For many of us, the rallying cry for efficiency and business fundamentals is the rebirth of a fad we never let out of style. The market correction and fear of a recession forces companies to make decisions they should have been making all along. With the market whips beating our perspective into focus, the opportunity is now to reinvent our businesses to endure.
Here are a few tips to help drive efficiency and focus on business fundamentals:
Figure out what’s committed and mandatory.
Costs should be bucketed into a grid with committed vs. non-committed on one axis and mandatory vs. discretionary on another. Understanding where expenses fall into this matrix allows you to assess your ability to lean out and execute zero-based budgeting or restructuring planning.
Take control and get visibility.
In a growth at all costs environment, some finance teams didn’t have the support to implement necessary controls resulting in excess and limited visibility. Whether you’re feeling the pain or not, use this time to implement the processes needed to manage the business’s finances effectively. You’ll need them to go public at some point anyway.
Demand budget management and efficient resource allocation.
Broad buckets of investment don’t work in this environment. Every person, purchase, and project needs to be justified, prioritized, and monitored. Figure out company-wide and department-specific decision-making frameworks. Be a good teammate by asking critical questions and helping to optimize decisions.
If you’re fortunate to have a strong balance sheet and business prospects, continue to invest in high ROI activities but reset expectations internally that the investment hurdle rate has been raised. Monitor growth channels closely and assess diminishing returns. Fund R&D with clear and quantifiable paybacks. Invest in internal projects to drive efficiency and employee and customer retention.
The processes and frameworks implemented today can be cornerstones in driving results for decades to come.