Cash flow, for your business, is so much more than “money in versus money out”; it’s got all to do with the different parts of your business and how they relate with the money moving in and out of your business. Understanding these relationships will give you a clearer picture of what exactly your business is doing and how to leverage that for better business opportunities.
In the case of marketing, there is a very specific relationship with cash flow which every business person needs to be aware of moving forward. Here’s what you need to better understand this relationship:
Hone Your Budget
You need to hone your budget; as a way of dealing with the unpredictable costs of marketing.
To get started, sit down and reflect on your upcoming marketing campaigns and how they relate to other sources of cash inflows and outflows. It’s not enough to settle for throwing things at the wall to see what sticks.
Create a realistic marketing budget (this should include allowance for some experimentation if necessary) that is proportionate to the rest of your expected business revenue and expenditure streams in order parts of your business.
Returns Over Everything
Never lose sight of the returns for your marketing efforts. Focus on metrics that provide you the context needed to understand your marketing efforts
It is not enough to restrict yourself to thinking about marketing ROI strictly in terms of “how many sales did that last campaign bring in?” –be ready to do deeper to more granular levels. Look at metrics like: Customer acquisition cost, and time spent on site as well as conversion rate (if your last campaign was aimed at increasing website traffic).
No doubt, it is important to know how your marketing collateral is performing in terms of overall sales and revenues, but when it comes to cash flow you need to delve deeper.
You will only be able to know the true value of every marketing dollar as long as you are able to:
Once you understand this, you will have a better grasp of the context necessary for understanding marketing’s effect on cash flow and vice versa.
Think of it this way: once you know that X action will pay off in Y way after Z amount of time, you will know the impact of every marketing decision and the time frame within which to expect it.
Not only does this make long-term cash flow projections easier to compute, its makes them more accurate as well.