Forward-thinking CFOs can help chief executives and others in the C-Suite who may not be “numbers people” better grasp how well they and their businesses are doing, says Kirk W. McLaren.
McLaren, author of the book, The Growth CFO Void: The Guide to What’s Holding You Back From Becoming a 2% CEO, is the CEO of Foresight CFO Consulting in Washington, D.C., and a graduate studies lecturer at Georgetown University School of Continuing Studies. He spoke with StrategicCFO360 about leaving your silo, pricing based on your products’ value and becoming the “trusted partner” of your CEO.
How do CFOs overcome obstacles to growth?
Most traditional CFOs are accountants with a big title. They tell us, “it can’t be done,” “we can’t afford it” or to “play it safe.” If CEO business owners played it safe, there wouldn’t be a company to speak of.
Growth CFOs take on the obstacles to growth: winning new customers, keeping and growing existing customers, building people, proactively gaining access to capital, and low financial performance.
How do they approach these obstacles strategically?
To illustrate how CFOs overcome the obstacles to growth, let’s dive deeper into winning new customers. The best CFOs:
– Actively collaborate cross-functionally. Everyone has perspectives and blind spots based on their seat at the table. The best minds do even better when in open collaboration with peers instead of being restricted to their silo. Growth CFOs collaborate with sales and marketing experts.
– Have business-building experience. CFOs tend to have decades of experience across different companies and industries. Thus they are able to see gaps that become opportunities. Plus many have the ability to cross-fertilize best practices from one industry to another. In some cases, this is disruptive.
– Identify uniqueness. From experience, Growth CFOs know that uniqueness is one of the eight performance drivers. It drives market acceptance across a life cycle, pricing strategy, impacts profit as well as business valuation.
– Elevate “that’s me” messaging. The CFO provides an extra level of thinking to learn the basis of messaging and brand. Is it based on the voice of the ideal customer or something else? Dialing into “that’s me” messaging lowers the cost of customer acquisition. That’s great, right?
– Ensure data mining. Oftentimes companies only partially mine their data for gold. The areas where data mining tends to yield the greatest result is customer segmentation and source analysis. In each, applying Pareto’s 80/20 principle tends to produce huge insights. For example, with a telecom client, we figured out that eight point-to-point calls made up 83 percent of the revenue. Competitive pricing for these eight calls drove a 27 percent increase in revenue almost overnight.
– Challenge status quo pricing strategies. Pricing is tough. Plus given the uncertainty, it is easy to feel a sense of fear when making price changes. Many companies’ default pricing approach is cost plus, market or lowball. What if you can price based on the value that you drive for your customers?
– Achieve recurring revenue. There is so much to love about recurring revenue. It allows us to optimize operations, cash flow is steady, and it increases the value of your business. John Warrillow’s book, The Automatic Customer, is a great resource to figure out the right model for you.
– Align sales and marketing capacity. With these insights, the best CFOs collaborate with sales and marketing leaders to figure out what to start, stop and continue. This is kind of like pruning a tree so that resources are continuously directed to their best use.
– Support performance with the numbers. Beyond the basics, CFOs know that nothing provides clarity like the numbers. They also know that most people are not born to see the number story. So CFOs equip team members with the right information through dashboards and financial reporting. Plus they develop team members to use the numbers by working side-by-side. It’s a habit, like many things.
This breakdown shows how Growth CFOs help team members obliterate the first obstacle: winning new customers. The same logic and expertise are applied to the remaining obstacles. The future of CFOs is the trusted partner with CEOs and their teams to figure out “how to do it” while protecting the downside.