Math of Marketing & How to Get More Marketing Budget

TL;DR: Smart marketers waterfall their goals. 

They know what needs to be true between where they need to be and where they are to drive business impact. They focus on levers that create results on the company’s core business objectives (CBOs). 

Which means two things:

1. They know what the company objectives are (for starters)
2. They know how to explain the value of their marketing strategy to the C-suite decision-makers as it relates to their CBOs.

A very small percentage of marketers speak C-suite. 

They stay in their lane and talk about impressions and clicks and tweaking ad levers—the busy stuff. Then, when it comes to defending their strategy, they have “oh shit” moments.

And that’s why marketing is the first thing to get cut when times are tough.

There must be a clear path from a marketing initiative to building pipeline. 

In this marketing recipe, you’ll 

• Learn how your marketing effort makes more business impact (driving more revenue/profit) 🤑
• Know what inputs and math equations to prioritize so you work on the easiest growth levers to achieve your goals 🎯
• Speak the language of the C-suite so you get some damn respect and more marketing budget 🙌

It makes sense to start at the top and work your way down once the company budget is set for the year.

The budget pins down the dollar figure a company wants to grow by— from this amount of revenue to this amount—within a year. The CEO, CFO, and CMO care about that revenue number a lot. 

It’s their core business objective (CBO). 

As a savvy marketer, you take that revenue number and math it down to granular, quantifiable marketing efforts. 

When you do this, it’s easier to defend your position when the CEO or the CFO asks which ideas (from your total portfolio of marketing investments) you’re most confident about. 

Oh shit 💩

The answer is the ones that add impact up the waterfall to the revenue or profitability goal for the year. 

We’ll walk through the Math of Marketing and show you how to figure out what needs to be true (the actuals) to hit your company target. 

It starts by looking at the macros: the biggest levers. Then we’ll look at the mesos (the middle layer) and, finally, the micros. 

The first question to ask is a two-parter: What By When?

1. What's the business goal? (that we can measure)
2. When does this goal need to be achieved? 

In our example, the company CBO is to grow from $15 million to $20 million in one year. 

Revenue goal: increase revenue by $5 million. 

You have a revenue target of $5 million. But…

What percentage of that goal does marketing own? 🤔

Sales will contribute to hitting that $5 million target, and same-store growth will contribute from a customer success perspective. But what sliver of the pie is marketing in charge of?

In our example, it’s 50% of 5 million, or $2.5 million. 

Cool. 

Next, look at your average customer value or average contract value—how much your company makes from one customer.

If it’s $50,000, like in our example, what is the gross margin goal? What needs to be left over? You can’t forget the cost that goes into 

1. Getting that lead 
2. Servicing the shit out of that lead 

That factors into customer acquisition cost, or CAC ceiling—the max amount you’re willing to spend to get a new customer.

In our example, the CAC ceiling is 25% of the ACV, so we can spend $12,500 to acquire a customer. 

Sorted. 

Now look at the mesos.

We’re halfway down the waterfall now.

From the top of the waterfall, we know the average customer value (ACV) is $50,000, and the revenue goal for the marketing department is $2.5 million. 

So how many customers will bring in $2.5 million this year?

Divide $2.5 million by the ACV of $50,000. 

We need 50 customers a year.

What about quarterly and monthly? 

• Divide 50 by four to get the number of customers per quarter (50/4 = 12.5). Round up since you can’t have half a customer. We need 13 customers per quarter to hit our $2.5 million goal. 
• Divide 50 by 12 to get your per-month number (4.2). Round up to 5 customers per month.

Now, how much will it cost to get those 50 customers? 

That’s the budget you need.

Multiply your CAC ceiling (the max amount you’re willing to spend to get a customer) by the number of customers you need to hit your revenue goal.

$12,500 CAC * 50 = $625,000 budget

It will cost $625,000 to add 50 customers to the pipeline. That’s how much budget you need to hit the $2.5 million goal.

See how that’s defensible? 

So when you hear, “You need to double the volume of our pipeline/CRM sales stage/revenue, but you’re not getting any more marketing budget,” you can call bullshit.  

You have the math you need to defend your goals against budget. 

Figure out the quarterly and monthly budget, too, so you understand pacing toward goals over time. In our example, marketing needs $52,000 monthly to hit the $2.5 million revenue goal.

Huzzah.

You have your budget. Now figure out the SQL close rate and the cost per SQL ceiling. And by SQL, we mean the last CRM stage before closed/won.

How many of your sales-qualified leads (SQLs) turn into customers?

In our example, it’s 25%. Or, for every 4 SQLs, one converts into a customer.

Divide the CAC ceiling of $12,500 by 4, and you get $3,125. 

That means your cost per SQL ceiling is $3,125. 

You’re already down to the micro stage, which is the MQL stage (or whatever you call the prerequisite stage of the SQL). 

Welcome to the bottom of the waterfall.

In our example, 50% of marketing qualified leads (MQLs) turn into SQLs, so divide $3125 in half. 

Your cost per MQL ceiling is $1562.50.

Keep waterfalling down to the stage before MQL. In our example, that’s the lead/demo stage, and our conversion rate here is 10%.

10% of $1563 is $156. 

The cost per lead ceiling is $156.

And if the click rate is 1%, then the cost per conversion is 1% of $156, which is $1.56.

Now you know the cost of every part of the journey that gets you to your marketing goal of $2.5 million. 

But what should you focus on first?

As marketers, there's no shortage of things we can do and spend our time on. But don’t confuse busyness with impact. 

You want to hit home runs, not first-base hits. 

You want to do less work with more impact—fewer dishes, bigger servings.

You want to be more surgical and be able to explain why you tried something over something else. 

When we look at paid media (the cost-per-click world)—the bottom of the micros—many marketers spend WAY too much time turning the dials and tweaking little things. But a bid adjustment in Google Ads isn’t going to 2X revenue.

Small optimizations won’t perform as well as higher-level stuff like conversion rate optimization (CRO) or talking to the sales team about what customer segments have higher close rates or what sales stage could have a higher cost per X ceiling.

When you have the math, you should be able to say that you’re going to do “this thing” first because achieving that goal will open up the waterfall so you achieve your goals faster. 

But most marketers don't speak in those terms. 

You could do things that take a long time, like rewiring your whole go-to-market strategy, including the sales team and the customer success team. But that’s a big effort and a big bet that takes a long time. 

And if you're wrong, you're fired. 

So start from the top. 

Talk to the sales team and understand if there are customer segments that have higher sales stage conversion rates than others but still have the same CAC as other customer segments. 

Could you go after more of that customer segment? 

If you have higher sales stage conversion rates, the math shows you can afford a higher cost ceiling. That means that you'll be below that cost ceiling and you'll get more volume out of your budget. 

You create more breathing room to go after higher-quality traffic within your desired customer segments and, here’s the best part, you might not even have to hit the cost per ceiling at each funnel stage.

Because if you’re below it, you get MORE volume of traffic, leads, MQLs, SQLs, and customers and you’ll be pacing ahead of your goal.

Instead of ending the year at 50 new customers, you could get 60 or 70.

When you're pacing ahead of the goal, not every day is a grind. You’re doing more impactful work and less busy work—top chef, not line cook chaos.

To get there, you have to know your levers. 

And to know that, you have to have visibility.

You should know what campaigns, ad groups, keywords, or content offers drive your highest conversion rates. That might mean investing in offline conversion rate tracking or setting rules with sales for when a sale is closed/lost so your marketing team gets the correct signals and insight.

You can have decent paid ad engines in place, but you have to be able to communicate the results to the higher-ups. 

Invest in that tracking plumbing so if someone asks you 

→ How many organic sessions does it take to get to an SQL?

→ Do you know what offers perform? 

→ Where would you spend more dollars if you had them?

→ Are there easy budget moves you can make?

—you have a good answer. You have to make sure you have the right infrastructure in place so you can relate what’s happening to senior leaders. 

If you invest in tracking, you’ll know what's working and what's not tied to your overarching goal.

The biggest lever you have is to move the budget around to different campaigns or ad groups and pause what’s not working to respect your cost-per-click ceiling. When you have more traffic coming through, the waterfall will give you more customers at the end of the day.

Bigger lever, bigger impact.

Mathematically, it makes more sense to pull out some budget to use for conversion rate optimization to drive a conversion rate higher. 

There are two parts to that:

1. Conversion rate
2. Connect rate

If you’re a B2B company that has a low conversion rate to begin with, say 1 out of every 100 clicks, and then once you have that lead, you see a low connect rate, CRO can fix that.

If conversion rates are low, it’s not necessarily because of low sales performance. It’s lower sales stage infrastructure or something simple like the speed-to-lead aspect—triggering an email sequence.

Fix those things, and you'll start to see the math change.

• You know what your goals should be based on the waterfall down from the CBO
• You know your actuals so you can compare what they are and what they should be
• You know what growth levers to prioritize.

Now you start messing around with the math.

What happens further down if you increase the conversion rate from 1 % to 2%? 

If you can influence increasing the close rate from SQL to closed/won, that's a big impact. So it’s worth analyzing what’s going on with closed/loss prospects so you understand why prospects don’t choose your company.

Once you know that, you can reverse engineer what marketing focuses on and influences (the lead segments with higher conversion rates) when it comes to positioning the pillars of the product. 

Clearly communicate that and back it up with math.

When lead to MQL and MQL to SQL improves, it’s a domino effect. And that creates more breathing room. 

You might not even have to hit the cost per ceiling at those stages because if you increase the conversion rates, you have more money to play with. You can get 50 customers by spending less than the budget.

Then, you go to your CFO and ask for more. 

Use the math of marketing to drive an impact for your company and your personal growth. 

Quantify all the things you can do.

Rank them and prioritize them.

Then, figure out if your current budget is spent the best way to drive the goals you care about. 

Take away some ad budget, invest in CRO, and use KlientBoost’s growth grid (that we use in-house).  

Will the next dollar you spend increase your budget? 

What's the expected payoff of that investment?

Track each stage so you know what’s impacting what—which ingredients create the best flavor.

Then go to your CFO and say, “Hey, if we increase conversion rates on our site by 20%, we'll get this amount of revenue gain and this many more customers. 

Make those bets.

Then, evaluate if you hit those goals at the end of your goal timeline and communicate your progress to the C suite using a macro % versus % goal pacer. 

The green line on this graph shows your KPIs, which could be customer volume or revenue. 

The red line is time—goals are only cool if they can be measured one a timeline.

Say you bet on onsite CRO, and you gave it three months to get a 20 % lift.

Monitor that each month. Is it working?  Do you need to pull the plug?

Use the % vs % Goal Pacer to communicate what’s happening in an obvious way that makes sense to the board—you're either winning or you're losing. Use the reverse waterfall language to show how the micro moves contribute to the macro. 

It’s the best way to get buy-in. 

The C-Suite doesn’t need to understand marketing to see what’s working on a graph like that. The CFO and CEO only need to understand the logic of math. 

Speak their language: 

“I need this much budget to get this number of customers at this ceiling.”

“The current budget allows us to reach 10% of our audience. We need this much budget to reach the full audience.”

Don’t lose them by talking about 20 different marketing principles they don’t understand (or care about). Just say X and Y don't match, and we need to make them match.

If they're not willing to budge, find the door fast.

You can’t perform if your hands are tied—and that’s a big signal they don’t care about marketing as a whole. 

Flee.

Speak about marketing in terms of financials.

Show how much budget you need to contribute to revenue.

Get attribution software. Track everything. Know which growth levers have the highest impact and where to spend your time, dollars, and resources.

Get promoted because you can defend your decisions and plans to stakeholders and communicate your Day Zero situation to Pay Day—money terms, not gut feeling.

Use 

• Waterfall math (Want more budget? Bake in the math)
• The growth grid
• The payoff you expect from your marketing investment
• Goal pacing with KPI percent versus time percent.

That’s how you get more marketing budget and the respect you deserve.

Bon appetite 🤌