Selling to CFOs: Everything You Need to Know in 2024

Introduction

According to experts, the world is heading towards a global recession in the first half of 2024. The Centre for Economics and Business Research, a UK think tank, estimates that up to 7,000 businesses in the UK will fail each quarter of 2024. Likewise, there were 2,328 bankruptcy filings, in the United States (1), in August 2023 – a 14% increase from August 2022.

Many companies adapted to this economic downturn, which began in April 2020, by changing their purchasing processes. According to a review by Sapphire Ventures, roughly 50% of companies reported “additional steps, more sign-offs, or new limits” for spending decisions. Chief Financial Officers (CFOs) play an increasingly important role within this new framework.

In 2022, over 77% of CFOs introduced cost-cutting measures to reduce overhead costs. Likewise, the average spending threshold for decision-makers in companies plummeted. Before the pandemic, CFOs at major corporations rarely needed to sign off on purchases smaller than $500,000. By 2020, that number dropped to $50,000. The CFO’s importance will only increase as the economy continues to decline.

To hit their targets, sales teams must adapt.

KEY INSIGHTS

In 2024, with a predicted global recession, selling to Chief Financial Officers (CFOs) will be crucial for sales teams.

• CFOs are now more involved in purchase decisions due to tighter budgets.
• Salespeople face challenges such as adapting to these stricter spending habits and understanding that smaller deals don't necessarily mean less scrutiny.
• Effective strategies include aligning products with CFOs' goals like cost reduction and revenue growth, preparing advocates within companies to make a strong case, and focusing on long-term value rather than just immediate savings.

Understanding the CFOs

Sales teams have three challenges:

First, they must contend with a new decision-maker: the CFO. The second is that CFOs are increasingly tight with budgets. “Blank checks” for tech items don’t exist anymore. (2) The third is that the greater involvement of CFOs across all buying decisions means that these people are more “time-poor” than ever.

Only 23% of sales reps in Q4 2022 hit their quota, a stark decrease from the 53% that hit their quota in Q4 2021. This figure will worsen this year unless sales reps evolve their approach with the CFO in mind.

A red herring

One way sales teams could navigate the CFO is to shrink deal size to stay under the radar.

This is tempting, and the logic is sound at a surface level. By reducing the size of deals, a CFO is less likely to be involved in the buying process. Furthermore, the logic assumes that even if the CFO is involved, they’ll be more likely to sign off on smaller purchases.

The first problem with this line of thinking is that it’s not practical for companies to change their pricing or standard deal size substantially. Profit margins are rarely big enough - on average only 7% (3) - that they can be slashed in a way that allows other overheads to be met. Even if they could be, this is way outside of a sales team’s remit - let alone a single sales rep.

Secondly, smaller deals don’t necessarily mean less scrutiny. On the contrary, long-term cost optimization often consists of discarding many minor expenses, especially when there isn’t an obvious return on investment (ROI). Naturally, the smaller the deal, the less likely there will be a substantial ROI. Even if there is an obvious ROI, CFOs are signing off on more purchases and, therefore, are more time-poor. Smaller deals are more likely to get sidelined and delayed to focus on bigger ones.

The third and final problem with this approach is that it’s not in line with how CFOs think. It’s not uncommon for companies to spend themselves out of recession. According to PwC, 57% of CFOs plan on making new hires (4) in certain areas to drive growth amidst the downturn.

Optimising budget often means optimising long-term growth as much as trimming overheads. For nation-states, the economist John Maynard Keynes called this strategy “the paradox of thrift”. It’s true for companies, too, so sales teams need to position themselves with this in mind.

Coaching up your “deal champion”

Understanding that CFOs aren’t necessarily adverse to spending is the first step. To close deals, however, sales reps need to speak with the CFO in mind.

Generally speaking, CFOs care about four things: - Reducing cost - Maximising productivity - Growing revenue - Mitigating risk

Sales reps should link their product or service to one or more of these priorities. This is harder than it looks since a sales rep still has to outline the relevant core benefits to the person they’re selling to.

Furthermore, this should be planned in advance, not ad hoc or on the fly. Statistics on productivity improvements or ROI figures are helpful. Remember, the sales rep often doesn’t sell to the CFO. That’s the job of the “deal champion”, the person advocating for your product or service.

Do not rely on the deal champion to intuitively understand these benefits. Taking the time to spell it out, or “coach them up”, makes it more likely that they can overcome internal objections.

The Mutual Business Case and ROI

Unproductive spending is a CFO's worst nightmare, so building a long-term mutual business case is critical.

Case studies are helpful but ultimately limited as they don’t guarantee results. The best way to build trust is to lay out an accountability roadmap. This is a series of checkpoints and critical performance indicators, with clearly identifiable metrics, that CFOs can use to evaluate spending on your product or service.

By setting expectations in a data-driven way, sales reps can help mitigate perceived risk over the long term, ultimately making spending decisions more palatable to a CFO.

Negotiations

The CFO is ultimately responsible for keeping a company’s spending within budget.

It’s a good idea not to concede anything until all of the ‘asks’ are on the table to avoid being chipped down. Likewise, only negotiate at the end of the buying process. Otherwise, you may make a series of concessions, only to discover that you’re expected to make even more at the next stage. Always ask why they’re asking for what they’re asking for. Doing so can help you overcome this objection by speaking through the roadblock.

For example, in the case of a value objection, you can rebuild, expand, or retirate the ROI case. Remember, you should be flexible on pricing but not foldable.

Minoa

It’s a challenging economy, and it will likely get worse. The last time CFOs were this important was in 2009.

It’s not a choice for sales teams to adapt to these circumstances - it’s a necessity. A crucial part of this evolution is for sales teams to be better able to communicate value. They should also be flexible in pricing and deal size without compromising profit.

At Minoa, we help sales teams overcome the scrutiny of CFOs by collaborating with the “deal champion” on building the ideal business case. Minoa is a valuable tool for sales teams struggling to value-sell to CFOs amidst a collapsing buying market.

If you’re interested in finding out more, book a demo today.

REFERENCES

• (1) Guardian | Yes, bankruptcies are on the rise in the US
• (2) CNBC | For the first time in a long time, CFOs can say no to tech spending
• (3) Brex | What is a good profit margin?
• (4) PwC | Business growth through recession uncertainty
• (5) Forbes | Recession forecast still right for late 2023 or early 2024
• (6) Sapphire Ventures | 2023 SaaS Buyers Outlook
• (7) YouTube | Chris Orlob - 7 tips to sell to CFOs in an economic meltdown
• (8) Bravado | Revenue recap 2022