What do Commercial Finance businesses spend on marketing?

Wanna talk through how an insight like this can impact your company?

marketing-spend-to-key-accounts

A quick google search of how to establish a marketing budget and you’ll hear a host of pundits tell you anywhere from 2-5% of revenue. Clearly they don’t know the commercial finance business. After years of working with smaller independents, huge commercial finance companies and the wholesale division of big banks, there is no formula that applies to all. Sucks, huh.

Before we break out our recent survey of marketing spend as a percentage of revenue in the commercial finance business, a definition of marketing spend: Email, Content, Social, Advertising (Online & Print), Industry Associations, Events (including T&E), Webinars, Collateral and graphic design, Video production, Web, Agencies, Service Providers, SEO and the Full Time Employees (FTEs) dedicated to the effort. The average marketing spend as a percentage of revenue based on our recent joint survey with our friends at Greenwich breaks down like this:

Equipment Finance Brokers (25 surveyed): .51%

A $5,000,000 revenue breaks down into a $25,500 spend.  Purchase an annual company membership in the 3 big industry associations and attend one event of each and you’d have about $2,500 left over. Most brokers are doing little to no marketing with no real dedicated FTE to help with the effort. The average marketing spend in other industries for $5MM in revenue: $100,000.

Small independent Commercial Finance Companies (50 surveyed – 22 ABL, 28 EF):  .64%

A $15,000,000 revenue breaks down into a $96,000 spend. One low end FTE typically, some advertising web reinvestment, a little email and an event or three and voila. The average marketing spend in other industries for $15MM in revenue: $300,000.

Mid-Large size diversified Commercial Finance Companies (15 surveyed): .69%

A $100,000,000 revenue breaks down into a $690,000 spend. A small in house marketing staff (5 or less) and some regular attempt at most of the channels of marketing. The average marketing spend in other industries for $100MM in revenue: $1,900,000.

Bank C&I Departments (6 surveyed): 1.49%

A $250,000,000 revenue breaks down into a $3,750,000 spend. A diversified in house marketing staff and regular attempt at most of the channels of marketing. The biggest portion of the spend variane between this and other groups is staff. The average marketing spend in other industries for $250MM in revenue: $6,000,000.

While we think you can glean a number of insights out of this we really just see one primary thing: equipment finance, ABL and other commercial lending outfits are extraordinarily underspending other industries. And that’s a fact, Jack.

So why?

Is it because the trappings of modern marketing don’t work in this business and just isn’t worth the investment? Nope. Commercial Finance companies spend lightly on marketing because marketing people don’t understand the commercial finance business. As such marketing departments and firms create terrible marketing, advertising (just take a look at the pages of the most recent Monitor Daily or ABF Journal) and sales enablement strategies that have no chance of helping you sell more. Now be really honest, your standard sales flyer is really not worth the paper it’s written on…right?

We think there is big opportunity in these numbers (stunner). The stats are VERY consistent from company to company, which means that figuring out a great marketing strategy as a component of an even better business development approach could be a huge differentiator for your company in the market. If you ever wanna know how marketing built from marketing folk born from the commercial finance business can make a difference…give us a holler.

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