March 9, 2023
The CFO Edition
There’s been a ton of talk about the CFO lately. Mostly the chatter has been about how they stop deals just before closing.
Lots of posts on LinkedIn about how to sell to CFO’s. Like this great one from Chris Orlob.
But in today’s edition I want to go deeper into what makes a CFO tick and what they are focused on in 2023… backed by data.
A recent CFO survey conducted by the Duke’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta shed light on CFO’s priorities in 2023.
State Of Mind
The below graph tracks the “level of optimism” among CFOs across the US. Clearly, their outlook of the overall economy as well as their own companies is currently at their worst levels since the pandemic, which equates to the same sentiments felt in the wake of the 2008 financial crisis.
So what? Believe it or not, CFO’s are human beings just like the rest of us, and when they look around, read the financial news and talk with their CFO buddies, they form opinions and right now that opinion is, “things are bad out there, they will get worse and it won’t improve for at least a year or two.”
Most Pressing Concerns
CFO’s have two main concerns about the ongoing impact of the downturn: inflation and the availability of quality labor.
Expectations for growth in 2023 are declining but still in positive territory.
This is where we as sellers can dig deeper to align our messaging with steps CFO’s will want to take to mitigate the negative impacts of inflation and labor shortages.
Here is a great piece by Deloitte called “How CFO’s can rise to meet the challenge of soaring inflation.”
In it are specific strategies which we can align our offers to fulfill.
“Reduce accounts receivable and increase accounts payable. Delaying when you pay suppliers makes sense when a dollar is worth less tomorrow than today. It also makes sense to insist customers pay you as quickly as possible. By reducing accounts receivable and increasing accounts payable, CFOs can minimize revenues lost to inflation and expenses paid to suppliers and contractors. Potential downside: CFOs risk alienating dependable suppliers at a time when supply chains are weak.”
How to leverage this: You could work with your management team to create an offer to restructure payment schedules for existing customers coupled with expansion deals if your company prioritizes new bookings over near term revenue.
“Re-think inventory management. In a high-inflation environment, producers of appreciating, nonperishable goods may want to hold onto more inventory, knowing that prices will likely rise down the road. Potential downside: If a recession hits and demand weakens, companies might get stuck with unsold inventory.”
How to leverage this: If you sell anything having to do with inventory management, ERP or other supply chain solutions, this is a perfect lever for starting a conversation with CFO’s.
“Invest in safeguards against labor turnover. High labor turnover is often associated with high inflation, and keeping top talent was hard even before inflation hit 9%. As workers seek wages that keep pace with inflation, talent-retention efforts become even more crucial. Investing in systems such as training capabilities, talent pipelines, and labor-saving automation can also smooth operations. Potential downside: If a recession hits and sales decline, investments in automation or better pay and benefits could make it harder for companies to align costs with revenues.”
How to leverage this: Labor-saving automation is a massive space, and many of us sellers will be able to show value in the arena of automating tasks that humans currently do. Referencing credible third party sources like this one, sending docs like this to CFO’s or other finance contacts will help align your value proposition with core imperatives to fight inflation.
Change In Spending
Interesting to note that most CFO’s responded that their spending increased somewhat or stayed the same. I would expect that decreases will accelerate in the coming quarters but it’s a good graph grounding our understanding in reality (a credible poll) vs. conjecture (sales guru posts on LinkedIn).
Lesson: seek out facts and data and take action accordingly!
The dreaded era of cost cutting has begun. This CFO.com article gets a different take on CFO top concerns stating that 58% of CFO’s say cost cutting is their top concern.
But where exactly will CFO’s cut costs?
This Grant Thornton survey lays it out.
- Nearly a third (32%) of executives said they would potentially introduce layoffs in cost-cutting efforts.
- External professional consulting support and fees (42%)
- Technology investments (41%) were also named as potential places to trim.”
The last one is of course the one that is the gut punch for us.
It means we can’t pitch tech for tech’s sake. We need to adjust our value proposition to the goals supported by the CFO who is king of the hill today.
The areas that CFO’s expect the least decreases in investment are:
1. Compliance around the SEC’s upcoming climate disclosure regulations can bring tax breaks and efficiency gains.
2. Security solutions mitigate the likelihood of data breaches which cost tens to hundreds of millions of dollars to remedy and devalue companies’ brands.
3. IT/digital transformations drive efficiencies, long term cost savings and competitive advantages.
We can go even deeper into which lines of business are winners and losers of budget in 2023 in this CFO.com survey:
- CFO level of optimism is low
- Their biggest concerns are inflation and quality and availability of labor
- Expectations for growth in 2023 are declining but still in positive territory.
- Several specific ideas on how to align our solutions’ capabilities with CFO priorities
- Cost cutting will increase, but compliance, security and IT/digital transformation projects will get prioritized.
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