Marketing is an Investment. How to Finance Your Marketing Campaign
Facebook Community Boost knows how and you should too.
PHOTO CREDIT: Getty Images
I am excited to be at Facebook's Community Boost event, an initiative that Facebook started late last year to help entrepreneurs get free in-person training to help grow their businesses. I have been a long time advocate of helping entrepreneurs grow their business through responsible lending. This initiative allows me a larger stage to do just that.
In the Pittsburgh's Community Boost this year, I will be talking to business owners and entrepreneurs about financing their business growth. And as I prepared for the event--an obvious question stuck in my mind--what is a finance guy doing offering a keynote at a conference that is predominately about digital marketing?
After all--don't marketing and finance types hang out in different departments in big companies, and have different majors in business schools?
The answer is while Corporate America might look at marketing and finance as separate functions--when you're running a small business--the two functions are intertwined and have to be thought of together.
How so? Marketing is an investment. Whatever you choose to help grow your business is going to cost money. And assuming it works--and starts to make your machine churn faster, there will be economic impacts that have to be considered.
Growth typically eats cash flow--and if you don't plan for it, you can find yourself in trouble.
Smart marketing decisions and smart financing decisions go hand in hand. You have to think of them together, hence the reason the finance guy, is speaking at a marketing event.
Things to consider when determining how much money you need
When you create a budget for your marketing campaigns, consider the hard cash you are going to invest, and the cash flow your business will need to support the growth assuming it works.
- Will you need to hire more people?
- Will you be required to hold more inventory?
- Will your new customers pay you right away, or
- Will you have to give them terms and let them pay over your time?
Smart business owners make financing choices early on to support their marketing plan. If you are going to have short term working capital issues:
- Do you have enough of a line of credit to support them?
- If you are making capital investments have you considered term debt, preferably in the form of an SBA loan to back them up?
The last thing you want to happen is to be stuck in a corner, and need extra cash in a rush. At these junctions, you risk going to an online lender, who will likely offer you a loan product with a short-term amortization, that creates tremendous cash flow pressure and can often intensify your problems.
So, while it might not be obvious, marketing and finance are deeply intertwined. And the chicken does not come before the egg.
BY Thomas Koulopoulos