3 Metrics Every B2B Marketer Should Know

Razzled-but-not-dazzled“When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind: it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science.”
– Sr. William Thomas, Lord Kelvin

The number one thing that has set me apart from other marketers throughout my career is my ability, and willingness, to do math.  It is not enough to make things look pretty or budget for events.  You must be able to express very clear and useful metrics that drive a business forward.  Here are 3 that I believe every marketer should know off the top of their head if ever asked.

ROI: Return on Investment

ROI

This is the basic of the basic.  You should be able to rattle off exactly what your ROI is for major initiatives and for your year overall.  Although we all know this is very basic, most marketers don’t actually bother to calculate it or share it.

If you have a negative ROI it could lead to negative consequences.  However, if you can get ahead of the question, report your negative ROI, and outline causes for this you will, most likely, be viewed as a professional in the eyes of your management.  Entry level marketers hide bad metrics.  Professionals address them head on.

Equity Value Creation

This equation literally tells the business how much more valuable you’ve made it.  Not how much money you’ve made it, but how much you’ve increased the company’s value.

This is a tough concept for many marketers.  We focus on the bottom line and how much deals are worth.  But how much is the company worth?  If you CEO decided to put the company on the market, how much more valuable have you made it?

This is a critical metric for marketers for two reasons:

  1. You’re communicating how your influenced deals affect the attractiveness of the company directly
  2. You’re communicating how your more fluffy work, like brand awareness and sales enablement, are contributing to the overall value of the company – if not the quarterly sales directly.

Equity Value Creation Formula

Let’s break this down:

  • Monthly Revenue – look at how much your influenced deals bill on a monthly basis.  If you’re measuring something like “brand awareness” look at your monthly revenue a year ago and compare it to now.  Calculate the difference.
  • Expense Ratio – What percentage of your revenue goes to cover expenses?  If you don’t know, a good estimate is 50-60%.  Expenses cover keeping the lights on, employees’ salaries, paying contractors, etc.
  • Multiplier – A multiplier tells a potential buyer of your company how much more than your annual profits they need to purchase you.  This one is tricky.  If your company is not publicaly traded, you likely don’t know what your multiplier is.

    Here are a few good rules of thumb I got from BusinessTown:

    • An extremely well-established and steady business with a rock-solid market position, whose continued earnings will not be dependent upon a strong management team:
      a multiple of 8 to 10.
    • An established business with a good market position, with some competitive pressures and some swings in earnings, requiring continual management attention:
      a multiple of 5 to 7.
    • An established business with no significant competitive advantages, stiff competition, few hard assets, and heavy dependency upon management’s skills for success:
      a multiple of 2 to 4.
    • A small, personal service business where the new owner will be the only, or one of the only, professional service providers:
a multiple of 1.

Essentially this equation takes your Annual Profits x your company’s multiplier and generates the value of the company if someone wanted to buy it.  You can use this to communicate how much more valuable your company is now that marketing is doing x, y or z.

NPV: Net Present Value

“A bird in hand is worth two in the bush.”

A dollar today is worth more than a dollar you make a year from now.  Marketers often report metrics based on the total value of a deal, which makes sense.  But to take your marketing game to the next level, start reporting on NPV instead.  Net Present Value is how much the deal is worth today.  For B2B marketers we often deal with more expensive, longer term solutions.   It could be years before our company realizes the actual full revenue from a sale.  By calculating your ROIs with NPV instead of total deal you’re indicating to your leadership that you understand the deal loses value the longer it lasts.  It shows you’re a professional.

Here is the actual equation:

Image result for npv formula

But only college students do it that way.  If your CRM doesn’t already calculate NPV for you, here’s a website that will do it for you.  There is an equation to calculate your discount rate, but here’s a cheat I found online for all our sanity:

  • 10% for public companies
  • 15% for private companies that are scaling predictably (say above $10m in ARR, and growing greater than 40% year on year)
  • 20% for private companies that have not yet reached scale and predictable growth

That being said, most CRMs can do it for you.  Just customize your opportunity page to include the field.

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