In a world where the next big thing emerges almost daily, it’s understandable that the pace of the business world over the past several years has been set to “rush.” From unicorn startups to tech giants, the relentless pursuit of rapid growth has overshadowed the age-old business mantra of long-term profitability and sustainability.
However, we’re seeing a transition emerge — businesses are once again focusing on the bottom line. This recent article in the Boston Business Journal caught our attention, as it speaks to this trend precisely. The article delves into the current economic reset, emphasizing why business priorities are shifting from growing at breakneck speeds to long-term profitability. Here’s our take on the reset, what the shift means to CFOs and other finance professionals, and the best way to prepare yourself and your organization.
Understanding the Economic Reset
The economic climate started to change (again) a year or two ago. Tech companies began massive layoffs, and talk of a recession loomed large. That’s when the vulnerabilities of high-speed growth without underlying profitability became painfully evident. The Business Journal article quotes a seasoned CFO who observed that his conversations with recruiters were no longer just about fundraising. Instead, he was being asked, “Have you ever actually run a business that’s made money long-term?”
This shift echoes throughout the nation’s startup hubs, where once sky-high valuations and rapid growth narratives are now tempered with sustainability, operational efficiency, and strategic foresight.
Why the Shift?
For many economic pundits, the shift was inevitable— if for no other reason than they’ve seen business priorities shift from growth to margins and back again. (Let’s not forget the dot.com bubble of the late 1990s with its growth-at-all-costs energy — and the 2008 financial crisis that reinstated a sharp focus on the bottom line.)
Growth for growth’s sake is a recipe for disaster. Despite impressive valuations, several startups faced existential challenges when the financial tide turned. When cash flow slows to a trickle, it’s inevitable that only businesses with a solid profitability structure can survive. This was evident as businesses that prioritized profitability found themselves in a more resilient position during economic downturns.
In addition, investors and stakeholders are becoming increasingly discerning. While growth metrics are attractive, there’s a growing appetite for businesses that demonstrate a clear path to profitability. It’s a shift from mere valuation to real value.
What it Means for Finance Professionals
Over the past decade, CFOs were primarily assessed based on growth, focusing on strategic planning and fundraising. Now, companies are seeking operational CFOs skilled in internal management systems, capital allocation, and revenue optimization — and they’re hard to find.
The role of the CFO is no longer just about showcasing growth metrics but about driving strategic decisions that ensure long-term profitability. The position is evolving from “scorekeeper” to that of a strategic partner in decision-making processes. Indeed, within many companies, the CFO is moving into the number two spot, advising the CEO on where the company stands from a data and technology standpoint. This move requires a comprehensive skillset and a powerful toolset.
The Future is Integrated and Intelligent
Think of the latest economic reset as a recalibration of business priorities and how they view growth and profitability. For CFOs, accountants, and finance professionals, it’s a call to evolve, embrace the new norm, and ensure you have the right tools to navigate this shift.
A successful shift may require finance professionals to rethink the tools and systems they use to run their departments and advise on corporate strategies. As accurate long-term planning and strategic foresight become expectations, relying on outdated or entry-level accounting software is too constraining.
To support the shift, businesses and their finance teams must focus on accounting and ERP software that offers real-time data access, integration capabilities, and built-in AI. You’ll want an application that seamlessly integrates with other business systems and provides predictive analytics, data-driven insights, and automated workflows. Such tools empower you to make proactive, informed decisions rather than just reactive overviews.
What’s more, these same applications power your business’s growth initiatives, too. While a shift towards long-term profitability may be underway, growth remains a worthy, if not essential, goal. Looking to the future, the new mantra may well be: Speed is desirable, but sustainability is indispensable. For those of us in the finance world, the best response is to equip ourselves with a financial management application — like Sage Intacct — that helps power both.