Michael Murphy —CFO of Personiv, was invited as a guest to speak on the MarketScale Retail Podcast with Sean Heath, where he shared his experience and insight as a financial leader sometimes required to "do more with less." Every company has to decide where it will put the three main resources it has — time, money and people — to use.
CFOs and other finance leaders are usually the ones tasked with making the decision, and as a CFO, Murphy knows that when it comes to allocating resources, every spending stream doesn't yield the same ROI. Listen to Murphy and Heath discuss how outsourcing can help retail leadership over at Marketscale:
Murphy explained to Heath that retail leaders — and this holds true across industries — generally have to contend with three spending streams in particular: customer acquisition; product or service delivery; and general and administrative tasks (G&A). The key, according to Murphy, is understanding what each stream can yield and adjusting the flow of resources accordingly.
How a CFO Can Prioritize to Transform
Murphy addresses these three potential areas of spend right away, ordering them by the ROI companies can expect from each. Speaking to Heath from a vantage point that includes over 20 years of financial leadership experience, "If I can spend more money acquiring customers and more money delighting my customers, the better off overall I’m going to be, in terms of the value I’m returning to my shareholders.”
By contrast, that third spending category, G&A, should take the smallest possible bite out of a company's budget. It's necessary, and it needs to be done right, but the more time a team spends on closing the books and generating reports each month, the less time they'll have to focus on the core competencies that drive profit and growth.
A Strategic Budget is a Dynamic Budget
But small to mid-sized businesses should take care not to let growth mute or circumvent their hard-fought ROI. Often businesses just beginning to scale know they need to be strategic about where to go next but keeping up with keeping the books prevents them from knowing how. As Murphy put it to Heath during their discussion, "You can just imagine, they’re throwing money at different initiatives to try to grow the business. They continue to put money in areas that may not be producing the ROI.”
Often, that ends up being an overemphasis on the tedium of G&A, or rushing to bring in more people to keep up with those tasks for you — in tight labor pools where businesses can end up paying top-dollar for the talent they do have access to.
Dynamic resource allocation means being able to change and grow with your business, which often means doing more work with less resources. Murphy urges leaders to do a regular gut-check when they're deciding what gets fiscal attention.
For Murphy, that means asking: "How do you prioritize what delivers the best overall results of where you want to take the company? In a lot of cases, that isn't coming up with the best G&A practice, HR practice or financial organization...you really want to be the best at delivering great customer satisfaction, so that's where you need to focus your resources and spend."
Outsourcing Transactional Tasks and Adding Value as a CFO
What it comes down to, according to Murphy, is understanding the difference between transactional work and strategic initiatives. Recalling a CFO role where he was spending the majority of his time on bookkeeping tasks, Murphy tells Heath that that time would have been better spent implementing more effective sales and marketing practices, managing investments for greater return or investigating potential acquisitions.
Leaders need to understand what they can leverage to avoid missed opportunities.
Murphy's offshore financial teams allow him to focus on those high-value initiatives, especially in a labor pool like Austin's, where unemployment is low and labor cost is high and rising. Companies in all stages can reap similar benefits. Outsourcing G&A often means:
A scalability ratio of 3:1 - for every standalone resource a company could allocate money to in house, there is the potential for access to three of the same resource overseas.
Time better spent - with the transactional task pulled out-of-house and off of a CFO or controller's plate, more energy can be placed into core competencies and business-critical tasks.
Time added back - Leaders can leverage time zone differences by arranging for handoff to occur at the top of the day. This allows a CFO like Murphy access to the information and resources he needs when he needs it. Essentially, it's a 24-hour work cycle without the risk of burnout or sloppy work.
Outsourcing can help companies like yours shift the focus from managing general and administrative tasks to planning for growth and executing strategic initiatives that drive profit. But you need the right partner. Personiv has been putting quality teams together in order to create custom solutions for leaders across all industries for over 30 years. Find out how we can help you do more with less by contacting us for a free consultation today.