As CFOs continue to deal with uncertain economic conditions, “ruthlessly prioritizing,” is a phrase you hear a lot, said Aneal Vallurupalli, CFO of Airbase – the San Francisco-based spend management platform. 

Between higher interest rates and market volatility, there are cross-currents of more restrictive access to new capital and a slowing of demand forcing businesses to reevaluate their priorities and take a harder look at their management teams. 

Evaluating the public market and understanding what it is saying to private companies in terms of priorities is key to best funding growth in this environment, according to Alex Clayton, general partner at Meritech Capital who spoke in Airbase’s most recent “What I Wish I Knew” series.

Algin on metrics: 

“What the public market is saying is that businesses need to align on both growth and efficiency,” said Clayton, adding that the days of a growth at all costs mindset are gone. 

“We used to be in a time where management teams were all about growing the top line and this was a well understood concept because the demand was relatively stable,” he said. 

Since demand is so uncertain and will continue to be for the foreseeable future, Clayton said he advises his companies to look at metrics that are easy to understand across the business, and not just within the corporate finance team. 

For example, looking at the annual renewable revenue per full-time employee, which allows you to gauge the impact that your headcount has on your overall long term health as a business, is a good way to get the whole business on board and aligned with goals for the week, month, quarter and year, according to Clayton. 

“This has been pretty successful in some of our companies where the entire business can understand and appreciate efficiency,” he said. 

Another important metric to align on in order to balance growth and cash flow are value based metrics, said Vallurupalli. 

One example of this is seen with Facebook: “Facebook figured out that knowing that someone who referred the product to a friend in the first seven days of use was going to be a value user,” he said. 

Knowing when certain data points can turn into indicators for the overall health of the business is key, and this is reliant on a clear understanding across the finance, data analytics and marketing teams, according to Clayton and Vallurupalli.

Knowing when to say ‘No’: 

Sometimes knowing when you are going to say no is just as, if not more, important than knowing when to allocate time and resources, according to both Clayton and Vallurupalli. 

“When you think about prioritization in uncertainty, think of it this way: when am I going to say NO,” said Vallurupalli. 

Being ruthless in prioritization will help you start tying more indicators to your business goals as well as help you manage scope creep, he said. 

“This is a hard needle to thread,” said Clayton. “You can say you are going to ruthlessly prioritize in certain areas, but then how do you react to competitors?”

Saying “no” can be a framework for assessing the value of what it is you are looking to get out of business decisions, according to Clayton. 

“The key is to think of metrics as indicators that tell you what not to do. The reality is that hard questions are going to give you hard answers,” said Clayton.