How Lean-Time CFOs Can Budget to Protect Revenue Pipelines

By Rob Goldenberg

It’s a challenging time to be a CFO right now. But one truth remains clear in spite of the headwinds: regardless of how the economic uncertainty shakes out, we need to manage budgets and maximize revenue efficiency, without dampening future competitiveness.

For example, when it comes to managing marketing budgets, that means cutting in some places and investing more in others. In this article, we’ll examine how CFOs can prioritize marketing spend to stay competitive, whatever the future holds.

Protect Pipeline

While it’s imperative right now to make sure you’re getting costs under control so margins and cash burn look right, you also need to balance that with keeping your business healthy. If you sacrifice in the wrong areas, you will go into the next year or more playing behind the eight ball, and you’ll have a hard time catching up.

Nowhere is that clearer than with a pipeline of projects, contracts and business. The best way to future-proof revenue is to continue producing enough quality pipeline, even in the lean times. As you’re considering making cuts to marketing’s budget, it’s very important to avoid hamstringing their ability to plan, forecast, and generate pipeline.

Many CFOs are accustomed to ignoring early-stage key performance indicators (KPIs) like stage zero to stage one pipeline targets. But in times when pipeline health is a more important indicator of future health than ever before, it’s wise to get into the weeds. Start looking for early signs of problems that might be lurking on the horizon so you can work to make sure the marketing team is properly resourced to meet them, even if that means making cuts elsewhere.

Whether you track pipeline targets in a spreadsheet or leverage AI to predict outcomes, it’s essential to set benchmarks based on past performance and market data, know what your most effective levers are, and predict shortfalls while you still have enough time to change course.

Maximize efficiency

A hallmark of leading in times of uncertainty is applying more scrutiny to overall sales and marketing efficiency. When your revenue growth trajectory changes, your capital allocations need to adjust to best support the new outlook. And when that change in trajectory is negative, efficiency is paramount.

Companies index on different high-level efficiency metrics for sales and marketing. Whichever metric you use, whether it is customer acquisition cost (CAC) or spend as a percentage of revenue, that target or benchmark must be stage and growth appropriate. Whereas you might be fine with marketing as 25% of revenue when you’re relatively small and growing at 100% per year, that won’t fly if you’re growing revenue at 20% per year.

When bringing marketing and sales metrics together, the amount of revenue you need to add per dollar of combined sales and marketing spend certainly goes up in difficult economic environments. We have all seen it before and, with that experience, we also know it’s no simple task. In fact, the cracks we face in sales and marketing in a strong economy turn into massive problems in a weak economy!

For example, sellers are so bogged down in administrative tasks, research, and other time-wasters that they only spend 35% of their time actually selling — which is probably why only 53% are hitting their revenue attainment goals.

An inefficient rep is very expensive — not just in terms of salary and benefits, but in terms of lost opportunities. And when opportunities are fewer and harder to come by, it’s more important than ever to capitalize on every single one.

The right investments in marketing can make sellers far more efficient by helping to attract, surface, and nurture the accounts that are most likely to close quickly. When marketing can fill the pipeline with accounts that are a good profile match, a good tech fit, and in market to buy, it reduces the effort needed to close an opportunity by up to 40%. By removing guesswork and busywork and helping sellers prioritize the best accounts to pursue, marketing can help sellers maximize their efficiency.

When you’re looking at smart places to direct marketing budget, focus on the places that improve sales efficiency.

Use AI to cut costs, not staff

Another way to maximize efficiency is to minimize menial, manual tasks that stand between sellers and customers. Having the data and AI available to quickly and effectively connect with the right personas at in-market accounts can mean the difference between getting into a deal first and losing to a competitor.

A lot of times, when markets are looking shaky and the economy is uncertain, companies have a tendency to cut fast, cut deep, and then deal with the fall-out later. This approach is supported by the investor community, both public and private, and certainly has some merit BUT ONLY in the context of maximizing efficiency, pipeline, and long-term value.

Just think about what happened at the Big 4 accounting firms when COVID-19 first hit. Their business reality went to “crickets” nearly overnight. Like many services industries, accounting is one where the main cost is people and, when faced with a precipitous drop in business, these firms decided to cut costs by letting a lot of their workforce go. Then, just a few months later and after substantial layoffs at the Big 4, the market for IPOs went through the roof, and accounting firms were in higher demand than just before we entered COVID. But those same firms were woefully understaffed and were scrambling to hire qualified CPAs in the most competitive job market in recent history.

That’s one reason that helping your current employees improve efficiency can be a safer bet before making drastic cuts to team size whenever possible. With smart investments in tools that promote efficiency, you can improve revenue generation and cut budgets and, ideally, prevent, minimize, or delay layoffs. You’re getting more out of your teams, and your teams are getting more out of their campaigns, without increased effort.

In some scenarios, a downturn might necessitate hiring more people, depending on your greater plan for dealing with the changing economic tides. For instance, you might want to bring on new salespeople to try to break into a new market. But if you do, be aware that you need to hire up in marketing as well so these new sellers are supported and set up with enough pipeline in order to be successful.

As we plan for an uncertain future, deciding where and how much to cut budgets while remaining competitive can be especially challenging. CFOs will continue to keep the pulse on all the same metrics we’ve always tracked — average deal size, sales cycle times, win rates, and rep attainment. But now we also need to scrutinize the earlier parts of the funnel to identify problems and opportunities early. We’d be wise to keep investing in the marketing programs and tools that positively impact pipeline and sales efficiency, while cutting spending that doesn’t measurably move the needle.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.