5 Fractional CFOs Share Insights on Harnessing Data to Drive Growth

In today’s rapidly evolving business landscape, data has become the compass that guides organizations toward sustainable success. And with the crucial role of guiding financial strategy across countless organizations, fractional CFOs are central to a company’s ability to leverage data to make informed decisions that drive growth.?

This article explores the insights of 5 established fractional CFOs who have mastered the art of harnessing data for sustainable growth. These financial leaders understand that data isn’t just a collection of numbers; it’s the key to unlocking business potential. From identifying areas for improvement to maximizing ROI, these fractional CFOs share case studies and insights about how data-driven strategies can transform companies from the brink of collapse to thriving entities.?

1. Data can help companies identify areas of improvement.

“As CFOs own the data, we’re able to identify places where we can make changes to process or ways of running the business.” – Mitch Federman, Chief Financial Officer

As a CFO, I firmly believe in the power of data to drive business growth. Effective CFOs take ownership of the accounting and finance data within a company, allowing them to drive change by critically analyzing these numbers and identifying key areas for improvement. Typically, I begin by identifying and prioritizing the key performance indicators (KPIs) that have the most significant impact on the bottom line. This allows the leadership team to get on the same page about what metrics make the most sense to review and analyze on a weekly basis – and what information matters most to the company’s success. From there, we can work on any structural or process changes needed.

Case Study: I had a client who didn’t know exactly where their company’s revenue was truly coming from. Upon data review, we realized that the bulk of revenue was coming from a mere one percent of their new customers. This insight led us to restructure the business’s sales operation, shifting from an account management approach to a more strategic and active approach to bring in new business. Leveraging tools such as Power BI, we were able to pinpoint true revenue contributors and implement changes to boost that one percent to a more substantial ten percent.

2. Data can reduce costs by unveiling which investments drive the highest return on investment (ROI).

“Data often unveils the most cost-effective strategies.” – John Khamis, Chief Financial Officer

Harnessing accurate data can illuminate areas of inefficiency and allow for more strategic resource allocation, and a greater return on investment for ongoing initiatives. Data can help ensure that business leaders aren’t overlooking any key areas that can help drive revenue, or overinvesting in areas of the business that aren’t giving them the returns they had anticipated.

Case Study: I had a client in the apartment industry. The company was heavily investing in marketing to attract new leads. However, they failed to realize that they were largely overlooking their existing customer base, and efforts to retain these customers. After a deep dive into their data, we discerned that the cost of retaining a customer was substantially lower than acquiring a new one. This revelation steered the company to pivot their strategy, prioritizing customer retention and renewals. The outcome was a more cost-efficient approach that maximized the company’s return on investment by focusing on the renewal side.

3. Data can improve decision-making by grounding leaders in reality and removing unnecessary guesswork.

“You’re only as good as the data. If you have inaccurate data coming in, you’re going to have poor decision-making on the other side.” – Tracy Golden, Chief Financial Officer

In my role as a fractional CFO, I’ve witnessed firsthand how the quality of data can make or break a company’s growth strategy. While inaccurate numbers can result in financial losses and business chaos, reliable data removes guesswork and ensures that decisions are grounded in reality, steering businesses towards their objectives.

Case Study: I was working with a multi-location medical practice that relied heavily on outdated Excel spreadsheets, riddled with errors that the company couldn’t pinpoint. Stepping in, I introduced automation and new software, only to uncover a significant cash flow discrepancy. The company was on the brink of not just a financial strain, but potential bankruptcy, with ambitious growth plans being severely jeopardized. Within a span of six weeks, we cleaned up the data and adjusted the company’s strategy. The result was a business that, within six months, had transformed from the verge of collapse to a thriving entity. The core issue wasn’t their lack of data, but the reliability of it. This goes to show just how vital data management and accuracy are for any business aiming for sustainable growth.

4. Data allows business leaders to analyze decision-making patterns, and improve future decision-making.

“It’s okay to take a risk on a decision, to really put yourself out there. We’ll quickly identify if it’s working or it’s not.” – Ronny Angel, Chief Financial Officer

In my experience working with entrepreneurs, I’ve observed that while gut feelings often play a role in business decisions, relying solely on intuition is unsustainable as a company scales. This isn’t to say that risk-taking is bad – rather, risks should be accompanied with data-driven analysis to understand the true effectiveness of bold decisions. By using data to identify decision-making patterns and trends, you can quickly judge what is working and what’s not so you can proceed more effectively.? Case Study: A case that stands out involved a company where we analyzed 18 months of operational data. We noticed interesting patterns in the data, with certain months showing deviations in profitability and shrinking gross margins. In discussions with the client and their team, we analyzed operational decisions that might have influenced these patterns. The data served as a mirror, reflecting the outcomes of their decisions – both positive and negative. This exercise underscored the importance of measuring and testing decisions. With accurate data at our disposal, we could swiftly gauge the efficacy of a strategy, decide its future course, and ensure that every decision was backed by concrete evidence, rather than mere speculation.

5. Data ensures that companies have clarity and direction, and don’t go off track.

“If it’s not making sense in terms of how to run the business, then you’re going to go off track using that data.” – Jim Downes, Chief Financial Officer

Data is critical to a business’s ability to understand their business and what is needed to ensure continued success. Beyond the concept of profitability alone, data is essential to ensuring that your company isn’t going off the rails when it comes to other essential aspects of your business operations, such as inventory, resource allocation, and more. Without having data-driven systems in place to inform your processes, chances are you will go off track or succeed by mere luck, instead of strategic preparation.

Case Study: A consumer products company was falling short on their sales targets mid-year. Delving deeper, the owner disclosed a surprising oversight: they had run out of their top-selling SKUs. The root of the problem was their reliance on an ERP system that used current sales to dictate inventory orders, neglecting to factor in stock-outs. This meant that high-demand items were consistently overlooked in inventory restocking, leading to missed sales opportunities. Recognizing this, we collaborated to devise an improved inventory purchasing model. With a goal of ensuring that popular products are always in stock and ready for customers, this situation underscored the critical importance of accurate data in guiding business decisions.

In conclusion, the wisdom shared by these seasoned fractional CFOs underscores the pivotal role of data as the North Star guiding businesses toward sustainable growth, serving as a compass for companies navigating today’s business landscape.?

Whether it’s identifying areas of improvement, optimizing return on investment, grounding decisions in reality, analyzing patterns for future success, or maintaining clarity and direction, these financial leaders vividly demonstrate the transformative potential of data-driven strategies. Their real-world case studies vividly illustrate how data can not only rescue businesses from potential failure, but also help them achieve the best future possible.

Ready to use data to help your company grow? Our team of profitability partners at Blueprint CFO can lead the way. Let’s start the conversation!