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With the days of free-flowing investment capital long gone, the path to scaling a high-growth company is no longer a wide, paved yellow-brick road. In fact, it’s a winding, mountainous path riddled with elevated interest rates, supply chain problems and talent shortages, oh my! And as costs rise and prior valuations fall, professional investors are carefully assessing their investments for returns, while overhang from past funding rounds further erodes their confidence.
Prioritizing profitability over growth at all costs
Gone are the days of growth at all costs. To stand out and gain investor confidence, entrepreneurial businesses must level up and demonstrate:
Investors are reevaluating their portfolios, along with revising their investment criteria. And all this is compounded by elevated interest rates that have really increased the cost of capital. There’s still a lot of unspent cash reserve out there. But the cost of capital is expensive, and investors are being a lot more selective about who they invest in.
To get on the path to profitability, founders should focus on five key areas of value creation:
Customers are always a top priority for businesses, but in today’s environment, profitability means obsessively putting customers at the center. Businesses need to get ahead of changing customer needs, behaviors, and buying patterns and strengthen these relationships while delivering exceptional value.
To improve your customer experience:
We’re looking for businesses that can execute across the three pillars of product, brand and mission. What’s the product that you’re selling to your customers? Is it effective? What’s the brand that you’re building around it and that develops emotional attachment? What’s your purpose? What’s your mission? What’s your reason for being, outside of just your product, and does that resonate with your customers and consumers?
Investors are no longer funding growth at any expense. In challenging times, they want to see businesses prioritizing the right initiatives while keeping costs down. Company leaders must now convey a story of operational excellence, disciplined investments and tangible business impact to garner the attention and support of investors.
An EY-Parthenon analysis of 5,000 of the largest global companies found that firms with robust cash management strategies were:
To prioritize cost efficiency:
Inflation is affecting different sectors differently. The cost of capital is now much higher, so as founders, folks are having to think a little bit differently about how that’s affecting their consumers. For example, do they have the ability to continue spending, and what is the price point that they’re willing to adapt to?
Scaling is impossible without talent. The right talent and skill sets can further your company’s mission and vision and propel your organization forward. To unleash the full potential of your workforce, connect your business and talent strategies and foster a strong workplace culture.
To harness the power of talent:
We were a team of four, and now, we are a team of 150. You start out doing a little bit of everything as a founder, and then, you slowly give away jobs to people that are way more skilled at doing those jobs than you ever were. Also, resources, opportunities and connections change lives. Who can I connect my team with that is going to matter for these young kids just starting their careers?
In today’s landscape, investing in digital capabilities isn’t a choice — it’s an imperative. Whether it’s boosting operational efficiency or elevating customer experiences, technology, especially in the age of artificial intelligence (AI), acts as a catalyst for long-term growth, empowering your teams to make better, quicker and smarter decisions that deliver value for customers.
To drive growth with technology:
First and foremost, we’re in the era of AI, so if you’re a business, you are now a data and AI company. If you’re not using AI, you will become obsolete. So the question is not if you’re going to use AI, it’s how will you use AI. And that could be in everything from customer support to automation to robotics to predictive analytics. The list never ends.
When the goal is to minimize costs, maximize profitability and improve customer satisfaction, supply chain optimization can be instrumental in driving value creation, helping your organization become efficient, resilient and agile.
To optimize your supply chain:
Anticipation and preparation are key for managing supply chain disruptions effectively. Contingency plans can help to ensure the continued flow of goods, maintain customer service levels, sustain financial health, and ultimately protect the company’s reputation and future growth.