Member Article

How to think strategically in today's business environment

With an agenda to expand, leading CFOs are taking very different approaches to achieve growth

Slowly but surely, Britain’s businesses are moving into expansion mode as the economic outlook improves. More than half the small and medium-sized enterprises (SMEs) surveyed in the most recent Close Brothers Business Barometer said they planned to invest in their businesses this year, amid increasing optimism for their growth prospects.

In practice, however, investment means different things to different companies, as leading finance directors will tell you. To get an idea of the disparate investment plans of high-performing businesses, take a look at a series of interviews with chief financial officers (CFOs) run by the magazine Financial Director in recent months – they underline the way in which finance directors are taking a leading role in the strategic direction of their companies in a growth environment.

At gambling firm Betfair, for example, CFO Alex Gersh has just completed a restructuring that saved the business £30m. “But I’m the kind of CFO that will tell you that you can’t become prosperous by cutting and cutting,” Gersh says. “So we took some of those savings and reinvested them.”

At international catering group Sodexo, CFO Siân Herbert-Jones says businesses must be prepared to take every possible opportunity to enter new markets. “We have entered most geographies by organic growth and started from scratch,” she says. “We have, on a few occasions, acquired a company to enter a market.”

Then there’s BT CFO Tony Chanmugam, who has spearheaded the telecoms company’s huge investment in pay television with two different strategic goals in mind. “You want to secure your existing base which is under threat from players who are giving away materially discounted services,” he says. “And you want to attract new customers.”

Meanwhile, Lorne Vary, CFO of the folding bikes business Brompton, understands the need to make risky investments from time to time. “The amount of R&D spend has been huge, but that’s because we’re not just focused on immediate profit but on expanding the business,” he explains.

At global software company Intuit, by contrast, European CFO Mike Williams is making a different type of risky investment, choosing to sponsor the Premier League football team West Bromwich Albion, in an attempt to build brand awareness in the UK. “It’s allowed us to talk to people we wouldn’t have been able to talk to before,” Williams says.

All of these CFOs believe that in the current business environment they must seize opportunities to invest in future business growth. But finance directors must also decide how to fund such investments. With four in 10 SMEs now actively seeking funding - according to the Close Brothers Business Barometer - access to finance is a crucial issue. Without that finance, growth plans may be thwarted.

In a marketplace where traditional sources of finance may not be available or appropriate, it is important that finance directors consider every possible avenue of potential funding. This includes the value locked up in a company’s assets, such as its unpaid invoices, inventory and property. Alternative finance options such as invoice finance and asset based lending (ABL) offer an opportunity to access this value, improving cash flow and freeing up funding for investments in future growth.

As the examples above reveal, finance directors are showing remarkable imagination as they plan strategically for future growth, investing in different ways to achieve their ambitions. The modern FD now needs to be equally imaginative as they plan how to fund these investments.

Key takeaways

• Identify your key growth opportunities and prioritise your business activity around these areas

• Establish the finance required to invest in these opportunities

• Look beyond traditional sources of finance to secure the most appropriate type of funding for your plans

See how the modern FD has become the key figure in ensuring the business if fit for purpose for future growth. View from the top: The modern FD’s guide to funding and investing in a post recession world. Copy and paste this link into your browser to download: http://bit.ly/1hMm4eL

This first appeared on the Close Brothers Invoice Finance blog

This was posted in Bdaily's Members' News section by David Thomson .