The Time of "Growth at All Costs" is Over

Even with a promising outlook in sales pipelines for the coming year, many CEOs still feel the need to err on the side of caution and stay focused on EBITDA rather than pursue growth more aggressively. This seemed to be the general consensus among participants at SBI’s latest CEO Growth Forum.

At the forum, SBI shared results from its recent surveys, showing that demand in the last quarter had been accelerating, compared to the months before when more CEOs reported consistent or shrinking demand. Forum participants, representing industries from software to technology, healthcare, and finance, agreed that the findings reflected their own experience, with strong demand building up in their own pipelines.

However, they also highlighted that market uncertainty and sluggish decision-making among prospects made it difficult for their sales teams to convert that demand into revenue. They noted that a lot of companies out there now require more signatures than before to close larger deals—C-suite being among the key approvers further slows down the deal cycle.

As such, most forum attendees were still in favor of staying in the mindset of optimizing EBITDA for the time being rather than return to a “growth at all costs” approach. In recent quarters, the participating CEOs had been focused on some of the following approaches:

• Some did the groundwork to rationalize their GTM approach and organization. These CEOs are prepared to deploy capital when they see more signals that the market is ready.
• Those who stuck to cost management had not made more difficult decisions to pursue productivity gains. These will focus on investing more in A players and coaching B players to improve commercial productivity.
• CEOs who have been focused on growing revenue from existing customers are now shifting toward new customer acquisition. This involves pursuing near-adjacent markets or pursuing new logos through automation and process improvement. The key to this approach is to keep acquisition costs down without under-indexing the lifetime value of new customers.

Another conversation that took place at the CEO Growth Forum was the impact of holding periods on decision-making for companies with private equity ownership. Many participants said that the later they are in their holding periods, the more likely they are to focus on EBITDA. Such a scenario pushes CEOs to avoid making any risky decisions to pursue large investments, expanding markets, and even mergers and acquisitions, as it is critical that any acquisitions do not dilute equity during this time. They added that it doesn’t rule out acquisitions completely, but the nature of targets and strategic intent will be different.

Key Takeaways and Recommendations by SBI

Based on the experiences shared by participants of the CEO Growth Forum, and drawing from insights featured in recent SBI research, SBI has three key pieces of advice for CEOs moving forward:

• If 2023 has been more about cost management than driving productivity, now is the time to focus on the latter. Shore up GTM operations, customer targeting, and commercial team skills to ensure that your organization is well positioned to capture more opportunities as demand increases.
• To balance EBITDA and new investment opportunities, focus on generating efficiency gains from commercial productivity and capitalize on them.
• Stay tightly aligned with the Board and investors on their appetite for investing in growth. This ensures that you will be able to capture opportunities that present themselves without diluting value.