The economic conditions we’re facing in 2023 are a far cry from the optimistic climate of recent times. The underlying sense of apprehension in the air calls for tightening belts and making some hard decisions.
In times like these, having a strong CFO – whether it’s an in-house CFO, or an outsourced CFO like us at Vital Addition – at the helm is critical. We look at what CFOs are prioritising in 2023 to help you understand the levers and strategies that can drive growth or sustain your market position.
Pricing
Whether you offer a service or a physical product, you should prioritise a review of your pricing to ensure that it’s in line with market trends. But also, given supply chain pressures and rising costs, a pricing review also needs to consider the right margin for your input costs.
When a CFO is looking at pricing, they’re doing so with a strategic lens. You may be following an expansion strategy with lower pricing that allows you to capture a larger share of the market. Or, you may choose to draw the same margin as previously so the business can continue to trade in a challenging climate.
Efficiency of resources
This is about understanding what you’re getting for every dollar you spend. A CFO will look at the issue of resources and consider how they can make any spend more efficient. This may include upping production for the same spend or spending less to achieve the same result.
The biggest costs in the majority of businesses are your people, including wages and other labour costs. We’re seeing many companies laying off staff because they simply got too many people. But a CFO will review efficiency across all spend and outflows, not just the costs of the team.
Growth
What does it mean to try and grow a business in a downturn? The first step is defining what success looks like in your business in terms of growth. While you may have previously chased an aggressive growth strategy, this year just a small amount of growth may be the definition of success. Or perhaps even a flat year would be a good year, given the economic circumstances.
A CFO will drive this conversation, considering expectations for the business, shareholders and the team. They’ll consider the market forces at play as well as the internal factors that will impact on growth.
Cash flow
If you’ve got too much cash flowing out of your business and now enough flowing in, that’s a problem. Your definition of success will impact on the net cash flow position you need to be in.
CFOs will be looking at all options for improving cash flow. Whether that’s renegotiating trade and payment terms for suppliers and customers or investigating financing options, cash flow is a priority. If the business is losing money, they’ll also be looking at ways to reduce the cash burn.
Capital raising
In the current climate, the bar has been raised on capital. But most CFOs are thinking about whether they need more capital in the business to create enough room for the business to continue to trade. Fund managers are under greater scrutiny from investors so succeeding at capital raising is harder.
That’s where a CFO will come in to manage shareholder expectations. Armed with a definition of what success looks like for the business in this climate, a CFO helps to manage the pressure from investors about the return they’re receiving on their investment.
Bringing it all together
Each of these priorities are levers a CFO can pull. If you review your pricing strategy, create efficiencies in your spend, improve cash flow and have a clear picture of success, you can likely raise capital.
If you need CFO support in your business to realise a successful 2023, get in touch. At Vital Addition, we offer an outsourced CFO function, giving you the CFO expertise you need in a flexible, efficient and tailored model.