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 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, which comes from marketing automation and CRM.
Continuously improving marketing and sales effectiveness will lower the cost of acquiring 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:
- SEO - I wrote a lot about why this is a strategic imperative here
- Content - create evergreen content that helps your target customer
- Build a great website experience
- Customer success - prioritize proactively making sure your customers are successful and not just focus on reactive service
- Co-marketing - build relationships and create value with other people and companies that serve your ideal customers
4. Focus on sales enablement and sales effectiveness
Do not focus solely on net new leads but prioritize increasing the conversion % of those you get.
One of our clients, MSI, asked us to help them grow their business, and we implemented an inbound marketing strategy.
The client could do fewer quotes and win more business because they focused on converting the best opportunities. Not all leads were considered good leads.
The best part about this story is that the owner sold the company, and its value increased by a factor of 3 due in large part to this inbound growth strategy.
5. Help your customers sell for you
Buyers today are far more influenced by your customers' opinions than they are by your marketing content.
You must build a culture of customer first to deliver the great experiences buyers demand and ones that they will share.
Customer experience is the new brand. It is what others say about your company that matters.
Focus on your company culture so your people can focus on customers. Read more about how you can become an Inbound Organization here.
6. Beware the economic forces affecting EBITDA
Economic conditions have a direct impact on EBITDA. Inflation, interest rates, market forces, unemployment, finding employees, and supply chain changes are just some of the few economic drivers that affect your EBITDA.
Aren't those issues that the C-Suite gets paid to handle? Yes, but they will impact sales and marketing and need to be adjusted to account for market fluctuations.
Customer retention becomes paramount in an uncertain market. Investments in loyalty programs and personalized customer experiences are common strategies to secure a steady revenue base. But you will need to be creative. You will need to be interesting, engaging, and different. Buyers will continue to expect the extraordinary as the baseline. Do not rest on your laurels or expect what worked yesterday to work today.
Sales and marketing can stabilize EBITDA by finding new revenue streams, creating new pricing models to adjust for demand, and lowering costs by adopting technology to drive productivity.
Summing up: in the most basic terms, increasing EBITDA is about lowering costs and increasing revenues.
But EBITDA is more important than revenue. Not all revenue is created equally. Low-margin, high-cost customers might help your business grow the top line, but the business will lose value.
When building your marketing and sales strategies, ensure you talk and think like the CEO and understand EBITDA.
Topics: Inbound Organization, Marketing, Leadership
