Let’s talk about scaling.
The term “scaling” can refer to business growth, a term most people (including company managers) associate with increasing profits. In our opinion, it’s a larger concept than just profit growth, and it’s worth discussion.
An organization aiming for true scaling must look not only at profits but also at organizational, business, and financial efficiency. When this efficiency becomes significant enough, revenues will grow while the resources required to generate them (time, money, manpower, etc.) will be considerably reduced.
To achieve significant scaling, the organization must understand how its product or service generates profits not in direct proportion to the time or money invested. The organization needs to create a business model that allows maximum leverage of resources to maximize profits, while simultaneously creating an efficient financial mechanism that saves on expenses and continuously monitors the production process. Only then, in our opinion, will the organization be able to initiate a process that can be defined as scaling.
Organizations that solved this equation essentially found the holy grail of the business world. Their revenues are not directly dependent on the time or budget they invest. For example:
- Organizations that, instead of providing a service (i.e., time with an expert), start offering a product.
- Businesses that, instead of selling a product for a one-time fee, create an attractive SaaS model that turns one-time customers into returning ones.
- Organizations that have developed technologies integrated into other companies’ products.
These examples present several business models that allow scaling. One of the key figures enabling these situations is the company’s CFO, responsible for the financial aspect of the process.
The Role of an Outsourced CFO in Scaling Processes
As one of the leading companies in Israel for business financial services, often one of our senior financial experts integrates as an outsourced CFO into the management team of our various clients. In this way, our outsourced CFO gets to take part in significant scaling processes as part of the client’s management.
The input of our outsourced CFO relates to the financial readiness of the business for scaling, and thus to the connection between finances and business activity. For example:
- Financial opinion on the current business model: The first step to scaling is an accurate examination of the current situation. Our outsourced CFO will examine the organization’s current business model, understand its true cost and profit, and recommend relevant changes.
- Assessing the financial resilience of the organization: Sometimes, to make significant scaling moves, the organization needs to make tough decisions, including deciding to pivot. Such significant moves often require financial resilience, or conversely, are necessary if the organization is not stable enough. The financial resilience assessment provided by our outsourced CFO will reflect to management exactly where the organization stands in terms of financial resilience and understand the options and courses of action derived from the current situation.
- Reflecting the cost of growth moves or new business models: Every new product, service, or move has a cost composed, among other things, of salaries, raw materials, software costs, and more. After the move is formulated by professional managers, our outsourced CFO can provide the most accurate cost estimate possible.
- Assisting in formulating a pricing model that allows scaling: Our outsourced CFO can help formulate a realistic pricing model that allows growth despite development costs, taxes, and other expenses borne by the client.
- Financial forecast: How much will the scaling moves on the table advance the business? Is there a saturation point from which it will be difficult to continue growing? Despite the challenges, does the financial aspect of the move indicate potential? Our CFO will be able to answer these and other questions based on company data and the business and financial experience accumulated with us.
- Cost reduction and financial optimization: Alongside efficiency and growth moves, to perform significant scaling, ways must be found to save expenses and optimize the organization’s financial conduct. Our outsourced CFO helps, among other things, reduce supplier and bank expenses, utilize tax benefits, spread credit, and interact with investors.
These are just a few areas where Danoy’s outsourced CFO can assist in scaling moves. If you are also looking to scale and in the process make your organization more efficient and profitable, contact us.