Aarish Shah is the founder of EmergeOne, having previously co-founded two businesses and worked in a number of finance roles. EmergeOne provides Part Time and Portfolio Finance Director (FD) and Financial Controller (FC) services to startups, SMEs and scale ups.
Aarish believes that managing company spend in a crisis means more scrutiny over cash coming in and going out, and ensuring that you’re only spending on the essential. Find out how he’s helped clients reduce spend and ride out the pandemic.
The main focus for EmergeOne when helping businesses has been cash flow. And the steps they’re taking to preserve cash are roughly the same, regardless of the nature of the business.
A crucial step has been to negotiate very heavily with suppliers whose services are no longer needed. Another step is to negotiate with landlords about rent (a costly and unnecessary expense currently).
The businesses Aarish works with have all been able to operate really well remotely, so they’ve pressed for rate reductions and in some cases even exited leases.
But when it comes to managing spend, Aarish emphasises the value of scrutinising every single outgoing – and confirming beyond doubt that they are essential. The smallest expenses add up, and you can only figure out which ones you should keep or alleviate by checking your cash flow line by line.
EmergeOne have been paying close attention to acquisition costs across the businesses they work with, as well as lifetime value, revenue and customer churn. Depending on the business, they might look at other metrics, but these are true for all of them.
And all these costs are related to how much cash is coming in and how much cash is going out. They’re not as concerned with monthly recurring revenue (MRR) or annual recurring revenue (ARR) – important metrics ordinarily – as they are with cash flow movements.
Knowing which cash expenditure to reduce will naturally vary from business to business. But Aarish has seen a reduction of a few of the same costs in different clients, starting with software services and marketing.
Several clients had been using multiple video conferencing accounts, for instance. If one is enough, they’ve reduced them to one.
Marketing’s another area which has taken quite the hit during this pandemic. Customers are less inclined to buy, so businesses are spending less on acquisition spend.
These two expenses are at the top of the list. But businesses are also looking more closely at headcount, and all of their spend in greater detail.
COVID-19 has affected EmergeOne clients differently. Some have had to put staff on furlough, or make salary cuts. Others haven’t had to make those decisions about their headcount.
Either way, they’ve been transparent with their teams to make sure everyone was pulling in the same direction. In a time of crisis, leaders should be as honest as possible with employees about the reality their business is facing – where it is and where it’s headed.
Some industries will suffer more than others, but recovery isn’t going to happen quickly. Teams will have to stick together to succeed, and for that they need to trust the people at the top. It’s also a sign of good leadership.
Knowing where to spend to survive wasn’t just about adding layers around spend for Aarish’s clients, but overall increasing scrutiny over spend. It was about looking at budgets time and time again, and having important discussions about them.
Companies put in place systems for purchasing and procurement where necessary, for instance using an expense budgeting tool or virtual card systems. These are huge because they give a business more control over spend without needing someone to waste time managing those outgoings.
It’s also about empowering people and not needing to micromanage them, allowing them to do their work while keeping an eye on company money. It’s why access to tools that offer these controls is more desirable than ever.