Prioritizing Profitability Over Growth: How CFOs Can Drive Financial Success

Prioritizing Profitability Over Growth: How Tech CFOs Can Drive Financial Success

by Dean Quiambao, Chris Perkins
August 31, 2023

In the ever-evolving technology industry, today’s CFOs face a new set of challenges. Funding has slowed and valuations aren’t what they once were, but companies still need to raise capital to stay afloat...or make the dollars they do have last as long as possible. This uncertainty also creates a sense of nervousness among business leaders who want to avoid the dreaded down round.

CFOs, this is an opportunity for you to have an even broader impact on the business. As market conditions continue to shift, it’s crucial for your organization to pivot from a growth-at-all-costs mentality to a more long-term outlook. By prioritizing a profit-focused company culture, optimized data analytics and efficient operating models, you can generate revenue that strengthens your company and attracts investors.

Use Data to Reframe the Company Culture

As CFO, you are in an influential position to reshape the narrative within your organization, align stakeholders and inspire collective commitment toward sustainable growth. As you guide the conversation toward profitability, data can provide a clear picture of where your company stands and help you chart the best course for the future. This is why it’s essential to shift the dialogue in a direction that empowers data analysis and supports timely action.

Focus on positive cash flow

Preserving funds and extending runway starts with prioritizing positive cash flow. As you adjust the company mindset to focus on profitability, it’s crucial to keep accurate books and create tangible forecasts that help improve cash management. This will also shed light on revenue streams and their expected return on investment (ROI).

By implementing cost analytics, assessing product categories and reviewing data on a client-by-client basis, you can identify your most profitable revenue streams. This process may also lead to divestment in areas that haven’t yielded the expected returns while allowing you to identify new investment opportunities.

Often, having a clear picture of the company’s cash runway can help drive crucial decision-making. For example, by deploying automation you can create a rolling 13-week cash flow model that monitors your overall company liquidity across numerous bank accounts. With this real-time snapshot of your accounts readily available in a handy dashboard, your organization can achieve a culture shift that helps leadership make actionable decisions and better utilize cash. This emphasis on cash flow also enhances transparency and improves communications with investors.

Review account management

Given today’s investor sentiment, it’s important to focus on customer retention instead of burning cash on new customer acquisition. In a cautious economic landscape that rewards profitability over growth, it is sound account management practices that win investor confidence.

As the finance leader, you are able to shape company culture from within. Leading with a long-term outlook that values strong client relationships, you can help build a stable company by:

  • Analyzing customer acquisition costs
  • Differentiating between high-revenue customers and those who yield the most profits (and leveraging data to determine the common thread between the two)
  • Developing stronger relationships with top clients
  • Taking opportunities to upsell
  • Optimizing account management to increase customer retention
  • Increasing profitability and expansion of existing customer relationships

Shift Your Operational Mindset to Do More With Less

The shift to profitability requires a new outlook on operations. Exploring innovative strategies and embracing technological advances can be the key that unlocks efficiency, optimizes costs and facilitates strategic decision-making – ultimately boosting your company’s earnings. The following tactics can help you begin to reshape your operational approach and pave the way to profitability:

Embrace Outsourcing and Automation With Measurable ROI

Leaner teams and delayed hiring are prevalent in today’s economic environment. But despite these significant cost-cutting measures, CFOs must still show a path toward company growth. In this complex landscape, investing in impactful technology and outsourcing can be a wiser move than ceasing your spending altogether.

Robotic process automation (RPA) is an innovative tool that can free your team from performing repetitive tasks and could significantly improve your profitability. To help cut costs, save time and increase overall productivity, you can integrate RPA across a variety of operational processes beyond the finance department.

Incorporating RPA into sales, human resources and other parts of your operations is a reasonable investment that can deliver a high ROI in a short amount of time – sometimes as little as six weeks. For example, one of our software company clients that implemented RPA was able to automate 40% of their back office processes, eliminate inefficiencies and transform their business to re-focus on other priorities.

If you are seeking profitability with limited staff, outsourcing finance, accounting and HR allows you to secure access to an on-demand talent pool while you continue to fulfill investor and employee expectations. This approach helps you prioritize the resources that offer the best ROI, so you can maximize your cash flow as you redirect your focus to your most successful products, departments and ventures.

Another valuable benefit of outsourcing is data generation. Many companies contending with a reduced workforce have lost the staff that produced critical operational data. By outsourcing these processes, you can still make informed decisions based on reliable figures.

Through these focused investments that deliver a tangible ROI, you can continue hitting milestones and scale operations even with reduced personnel.

Extend Your Runway as You Build a Better Business

As CFO you play a crucial role in building a sustainable company, charting the course toward lasting profitability in all economic environments. With a bold, proactive mentality that sets the tone at the top and reliable data to support agile decision-making, you can instill investor confidence as you create the path that drives steady business growth.

Speed Your Technology Company’s Path to Profitability

Powering the actions your organization needs to achieve sustainable profitability can be a heavy lift on your own. We’ve helped hundreds of technology companies make the bold changes needed to thrive. Contact our Technology Industry experts today to start mapping the fastest, most effective strategy to help your organization drive financial success.

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