The term “capital efficiency” bubbles up in VC circles all the time. Why? Because VC’s are in the business of getting the most out of every dollar. But doesn’t that hold true at any stage of growth in a company?
Unfortunately not (but it does keep consultants in business).
Somewhere along the way as a start-up blossoms into a small business and then flourishes into a medium-sized business priorities change. Don’t get me wrong, the chase to get every dollar and further market share are still there, it’s the priorities around the dollars used to meet those goals that change.
As the organization grows, more and more processes are added to meet company goals spawning little inefficiencies here and there. Hence, the live and die via cashflow mentality is replaced with departmental budgets. And when times are good and budgets are big the ROI on every dollar is not examined as closely. Yet these days with the markets yo-yoing every time Greece makes a new announcement, capital efficiency has made the agenda for every departmental meeting.
As Chris Shipley pointed out some time back in a post, “the key is to make smart decisions about leveraged spends.” Cutting all spending suffocates any chance for a business to grow.
This approach to growth is fueling the move to SaaS amongst the SMB space. Investments need to be made for businesses to survive and stay competitive. The SaaS strategy maximizes every dollar spent. You pay for usage without incurring the costs of the infrastructure needed to deliver it.
If you want to make a real impact at your next department meeting, suggest a SaaS strategy to trim the fat off the bottom line.