TinkerX

I have some harsh words for many legal marketers: when it comes to building a marketing budget, you’re still amateurs. And stop calling me "Mom."

Show me the money

Years and years ago, I had a boss/mentor who made me learn to budget. Note the usage – "learn to budget," not, "learn the budget." I initially didn’t get the distinction.

She sent me the overview information from the year before for a $2 million direct mail budget. There were 12 different accounts, predictions for customer activations, and estimates of how printing and postage costs might be changing. I did what I thought was a neat little job of putting all of that on one page and handing it back to her well within deadline.

"Where did you get your numbers for next year?" she asked."I got the customer forecasts from Finance, and I put in best-guess printing and postage changes from our vendors."

"Right. But where did you get the numbers on printing costs for each type of piece – for fulfillment, for order-taking, for the seasonal pieces – you know: the basis for all our costs."

Suspecting that this was not the right answer, I answered, "I got them from last year’s budget."

She shook her head and half-smiled, half-smirked. "I need you to know why each of our expenses costs what it does. The budget isn’t just for giving Finance an idea of what we’ll be spending. It’s a way for us to measure our efficiency and productivity. Don’t just understand ‘the budget.’ I need you to be proficient at everything that goes into it."

How could I tell when I had become proficient? Stay tuned.

Are you building without a blueprint?

I have an uncle who builds houses. No cookie cutter stuff; they build to plans that their customers have a hand in developing. That’s great for customization, but a pain when people suggest, "Let’s move the bathroom to the end of the hall instead of right next to the kitchen, OK?"

In the mind of the customer, "bathroom" is a fixed, self-contained idea. For my uncle, it connects to the plumbing, the electrical, the HVAC system, etc. You can’t just pop it out of one place and into another. To make this clear to customers, he shows them a detailed blueprint of the house. That way they can see all the connections and understand why it will cost $12,000 to move the bathroom.

Or, as I like to say: If the Devil is in the details, you can’t fight him without understanding the details.

It’s the same way with a marketing budget. Questions a proficient marketer would ask about a particular advertising buy might include:

• Why are we advertising in this particular pub?
• What’s their demographic and reach?
• What premium do they charge for color?
• What’s our best frequency discount?
• Can we get this year’s rates for next year if we lock in early

That’s a lot of questions. And that’s just about one ad buy! But if you don’t know the answers, how will you respond when management suggests you cut it? You’re hosed. But when you do know the answers, firing off a well-informed response can be the highlight of your week. Example:

"We can cut that. But we moved money there because they reach executives in the construction industry. We’re getting full-color for free because we’re sponsoring their spring seminar. They need a law firm to cover the asbestos and mold topics, and we’ve got dibs on providing two speakers. The toxic tort group is working up a binder to hand out. But we can cut it if we have to."

That’s a great moment. When you budget (verb) something for a reason, you need a reason to un-budget. When something just sits in the budget (noun), it’s easily dismissed.

Show them some folding money

Two years after my boss made me "get it," I was working on a new collateral budget and the cost for one of the pieces struck me as odd. So I had the agency work up an alternate demo for me to run past my VP.

"Which of these is better?" I asked, handing him the two versions. He looked at them both for a minute and then said, "This one… the one with the tabs."

"I agree," I said. "But is it $1 million better?"

I believe his exact response was, "Spoo-dee wot-da hunh?"

"Yeah," I replied. "Based on forecasts, we’ll burn through a million of these next year. Die-cut tabs means we have to spiral bind. Lose the tabs…"

"And we save a-million bucks. And that’s folding money. Do it. Good work."

That was the day I knew I was proficient. Felt real good.

Master your domain

So… if you haven’t ever gotten a really keen grasp of the budget — if you haven’t "budgeted" in a verb-i-licious manner — you need to start now. Today. OK, not today (’cause it’s Sunday, and tomorrow is July 4), but within the next couple weeks. Why? Because it will take you a long, long time to do the budget thing right the first time. Here are some tips on becoming a budget control freak.

Get a hold of the GL for the last 12 months. If you don’t know what GL means… now’s the time to learn. The "General Ledger" is the report that Finance keeps of every dang thing everyone in the firm has spent. That’s where you’ll find your evidence.

Know the codes. If you’re with a medium-to-large firm, my guess is that your Finance Gang uses a set of account codes to keep track of who-spent-what. These codes, and the way they are used, will vary from firm to firm. But most accounting codes are made up of a few key bits that help everyone "follow the money." If you have multiple offices, there is probably a "location" chunk of code. There may be a date included as part of the number string, too. But all GLs should reflect something generally known as the "natural account code." This is the part of the code that says which "bucket" the money comes out of. There can be multi-part natural account codes, too. The first part may designate the department, and then there may be a part for major sub-departmental distinctions, and one for activities. So a final account code might look like this:

        001-04122005-030-31-1159

Where the numbers might equal something like this:

        001 = location (ie, the spending hits the office designated "01")
        04122005 = date of the spend
        030 = departmental code (let’s say this is for "Marketing and Sales")
        31 = advertising
        1159 = print advertising

So, with this one code, you can tell everything you need to know about who spent what on which where.

If you are lucky, your Accounting Gnomes can pull out just the GL for your department, and sort it by either date or natural account code or both. If you’re really, really lucky, they can stick it in an Excel spreadsheet so you can do all your own sorting, calculations and investigations without as much… er… pain. If all they can give you is a print-out or data dump of the entire GL… you will have more pain.

Get formatted! Eat the pain! Don’t give up! Have your secretary search the GL and put all Marketing spends for the last 12 months into a spreadsheet, or take what Accounting give s you and mess with it until it’s in a format you can work with. Your spreadsheet should have sortable columns that let you see what you need to see in order to plan — to make budget a verb. Accounting and Finance aren’t in charge of your budget… you are! So take the data and put it in a format that works for you.

Get informed. For every GL entry, know WHY it costs what it did. Know what the intent of the spend is. Does it increase your brand image and mind share? Does it protect against competition? Is it meant to draw attendees to an event? Is it, like meals and sports tickets, entertainment and client development? Know it all.

Get control. I suggest that you ask your firm management to let you put entertainment and charitable spending in your budget plan, even if you aren’t in charge of authorizing spending in those areas. Why? Because entertainment and charitable giving impact areas that ARE in your area. If your firm is spending a ton on entertainment, you probably shouldn’t be spending as much on client development; the lawyers are already schmoozing large. If your firm is spending millions on charitable giving, you probably need to budget more PR dollars in order to make sure that the community KNOWS you’re spending that money on them. Where a budget will impact your goals, get it in your spreadsheet. Again — you may have no control over that money, but it has control over your goals. So you need to know about it.

Start planning. Once you have an understanding of what you spent over the last 12 months (July 04 - June 05), you can start analyzing and planning. You’ll begin to see relationships and trends. Which is very, very good. You may notice, for example, that you do a large seminar on employment law in June, but the  editorial calendar for one of your chief advertising venues has their employment issue in August. There’s an opportunity — if you shift your seminar to October, two months after the employment issue of the magazine, you can hit the mag with a big ol’ ad that also mentions your upcoming seminar.

See? The budget is connected to everything. Knowing it up-down-and-sideways will help you in ways you’ve only dreamed of.

Expect resistance. Except from Finance. If you tell them you’re working to get your initial budget plan in place by the end of Q3, they will (I bet) go out of their way to help you out. They love to get any numbers they can before the end of the year. If you hint that you want to start a trend of early budget planning, they may buy you a car.

But others will not be so sanguine. If, for example, you want to start doing more in-house desktop publishing and design, and want to budget more for headcount, but less for agency or vendor support… your Hiring Committee may tell you to wait until <whenever>. If you need to know how/when you can get more IT resources — an appropriate PC, scanner, software, etc. for your new hire — the IT department may not be prepared with that info for next year. Again I say, DO NOT FEAR! Ask for a reasonable estimate. Put in "dummy" number based on your own idea of what things might cost. At worst, you adjust the numbers when you get better data. At least you have a place-holder and can speak to the issue with some level of understanding.

Reap the rewards. You will find inefficiencies. You will find areas where there is overlap. You will find outright fraud (I’ll do a post about bogus ads and lists sometime soon). You will find things that have hit your budget that should go in someone else’s. You will find opportunities for improvement. For example, doing a yearly ad buy instead of ad hoc can save you 10-20% depending on the medium. If you sign a contract before the end of the year, you may be able to lock in this year’s rates for all of ‘06.

When you’ve added up the dollars you’ve saved, or plan on saving, market your accomplishment. Go to your manager and tell them that you can achieve the same results in 2006 as you did in 2005, but with a 12% DECREASE in your budget. How much will they love you on that day? Also… go in with a recommendation on how you’d rather keep the budget the same, but increase productivity or results in areas that you feel are under-budgeted now. If you identified $5,000 in savings in your ad budget, but think you should do more seminars, make that point. Do a couple versions of the budget — good, better, best — that clearly link spending to results. Zowie, Batman… won’t that show off your "proficiency."

It’s hard work. But it will mark you forever.

The firs time you put together a serious, well-understood budget will take you a long, long time. It will be scary. You will need to delve into areas you’re not familiar with. But in the end, you’ll have a skill that will serve you well at any firm, or in any industry. Because people don’t want to promote or hire managers who can’t "follow the money." If you can whip out a 20-page spreadsheet, all nice and orderly, and speak to the budgeting process… dang, they love that. You’ll have a skill that anybody, anywhere, will appreciate having on-board.

One final word of caution, though: some firms, marketing partners and firm managers don’t care about the budget details. Unless you can show them significant savings or projected earnings, this level of detailed understanding will NOT ingratiate these types of managers to you, mostly because they don’t understand the budget that well, either. All they want to hear about is "the big picture." They may only pay attention to savings you suggest in increments of 10% of your entire budget. They may only care about issues of headcount, since that’s something that they can grasp on a visceral level. They may simply not want to be bothered with budget details, since they don’t want to be bothered with business management issues in general.

My advice — learn to budget anyway. And then go looking for work at a firm that does care about the details. Because firms that don’t care aren’t ever going promote serious marketers who make a real, fundamental contribution to the organization.