In our first Friday 15 of the new year, we talk about everyone’s favorite beginning-of-the-year topic: budgeting!

Specifically, how do you work with your CFO to get the budget you need.  The CFO’s job isn’t to tell you “no” – their job is (in part) to manage how cash is spent. As a digital executive, your job starts with understanding how your CFO thinks about the world.  Andy & Brian share ideas about how to build better rapport with your CFO so you can grow your side of the business.

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Brian Beck: Welcome to the Friday 15 – we are rocking here at Master B2B with some new music. My name is Brian Beck here with Andy Hoar. Welcome to Friday 15, our first session of 2025. The world is changing or maybe saying the same. Welcome.

Andy Hoar: Your house is still there, which is most important.

Brian: We had a bit of a firestorm here, unfortunately, in Los Angeles County. I live up in the hills and it was a pretty crazy time here early in the year. A lot of people lost their homes, really frightening stuff. The world’s changing out here, Andy. These fires, unfortunately, are happening more frequently. We’ll see. We were out of our house for three days. Kind of crazy. Now you’ve got to deal with the big news, which is that the Supreme Court said that TikTok can be banned. TikTok prepares to shut down app in the US on Sunday, a couple of days from now, sources saying, Andy, for those of us in the B2B community, you might say, well, gosh, this doesn’t really have much impact on us. But this is really a landmark decision in some ways, right? What are your thoughts on this?

Andy: I think the importance here is that this is really the government stepping in in the social media space. Obviously they’ve brought lawsuits against companies like Facebook and there’s anti-trust lawsuits. But this is the first direct intervention it seems by the government, which is the only thing that can stop these larger tech companies. That seems pretty clear. Some of you said, years ago, someone at Amazon told me this, like, under his breath, I think the only thing that is going to stop us is the government. And it’s true because they become almost natural monopolies. That’s a terrible word to use. But because people like what they’re doing, that’s the thing. If they deliver things at a lower cost, they have loyalty around that. Now, there’s always the potential. This could turn into something much uglier with real monopolies. But yeah, this thing with TikTok, though, is only a function of whether the government’s going to enforce the ban or not. And the Biden administration said they’re not. And the Trump administration is kind of waffling on this. So it could be that the Supreme Court said the law of the land is TikTok can’t operate in the United States. And the government and the administration say, well, we’re not going to do anything about it. So we’ll see what happens.

Brian: Andy, we’re going to talk today about a hot topic for everyone, budgets. What’s happening with B2B budgets in 2025? We’ve done research on and off on this over the past couple of years. We’re going to share some of that. This is some research that was done back in, I think, 2019, 18, 19. What are your biggest challenges in building your B2B e-commerce business? The number one across manufacturers and distributors, number one reason or challenge is lack of money. So clearly in the past, and we’ve heard this anecdotally through the years, lack of money is really – it’s leadership not providing the dollars or understanding how to think about investments in digital. And I think that persists. And we’re going to talk about that today. But if we fast forward, we did this research last year where we asked the question, has your company provided you with sufficient financial resources to achieve your technology investment goals for 2024? We asked this question early 2024. And a massive number, almost 90 percent said, yes, we’re getting the money we need. But at the same time, and we’ve cited this statistic numerous times, the ROI pressure on the executives getting the money has increased, has sped up almost 70 percent said compared to three years ago. The timeframe I need to show in ROI has increased. It’s sped up. So, you’ve got this pressure on the digital team, the e-commerce team, to show me the money, show me what you’re doing for this. And the challenge we have here, Andy, is that ROI on some of these digital investments can take time. These are significant investments sometimes, multi-million dollars, $10, $15 million dollars in some cases for major systems implementations, multi-global multi-brand companies. Gartner says the enterprise e-commerce platforms generally achieve ROI within 18 to 24 months, factoring in setup costs, integration challenges, et cetera. I’ve lived this as a VP of e-commerce and practitioner. It takes time to recognize the investment and the return. And it’s also really hard to measure sometimes. You think about sales or traffic being done on the e-commerce or digital front, but then, the actual revenue coming in through other channels like a sales force or an EDI system or some other way. And, how do you measure some of these things like PIM or, product information management or data cleanup or foundational investments and analytics and things like that. So what are your thoughts on all this? We’ve seen some improvements in budget availability, but, are we setting ourselves up for failure here because we can’t show the ROI?

Andy: So we asked our practitioners during our roundtable series last year, we gave them time, and we said, hey, we’re going to take five, ten minutes here. We have a quick survey. We want to know what your priorities are for 2025. And number one, it’s very consistent. The different colors are the different round tables. But very consistent, and we saw the same two things. Number one and number two are the top priorities. Analytics and reporting & ROI of digital investments. What’s interesting is those things are interrelated because the ROI comes from the measurement. Now, the measurement comes from having access to the data, which is another discussion. But these point to the exact same thing, which is if you’re not measuring what you’re doing, you’re not going to get the investment dollars. So what’s hindering people’s ability to do that? So we know in our anecdotal conversations with people that there is a bit of an old school new school dynamic going on here, where you have the new school, which is the VP of digital, let’s say, who’s got all these metrics that he can show online and online to offline, so cross-channel analytics, et cetera, about how digital is affecting offline. But if the CFO at one of these companies is still traditional? Many of them want to accept those arguments. They’re looking at things like how is this increasing inventory turns – which, by the way, those are great metrics, but they may not be the right metrics in this new day and age. So what we’ve seen is that people are not necessarily gathering the right data. They’re not necessarily analyzing it properly. And they’re thinking about it really as an investment cycle, as opposed to a continuous process. And then they’re going and talking to CFOs, who are saying, well, we wrote a big check during the pandemic, and now we’re waiting to see that payoff. So there’s the pandemic hangover. There’s this notion of, again, that investment cycles are off. So there’s a bit of two groups that are not communicating very well here. And we know a story of one individual who struggled with this. This person was telling the right story, but the person listening wasn’t hearing what this person was saying, and it didn’t work out. I think there are more stories like that out there. So there’s a little bit of a given on both sides. And I do think that ultimately the digital people have to prove to the CFO, for example, that digital is worth investing in. But it also requires the CFO to understand that this isn’t like 1985, 1995. This is 2025. It’s a little different.

Brian: We’re holding our Summit in March at the University of Chicago. We’re looking to have a CFO panel there, and actuall, get the perspective of some of those CFOs, talking openly with our heads of e-commerce and heads of digital and marketing. And what are the things they actually need to see and what are the challenges? I relate this back to my book – I published it almost five years ago now. But I included a study in there from Korn Ferry. And what they did was they looked at the traits of the most successful digital leaders as it relates to different metrics of e-commerce maturity. What they found, this is probably no surprise to those who are listening and who have been successful – you’re as much of a salesperson and a collaborator as you are an executor when you’re leading e-commerce at these companies. And this applies to the CFO as much as it does to all other aspects of the business, the sales team, etc. You have to get your CFO on board with this and really do a good job selling them. How are we measuring this? Otherwise you’re not going to get the budget. Now, there’s a point at which you’ve got to say, like our friend who shall remain unnamed who left that company, who was the VP of digital, he couldn’t get a CFO to see these things. Or the C-suite. And at some point you’ve got to say to yourself, as a digital leader, I’ve just got to leave. I’ve got to find a different environment where the CFO and the board and all the rest are going to understand that this is, I like to say, this is existential to some degree. You have to make some of these changes to your business, to data, to your infrastructure, to things that are not necessarily going to say, hey, I spent a dollar and got $10 back and I can immediately attribute it to that investment dollar. It’s like opening a store or building your backend, help desk systems or even building a finance function at a business. Trying say – “ok, finance function. Tell me what your ROI is.” There are accounting functions – they don’t have an ROI. They’re cost centers. So some of the things that you have to do in marketing, well, you could argue both sides of that one. But you get what I’m saying, right? It’s a double standard.

Andy: I think also it’s worth noting though that sometimes these things become tail wagging the dog scenarios where people spend all their time to get budget for things and it’s so hard to get it that they get the money, and then they end up wasting the money. So I know you’ve seen this. I’ve definitely seen this where they go out and buy a PIM that they don’t use. right? So a CFO says – You guys bought this PIM three years ago and you’re not using it. Why do you want me now to give you money for an e-commerce platform, re-platform, for example? They hired people who aren’t qualified. That’s another thing I see. They moved people under roles and said, well, this guy’s been with our company for 20 years. He’s got the right attitude. He’s never done any sort of analytics. Well, he looked at our data once in our ERP, right? So this person doesn’t really know how to do their job. And then ultimately it all comes down to one thing and I’ve seen this time and again, they don’t have the right digital strategy because they don’t have a digital strategy. Their digital strategy is to have a digital strategy, which is ironic because that’s not going to work. When you posted this on LinkedIn, my first thought was, priorities should drive budget, but all too often, this is where the tail wags, the dog. It becomes reversed with a budget that drives the priorities and they get out of whack. And then the CFO comes back and says, well, wait a minute, we spent all this money, especially during the pandemic. And there’s a bunch of things we’ve seen no ROI on and it all gets polluted by that. So in other words, it becomes like an aggregate ROI. And the digital people have to do a better job of saying, well, wait a minute, maybe the ROI in that PIM system we bought three years ago is low because we haven’t implemented it yet, but the ROI in the e-commerce platform is high. So let’s separate these things. But again, like you said, ultimately it’s incumbent upon the digital people to put it in the terms the CFO understands.

Brian: Absolutely. And then of course, overriding all this Andy is, you’ve got, the economy, right? And it’s been weird ever since the pandemic. Now Goldman Sachs has come out and said, hey, the US economy is poised to beat expectations in 2025. The US economy is in a good place andrecession fears have diminished. Inflation is trending back towards 2%. Labor market is rebalanced. And they expect 2.5% US GDP growth. CFOs think about this stuff – they don’t think about e-commerce and digital in a bubble. They’re in charge of managing the whole business, right? And the economy impacts these companies. There are a lot of our listeners at very large companies and mid-sized to very large companies that are affected by macro trends. Any thoughts on how the economy plays into the budget?

Andy: Who knows. We have talked about this for a couple of years now. And I will point out that Goldman Sachs flipped on this a couple of months ago. They had a forecast. And now it’s completely different again. So, hey, that might be the reality of things. It could just be that forecasts are not good for these things anymore because it’s so unpredictable. Events are driving what’s happening now. Who knows? But yeah, you do the best with what you’ve got. And B2B companies tend to be more conservative. They tend to have to look over longer periods of time because they have to buy inventory. If your B2B company has a warehouse full of stuff, it costs money to carry that. So, I guess their magnifications are bigger for making investments. But it’s funny, we were just talking about investments. I think a lot of CFOs tend to think about it that way. They think of digital the same way they think of their offline investments. And that’s a great example.

Brian: We just did a poll on LinkedIn where we asked executives whether they’re getting more budget or not. We asked the question of B2B manufacturers, brands, and distributors: what is happening to your budget for digital investments in 2025? 50% said they were increasing. 28% said they were staying the same. And 22% said they were decreasing. Now, you can look at these numbers and see this as a relatively bullish outlook. And to some degree it is. But that’s down, Andy, from where we were a year ago. Now, they’re not exactly the same cohort we’re surveying here. The sentiment is seems to have changed. What do you think?

Andy: I think it’s the economic uncertainty. This could change too in a couple of months if the economy starts to pick up or if the economy slows some more. Just look at interest rates. Are they going up or they’re going down? Who knows? Even the Fed doesn’t know, right? So if the Fed doesn’t know what interest rates are going to do, then how in the world are economists going to know what the economy is going to do? The reality is the metrics that we used before are oftentimes lagging indicators of where the economy is going. And so nobody figured out what indicates where the economy is actually going. All they know is where it’s been. And so we’re in this world. We’re trying to kind of figure that out.