Why Marketing and Sales Should be Thinking about EBITDA
EBITDA is not a measure most marketing and sales leaders spend much time worrying about.
But they should.
If marketing and sales thought about EBITDA (earnings before interest, taxes, depreciation, and amortization), they would be thinking about the same things the CEO and other C-suite leaders are thinking about - namely, how to make the business more profitable thus more valuable.
How can marketing and sales start thinking like the CEO?
1. Understand customer lifetime value
Do you know which customers are most profitable? Which segments?
More profitable customers mean higher EBITDA. The lower your selling and marketing costs, the higher the EBITDA. If you win business faster with less investment needed with a certain type of customer or in a specific industry, your EBITDA for these clients will be higher.
The fewer discounts or givebacks you need to offer to win the sale, the higher the EBITDA.
Which customers buy more often or deliver repeat business more consistently? Repeat business is less costly to earn than first-time new business.
Having a firm grasp on these questions will help you build a model of customer lifetime value, which will give you the credibility to talk about business value and the other core topics your C-Suite cares about.
2. Know the cost to acquire a new customer
Knowing which customers are most valuable directs you to understand how much you should be spending to acquire them. Closely related to lifetime value is customer acquisition cost. This is simply the total cost to acquire a new customer.
Lowering the cost of customer acquisition, especially for those high lifetime value customers, drives improved EBITDA.
This is where marketing automation and sales tools like CRM are so critical. Marketers need to know what it costs to generate leads, track the conversion of those leads to customers, and monitor what influences those processes. The only way to do that is to have insight into the customer journey. That insight comes from marketing automation and CRM.
Continuously improving marketing and sales effectiveness will lower the cost to acquire new customers, which increases EBITDA.
3. Build investments in marketing and sales, not just spend money
Do you chase the shiny thing?
By that, I mean, do you bounce from one tactic to another without a long-term strategy or focus?
Investing in your marketing and sales means being consistent and steady. Figure out where the high value, high margin customers are going for information and commit to being in those places with valuable, helpful marketing.
Build marketing campaigns that last and do not spend on one and done efforts. Invest your time and budget so that you can see a long-term return.
Examples of long-term marketing and sales investments include: