Make revenue-efficient investments during a recession
"Go against the grain, refuse to conform, take the road less traveled" - Mandy Hale
With the first half of this year drawing to a close, 2023 so far has certainly not been boring.
In spite of the unfortunate mismanagement of a few US banks and continuous layoffs in Big Tech, inflation in Europe and the US seem to be reducing, and earnings results for public companies during the first quarter have been somewhat positive. This cautiously optimistic outlook is reflected in the risk-reward sentiment of public market investors (see VIX index and stock indices below).
While the macro environment certainly influences how a business or individual evaluates investment decisions, time tends to favour investors who wait - especially those with deep pockets and a conservative risk appetite. However, when it comes to entrepreneurship, startups and scale-ups, and small businesses in general, a recession is often the best time to be opportunistic and to thrive against all odds.
With summer officially underway, I wanted to share some of my key learnings over the past three years since launching Pegafund.
1. Extraordinary leadership requires authentic, adaptable and distinct communication
Everyone talks about effective communication. But what does that really mean? “Effective” is so subjective based on your audience and the situation that it is very tricky to define.
In my experience working with 30 SaaS scale-ups over the past 8 years, what sets leaders apart is their ability to change their minds, rethink and unlearn key assumptions they hold true; and then to be able to articulate that well to others within their team and customer base. Adam Grant discusses this skill in his book “Think again”.
This is very challenging to do in a remote-first or hybrid work environment, especially where cultures and languages vary. So often the best way to do this is to frequently look at the numbers, refine their definitions, scale the processes behind them, and most important of all - regularly exchange key insights and engaging stories that matter. This is what triggers immediate actions and compelling events that lead to real-time decision-making. It applies not only in a team environment, but also with prospective customers.
I am excited by the significant advancements in AI and how they can enable all of us to be more effective data-centric storytellers.
2. Creating and using networks are a sure path to growth
COVID and the war in Ukraine have been devastating. The positive is that they have also provided many people the catalyst to slow down, to reflect and re-evaluate life choices, and make meaningful changes.
I am grateful that Pegafund started as a remote-first business from day one, and that “Fractional CFO” and “Modern CFO” are now household terms (whereas they were barely used a few years ago).
In building Pegafund, what I have experienced first-hand is how practical and strong network effects can be when you bring together individuals who share a common set of values and purpose. For me on a personal level, everything starts with the “why”. I believe in efficiency, fairness and equality, and continuous growth by leveraging the experience and generosity of those that have “been there, done that” before. There is a wealth of knowledge and resources out there; and it is simply a matter of identifying them for the right purpose, at the right time, and feeding the “snowball effect” that arises from paying it forward and giving back.
3. Talent and culture are what create lasting value and impact
Recruiting and retaining talent, and creating a cohesive culture is often the biggest challenge (but also the biggest reward) in building a business. A person could have a great pedigree and prior track record, and they may even work really well with you one-on-one or in a certain environment; however, it does not guarantee a fit within the broader business or bigger vision of where the company is heading. This is why it is so important to build and nurture a culture based on a common set of principles, values and purpose. When the times get tough, the team collectively rises to the occasion and stands out from the rest.
While Big Tech continues to have significant layoffs, it presents an unique opportunity for the startup and scaleup ecosystem to strengthen its foundation with experienced talent and a balanced business culture.
The natural inclination during macro uncertainty and pessimism is to reduce cost and preserve cash. In fact, traditional CFOs would first reduce people and marketing spend since they are often the biggest and most difficult to attribute “costs”.
However, a Modern CFO prioritizes revenue-efficient investments and doubles down on those activities. This includes decisions that solidify the positioning and brand distinct to a business in a way that best serves current and future customers.
I've also been taking a look at my own business and thinking about how we can best communicate what we do. With this in mind, on the third anniversary of Pegafund, I am pleased to share with you our new website. The intention is to better articulate why we exist, what we do, and to provide a peek into how we do it. It should also free up time to serve more companies, so we can do more of what we enjoy the most.
I very much welcome any feedback you have, and hope it demonstrates our commitment to always putting Pegafund clients and founders first. Happy Midsummer!
Great article Joyce. Wise words that, if adopted, will set your readers apart from the others.