Results are in from the Q4 2015 “CFO Signals” survey by Deloitte. The survey of more than 100 CFOs from large North American companies sheds light on what Chief Financial Officers are planning for 2016. These results are also very relevant to small businesses and startups here in the San Francisco Bay Area and Silicon Valley.
Most are focused on maximizing company efficiency while focusing on growing in current markets. In other words, their goals are to improve profit margins through carefully managing costs even while growing with current products and markets.
Here are some other insights from the survey:
“Improving profitability: More than 80% of CFOs expect to execute substantial productivity/efficiency improvement efforts. Forty-seven% of CFOs expect efforts to lower and/or control labor costs; 45% expect efforts to lower and/or control non-labor costs; and 46% expect to focus more on higher-margin businesses.”
More than 90% of CFOs say that one of their top 3 priorities is increasing revenue in current markets, and almost 75% say a top priority is to reduce costs.
More than 80% of CFOs said that investing cash for growth is a top 3 priority.
Revenue grew 5.9% on average.
Earnings (profits) grew even faster by 8.3% on average.
Capital spending grew only 4.9% on average.
63% of CFOs are looking at M&A deals in 2016, largely focused in existing markets in order to achieve scale efficiencies as well as to acquire customers in both current and new markets.
CFOs cite uncertainty due to the U.S. presidential election as well as new regulations. This was especially significant in the retail / wholesale, financial services and services industries, with twice as many CFOs in those industries saying the election outcome will likely affect their company's performance versus those who say it will not.
Overall CFO sentiment is at the lowest level in three years.