Many economists are optimistic that the Federal Reserve will navigate a soft landing for the U.S. economy and avoid a recession in 2024. There is evidence of a brighter new year despite inflation persisting at rates higher than most would like yet lower than immediately following the pandemic. Despite the improvements, the cost to borrow remains at a multi-decade high. In this environment, a fiscally conservative posture remains appropriate while also ramping up plans and preparations for the economic easing that is on the horizon.
Time to Optimize
As the potential for a rebound emerges, however incremental, organizations will be well-served to prepare for more growth initiatives and a budget shift to more revenue-generating functions. The key is to optimize commercial processes today so you’re ready to act quickly when the time is right. Otherwise, you will risk missing opportunities because you acted too late.
To prepare for growth opportunities in 2024, consider zeroing in on four business areas.
1. Look to Your Data
Data will continue to be king in 2024 since it’s the key to achieving business growth. From competitive insights to your customer’s willingness-to-pay thresholds, what you know and when (as well as why) will make all the difference. It’s partly why 75% of professional pricers said data analytics is the most sought-after skill this year.
To understand what’s happening to your business at a granular level, consider launching a variance analysis or a price-volume-mix analysis. What’s driving margin? Where is your profit coming from? An analysis will help you see gaps in expected vs. actual sales and what’s causing that gap — is it the price effect, volume effect, or mix effect? Are there segments of your business showing trends towards quicker recovery and others showing continued drag? Use this data to help inform investment strategies to ensure incremental dollars go towards the highest leverage areas. This performance analysis will deliver invaluable insight as you simulate and implement strategy adjustments in 2024 and beyond.
2. Optimize for Quick, Efficient Sales
Shorter sales cycles mean faster revenue realization. A streamlined sales process helps win more deals. Too often, sales cycles drag on as the sales team struggles to profitably configure and quote large, complex products. Optimize this process with configure, price, and quote technology that automates the process and ensures appropriate pricing initiatives and adherence to profitability metrics every time. Approval workflows quickly deliver accurate quotes, improving the customer’s experience from the first encounter.
To drive up deal size, consider artificial intelligence (AI) powered tools that can support the sales team with tailored, personalized cross-sell recommendations. Good-fit recommendations also enhance customer satisfaction, which drives higher retention.
3. Limit Revenue Leakage With a Rebate Program
At first glance, rebate programs can seem like more trouble than benefit, but in truth, they are an untapped revenue-generating function. Automation makes them much easier to manage. Successful rebate programs will grow revenue, encourage buyers to choose your organization, and cement long-term buyer-seller relationships — making this a critical step in preparation for brighter economic times ahead. Rebate programs can deliver 2% to 10% in incremental sales.
Rebate program problems arise when customers promise to purchase a specific volume at a low price but fail to do so. Be sure to use rebates to price on “actual” rather than promised purchases. When well executed, incentive programs are powerful tools for directing preferred buyer behavior.
4. Leverage AI for Efficiencies and Intelligence Gathering
This look at preparing for 2024 wouldn’t be complete without including artificial intelligence. While finance teams are taking a slower approach to implementing AI than other business functions, the technology is coming. According to Gartner, 80% of large enterprise finance teams will rely on internally managed and owned generative AI by 2026. Within the pricing function, 51% report already using it or have plans to do so within the next 12 months.
AI is an important enabler for CFOs as they work to achieve a deeper understanding of the economics of the business. Implementation might start with billing, ERP, or vendor contract negotiation automation. AI can also be used to formulate timely pricing suggestions after reviewing competitive price activity. There are many use cases. Line up two or three based on organizational needs and get started.
The last few years have shown us how resilient the global economy can be. Ensure your organization follows the same path by preparing for a quick, well-timed response to brighter economic times. Calculated strategy shifts within finance and across the organization today will support big steps forward tomorrow.
Dayton Kellenberger is CFO of Vendavo. A first-time CFO at the age of 32, Dayton has more than 12 years of SaaS technology experience and a distinguished track record of leading high-performing finance teams.