. I inscribed a thank you note and handed each card to the customer wishing them “Happy Holidays.” That year, I ended up with $250 in seasonal tips – an ROI of 150%! I created some value for myself. It didn’t take long until I realized how marketing works from a financial perspective and how one can measure such value.
The importance of turning a profit
At the end of the day, what good is marketing if it doesn’t turn a profit? Financial analysis in marketing allows marketers to understand the impact of strategic decisions on the company’s financial results. Marketers familiar with financial terminology and concepts such as return on investment (ROI) have a better chance of getting the budget they want and earning the profits they desire.
Ask yourself: if you have to make a choice, wouldn’t you prefer to have more information, even if some of it is conflictual, rather than base your decision on a hunch? Moreover, isn’t it better to know how your efforts bring value to the company with ROI calculations?
Won’t you be able to better communicate to company leaders why you deserve more budget and that you will help the company reach its goals? This is made possible by financial analysis in marketing!
The importance of knowing what profit is
What should you do when someone hands you a financial statement or an annual financial report? In today’s business world, the answer can’t be “pass it to the accountant,” “pass it back,” or even worse, “throw it out.” Annual reports store an immense amount of important information about a business, and marketing professionals MUST know how to read them.
Often marketing professionals are criticized since they are viewed as creative and innovative people that tend to spend the company’s money without worrying about how effectively or efficiently it is being spent. Those days are over.
It’s time to invest in yourself and your career. Come and join me and the CMA, and let’s talk numbers. Let’s look at ROI and other vital ratios; let’s talk about annual reports and learn the language of business so we can prove our worth through the value we create.
Join me at the CMA's Marketing and Finance, Partnership for Growth training on Thursday, March 2nd from 1:00pm to 3:30pm ET.REGISTER NOW