WHAT IS ADVANCED FINANCIAL MODELING?
For 100 years marketing has lived “below the line” as a vehicle to help launch products, build awareness and consideration. However, digital channels have provided marketers a way to think of marketing more like an electronic sales channel, driving leads, conversions and revenue.
However, agencies still behave like marketing is a below the line business contributor. Prove sees things differently. Today, Growth Hackers like us at Prove use digital marketing to execute “Goal vs. Actual” marketing, setting goals for each key performance indicator across each marketing channel. This allows us to continually optimize each effort so that leads, transactions, revenue, customer retention and social sharing goals are met across the board.
To accomplish this modern way of marketing, we develop financial models that incorporate known results and agreed upon forecast assumptions.
Our modeling projects start with a spreadsheet-based mathematical model consisting of Assumptions, Calculations and ROI Forecasts to help understand the appropriate investment in digital assets, as they allow our Business Intelligence team to:
- Identify trends from existing business data, and agree on key assumptions
- Create a data-backed marketing budget that is scaled by improved key gates of performance
- Compare Goal v. Actual after efforts are rendered
Such a model is designed to determine what key performance indicators, media costs, conversion rates, etc. must be achieved to scale. Working with our models, it becomes possible to forecast how improvements in each “gate of performance” work toward the ability to scale.
WHAT DOES YOUR CUSTOMER JOURNEY AND SALES FUNNEL LOOK LIKE?
Financial modeling helps to understand the “shape” of our clients’ sales funnels and their revenue, new customer, and sales mix objectives. The end result is a data-backed marketing budget that outlines which channels and activities will work together to achieve our clients’ goals.
Our Business Intelligence team recognizes that every industry and every business has a unique sales cycle and prospect-to-lead-to-sale time and our financial models reflect those nuances.
Assumptions power the model as shown below.
EXAMPLE ASSUMPTIONS
Setting assumptions is the first step; we seek agreement with our clients on the assumptions so that the next step can be accomplished.
Ask us for help in developing your model today.
That important next step is to back into the desired results so as to understand how much investment is needed to accomplish the goals). For example, if the 12-month revenue target (consisting of both new customer acquisition revenue and current customer retention revenue) requires thousands of transactions, budgets need to be set to accomplish those transaction goals.
Knowing that you have an investment requirement that is likely to result in the sales volume you seek (rather than starting with a fixed budget and hoping for the best) is sometimes eye opening! How will you as a marketer justify potentially larger investments than the old “below the line” marketing approach? The financial model is the means to make the case in a highly effective way.
No model or request to finance is complete without a return on investment forecast. Our models do just that!
Here’s an example from one client’s model.
Are you ready to begin moving marketing up to Above the Line and finally right size the budget so as to be able to hit your targets comfortably? Let our financially savvy Growth Hacking team work with you to transform how you execute digital marketing. Let’s talk.
B2B CLIENTS AND THEIR WATERFALL
We work with both B2C and B2B clients. B2B clients often have a unique way of measuring cost at each stage of the revenue generation cycle. We work closely with B2B clients to understand their business and develop each stage of their revenue cycle.