To get through the recent recession, growth and middle market companies were forced to adopt a more disciplined approach to financial management. Nearly four years later, financial discipline has become a way of life for successful companies. CFOs at these companies understand the importance of a strong balance sheet, and that having sufficient cash on hand gives them financial flexibility and improves their ability to respond to an ever-changing marketplace. Maintaining such a strong level of financial discipline over time isn’t easy. As growth increases, and spending and investment needs put pressure on a company’s cash reserves, it becomes more important to manage working capital effectively. From negotiating better payment terms with suppliers to finding new ways of improving their cash flow, CFOs need to lead financial discipline at their companies to ensure they are in a strong financial position, so they’re prepared to compete in today’s unpredictable business environment.
“Winning market share by price alone is a losing game. Innovate or die.” – quote from a CFO of a company in Professional services sector
The National Center for the Middle Market, a collaboration with The Ohio State University Fisher College of Business and GE Capital conducted comprehensive research focused on the Middle Market, defined as companies with revenues of $10MM to $1BN. Growth Champion companies achieved 10%+ revenue growth in the 2010/2011 period and project a similar rate in 2012. They represent 9% of the total Middle Market. This double-digit growth is generally not correlated with factors such as company size, industry type, or location. Rather it is linked to certain business practices and behaviors. One such behavior is a focus on innovation.
The characteristics of “Growth Champions” were defined as those elite middle market companies that grew at four times the rate of U.S. GDP by the National Center for the Middle Market, a partnership of The Ohio State Fisher College of Business and GE Capital. These characteristics as defined by the Center were summarized in a prior Harvest article and are listed below:
- Strong management culture
- Exceptional talent management
- A formal growth strategy process
- Sharper customer focus
- A broader geographic vision
- Focus on innovation
The following is from the Bank of America 2012 CFO Outlook – Spring Update
Who participated and how results were gathered
From February 16 through March 14, 2012, Granite Research Consulting completed 251
interviews with financial executives from U.S. companies with annual revenues
between $25 million and $2 billion. Participants are referred to as CFOs throughout the report since two-thirds of those surveyed have C-suite titles and most are CFOs.