That growth thing early-stage startups tend to overlook 🙈

Hi there,

Welcome to Human Scale! Here, we’re real startup people (not AI-generated at all!) who roll up their sleeves to help founders grow their user base and brand impact every day. This month, we’re focusing on the fundamentals of building realistic marketing budgets and aligning forecasts. (You know, super fun stuff.) Whether it’s for a newly launched company or a company you’re new to, we hope you find something helpful here.

For Startup Founders: Include realistic marketing costs in your OPEX / P&L / business forecasts. 🥴

A wise startup CFO (more like all of them) once told me (more like a thousand times): “I’d love it if you could spend $0 on acquiring customers.” To which I said: “Sure thing!” (and cartwheeled away 🤸).

Actually, I laugh. In all seriousness. We need a budget—one that aligns with the business stage and available resources.

First, we need to come to the table and agree that marketing is an operating expense and should be accounted for like any other business function, including people, tools, and expenditures such as paid media (if applicable) and other supporting services. At early stages, it’s not uncommon for founders to skip (overlook) this budgeting exercise. We get it—it’s not easy to do.

Here’s a simple way we approach this: First things first, does an overall business revenue forecast exist? The goal is to ensure the marketing budget aligns with the overall business forecast. Based on the answer to that question, we’ll break down the steps into two lanes:

YES there is an overall business forecast 😁

1. Start with an estimated blended CAC. If historical data is not available for reference, you can research typical costs for your industry or category online (e.g., using Google).

2. Break out the underlying new customers/users needed to meet the revenue projection if this is not inherent in the forecast. Often, these figures are included in the background calculations with supporting historical data when available. If no historical data to reference, make reasonable estimates based on pricing, average order value (AOV), lifetime value (LTV) projections, and basic assumptions about new and repeat customers. For example, assume no repeat customers for a new subscription service for the first three months, with a gradual increase to a 50% retention rate by the end of the year. For an e-commerce business, assume a 30% repeat customer rate. Break this out by month.

3. Multiply the estimated CAC by the assumed new customers/users. This should provide a potential monthly media spend.

4. Adjust the potential spend based on non-paid customer acquisition methods. If the calculated number is higher than your desired monthly spend, consider assumptions for $0 CAC customers and other acquisition methods, such as partnerships and organic social media. Ensure that these methods are adequately resourced, as they have associated costs and should be included as another line item.

5. Evaluate the forecast’s feasibility. If there is a significant gap between your desired spend and the calculated spend, it could indicate that the forecast is not workable. This is a common challenge. Consider whether there are other business changes (e.g., new product launches or innovations) or market advantages that could increase revenue. Make sure these factors are fully accounted for. If so, the forecast itself may need to be adjusted.

NO there isn’t an overall business forecast 😕

Not to PROJECTION SHAME but you should ideally create an overall business revenue projection. That said, we can start with this approach:

1. Set a revenue goal for a year from now. Determine the desired revenue or number of customers you would like to achieve 12 months from now.

2. Break down the goal monthly. Apply a gradual growth rate each month of new customers until you reach your goal number. If there is no historical data available, you can research typical growth patterns in your industry. Note: The result may not be entirely realistic, but it can serve as a starting point for this exercise.

3. Using this monthly breakdown, proceed to STEP 1 in the “YES” section of the instructions. 👍

How startup growth marketers can nudge here 💰🫰: You can do a bottoms-up forecast based on your efforts and available resources and see where this “meets” the overall business forecast. If it doesn’t meet, actually – this is a great discussion point. You can have a data-guided discussion (with the company’s purse holder) around resource allocation and other business levers that may not be visible to you. 

Until next month,

GOC