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Get More of Your Marketing Initiatives Approved with a Strong ROI

Jeff Antaya | Substack

The best marketers are successful business leaders. We understand that we don’t spend money; we invest it. Investing money means that you will get back more than you spend, in other words, it has a strong Return on Investment (ROI).

Our ability to properly estimate a marketing investment's ROI is a key element of a good business case. This is important because most approval teams have at least one finance person, and numbers are a financial person’s love language. A well-thought-out and conservative ROI is the first consideration for many people in the approval process. 

However, many very good marketers are more “right-brained” and excel at creativity, intuition, and artistic abilities, but may struggle with putting together a reasonable financial case. The overall approach and necessary estimates required to prepare are elusive to some people.

Today we want to go through a few examples of the financial analysis required to support your investment requests:

Scenario 1:

You have proposed a 6-hour seminar for clients and prospects of your wealth management practice. 

Data points and assumptions:
  • The total cost for the event is $50,000
  • The total guests (including both clients and prospects) is 125 people (65 clients and 60 prospects)
  • You estimate that 20% of the prospects will request a meeting after the event, and within 3 years, five of the people will become clients
  • 10% of the clients will give you a referral to others, and within 3 years, 2 of those people will become clients.
  • A typical client will pay you $20,000 per year for investment advice and tax support
  • The average client stays with your firm for 10 years.
ROI Calculation:
  • Within 3 years, you will get 7 new clients
  • The seven clients will generate $140,000 in new annual revenue 
  • If you expect them to remain clients for 10 years, they will generate $1,400,000
Conclusion
  • This is a good investment. The $50,000 investment will result in $1,400,000 in new revenue

Scenario 2:

You have proposed adding a new software named Propense.AI to your tech stack. The software is designed to identify “cross-serving” opportunities for firm clients based on sales to similar clients. However, you know that no matter how wonderful any software is, the partner adoption will take several years. To prepare your financial projections, you use a very conservative approach.

Assumptions:
  • The pricing of the software is determined by the number of partners in the firm. In your firm there are 100 partners, and that means the estimated software licensing fee will be about $100,000 per year.
  • In year 1, 20 partners will successfully use the software and sell one additional service to their clients
  • The average billing on a new cross-serving opportunity is $15,000
  • 50% of the services sold will be done when the initial work is complete.
  • 50% of the services sold will have a recurring element for another 4 years (total of 5 years.)
ROI Calculation:
  • Year 1:
    • 20 partners sell an incremental $15,000 in new services to their existing clients, which equals $300,000
    • 10 of the new clients will require the service for an additional four years (tax return, cyber audit, SAAS review). This results in an additional $600,000 of revenue.
    • With 20% of the partners participating in year one, they will generate an additional $900,000 of revenue.
Conclusion:
  • A $100,000 per year investment will generate an additional $900,000 of revenue from the first year of use. As additional partners begin using the software, the incremental revenue will rise even more.  Based on the positive ROI, you receive a solid endorsement to license the Propense.ai software.  

Although exact numbers are unavailable, we can estimate based on historical data.  For example, we are aware that several partners consistently show enthusiasm for discovering and testing new software.  Others are more skeptical and may be considered “fast followers.” These partners will never use first but jump on if the first adopters have success. 

By preparing a conservative and straightforward financial analysis, you are speaking the finance team’s language and demonstrating your business acumen. Both will help get more projects approved.