Are you reworking your business model to account for shifting realities? It helps to have the valuable perspective of a CFO at the table – and it doesn’t have to be your CFO.
Every successful business model decision examines finances from every angle, and yet in many companies, the CFO is still relegated to financial stewardship but not involved in strategic planning from the top down. All too often the business owner or CEO is the one spearheading transformations, with CFOs providing only transactional support.
Oracle ran a survey of 930 CFOs worldwide entitled The CFO as a Catalyst For Change that highlights this trend:
“The CFO role is becoming more strategic and influential, but challenges remain. More than 70 percent of CFOs say that their overall level of strategic influence has increased over the past three years. But for now, most CFOs say they still play a supporting, rather than leading, role in strategy, despite an appetite to become more deeply involved… Less than one in three CFOs play a leading role in business transformation.”
Rapidly emerging technologies and markets are disrupting business models just as rapidly, and a CFO is a perfect executive to identify new avenues for success while simultaneously performing cost-benefit analysis – particularly as CFOs are becoming more and more involved in risk management and IT decisions within their organizations. Finance touches every aspect of a business, so the CFO will have a broad perspective over where the most meaningful changes can be made.
Of course, if your CFO is engaged in incorporating a new ERP system, or you don’t even have a CFO, you may want to consider engaging CFO consulting services when you’re doing some soul searching as a business. Bringing in a seasoned third-party executive consultant not only provides you with a completely unique perspective but the benefit of them having driven success for dozens of other organizations just like yours.
When you’re next updating your business model canvas, a CFO can help guide you through a few key operational questions that will ultimately help make sure you’re pivoting intelligently.
Key Questions a CFO Can Answer to Guide Your New Business Model
1. What factors are restricting the growth of the company?
Since a CFO has an eye to the balance sheets of the company, they are in a strong position to identify the anchors weighing down your growth potential, and help set smarter goals and KPI thresholds on which you would need to rethink business efforts and cash releases. Some of these factors may include:
- Business structure and management
- Lack of labor or employee training
- Lack of capital
- Shifts in the market
- Major changes and innovations within the industry
- Managerial capacity
2. What is the primary uncertainty facing the company?
It’s all too common for businesses to underestimate uncertainty when developing business plans and predictions. It’s important to ensure that you have Plans A through Z prepared should worst-case scenarios materialize.
- Some examples of potential uncertainties include:
- The potential for major competitor announcements or disruption
- Major shift in demand from customer segments for your products or services
- Performance-related to entering new markets or geographies
- Upcoming regulatory issues related to the business
With limited time and resources, of course, it’s impossible to develop fully fleshed out plans for every contingency. One helpful way to prioritize your efforts is to organize them by the level of uncertainty. We like this 4-tier system developed by McKinsey consultant Hugh Courtney:
Image Source: McKinsey & Company
The way you plan within each tier varies, and while Level 4 uncertainty is rare, it’s good to plan as much as is reasonable so the business can adapt swiftly when needed.
3. What technology or competitor has the potential to upend our strategy?
A strategic CFO will always have an eye to “what comes next?” This is particularly true of competitors and technologies that stand to completely disrupt the market landscape. A CFO is able to make many reasonable competitor predictions by analyzing the market and what financial data they have available to them. Some of these insights include:
- Current performance and sustainability, given the strategic focus and market landscape
- Analyze financial statements to determine the efficacy of management and KPIs
- Determine the state of the capital structure, given exposure to risk
- A SWOT on corporate transactions such as M&A and IPOs
- Value the competitor via forecasted performance
These same criteria are also a method to analyzing businesses for acquisition potential.
4. How can we efficiently scale so that revenue increases faster than costs?
It’s one thing to grow, but another to scale – growing rapidly without a substantial increase in resources. CFOs are always mindful of the bottom line and the efficiency of business operating units, which makes them able to quickly pinpoint areas that need additional focus or a restructuring. Some of these potential initiatives include:
- Seek new avenues of investment capital
- Hire growth-minded management
- Development and implementation of scalable processes
- Reduce diversification towards a focus on what works well
- Supercharge sales and marketing with measurable goals and KPIs
- Investment in company culture
5. How can we free up capital and other resources to invest in priority initiatives?
Lastly, it helps to have a CFO at the table when conducting your business planning as they have a full eye to your company’s resource management. They can help you strategize on making operational changes to bolster your company’s bottom line and free up capital for new priority projects, such as:
- Smarter Forecasting: Implement a scenario and uncertainty-based revenue model that incorporates multiple revenue streams.
- Reduce costs: Look for any way to cut costs without sacrificing long-term growth plans. A CFO will re-evaluate your financing and cash flow strategies, your cash release decisions, and your tax planning strategies.
- Diversify procurement: Diversify your supply chain and lock in critical contracts and drive new bargains.
- Asset Management: Determine which of your assets can be disposed of while also keeping an eye to strategic acquisitions
GCG’s CFO Consultants Can Keep You Ahead of Market Disruption
If you’re looking to transform your business model while leveraging financial executive-level expertise but aren’t sure where to start, look to Greenough Group. Our CFO consultants are available to work with you to reinvent your business model to keep up with (and stay ahead of) disruption.
“GCG’s executives don’t work like typical consultants; they integrate themselves into the company like they’re part of it. They’re deeply engaged in our business, take full responsibility, and we trust them completely,” said Michael Tso, Chief Operating Officer and Co-Founder of Gemini Mobile Technologies.