Revving Up for a Bounce Back Year: Top 5 CFO Priorities for 2024

As the close of 2023 approaches, companies and their finance chiefs are keen to return to accelerated growth conditions in the new year. While the macroeconomic environment is far from certain, early signs point to strong potential for 2024 to be a bounce back year for maximizing valuation.

Timing will be crucial. Companies that step on the gas at the right time and with the right strategic plans to support the trajectory will be poised to pull ahead. With that in mind, here are five priorities that should be central to every CFO’s plans as we head into the new year.

1. Turning back on the growth investment faucet at the right moment. Assuming the macro environment recovers the way the Federal Reserve hopes it will, we’ll see interest rates tick down and consumer demand tick back up throughout 2024. Collectively, this will spur a shift from fixed income investments back into equities, especially among portfolio managers seeking growth companies.

This scenario represents the ideal time for companies to lift their moratorium on growth investments and begin funding big growth bets. Investments in areas such as transformative tech, sales force growth, and end market expansion, for example, can deliver incredible ROI for companies at a time when the economy is turning.

At the same time, disciplined funding will be key to achieving shareholder buy-in. CFOs and IROs should prioritize investor messaging that reinforces how their companies are funding transformative growth investments in a responsible way. Communicating close adherence to hurdle rates, accountability among project sponsors, and clear thresholds for knowing when to cut funding are a few ways to attract those investors who are eager to get behind companies fueling smart growth investments. Companies that can time things perfectly to deliver outcomes as the macro environment balances out will be well rewarded for the effort.

2. Pursuing M&A while valuations are down but rebounding. Historical data shows that M&A activity typically bounces back aggressively in the last few months of an economic downturn. Two factors fuel this phenomenon: most target companies have depressed valuations, and most acquiring companies are keen to accelerate growth and capabilities coming out of a slowdown. Subsequently, leading CFOs and their teams are shopping the market now looking for the right inorganic growth opportunities.

With lower valuations, M&A is top of mind for investors right now, too. Keep in mind that many shareholders will be more preferential toward deals largely or wholly funded by cash and equity, which allows companies to sidestep the issues of still-elevated interest rates and inflated cost of debt.

Of course, not all companies should, or even can, engage in M&A in 2024. It is important for companies that are staying on the sidelines to be prepared to explain why and to discuss their alternative approaches to growth. Non-acquisitive businesses often find that orienting messaging around internal growth investments can be equally as appealing to investors as M&A, especially when they deliver big results.

3. Achieving scale as top line growth returns. Given the environment, most businesses are running leaner today than they were 18 months ago. Whether companies cut selling, general, and administrative spending, capital expenditure investments, research and development funding, or costs in other areas, there is room for the metaphoric belt to loosen in a more growth-oriented environment.

For companies that want to accelerate top line growth, it will be critical for CFOs to stay hyper focused on messaging around reigniting investments in the business in order to scale. Businesses that lack technology, infrastructure, or appropriate headcount will encounter significant hurdles if top line growth outpaces internal investments at too great a pace. So, it will be important to reassure investors that the business is setting itself up to fully support the growth it is pursuing.

In particular, technology investments are often viewed favorably among investors. Such investments allow efficient growth without significant ongoing costs. While it may seem overly granular, shareholders appreciate hearing details about ERP implementation, AI enablement, and process automation, so don’t shy away from tech talk, especially in the context of scalability.

4. Consistently engaging current and potential investors. If the economy balances out, investors will come flooding back into equities. In fact, hedge funds—often the canaries in the coal mine signaling where markets are heading—have already been piling into equities over the last couple of months. Further, active stock picking is back on the rise, meaning predictable fund flows are a thing of the past. Together, this could mean a lot of companies will see large scale turnover in their shareholder bases.

In this environment, there is both an opportunity and a need for ramped up investor engagement among management teams to make a differentiated case for why their company is an outperformer in a sea of rallying stocks. Further, there is a direct correlation between corporate access and the accuracy of consensus. Thus, heightened investor engagement can also serve as a useful tool in managing expectations that the company can continue to deliver against, especially among a shareholder base that includes many investors new to the stock.

For all these reasons, an investor day with fresh long-term targets and a credible growth narrative will be a must for many companies. Because investor days represent the ideal time and place to unveil strategic plans and financial goals, CFOs should rightfully be lobbying for a mid-year event to dive deep with analysts and detail their trajectory forward.

5. Building a foundation for audit-ready ESG data. While CFOs are eager to deliver top line growth, they also know that compliance cannot take a backseat. Whether they fall into the believer or the skeptic bucket, CFOs across the board are gearing up to face new regulations, which impact companies’ ESG disclosure requirements.

Public companies in the United States are impatiently awaiting rules from the Securities and Exchange Commission, even as regulations from California and the European Union have escalated compliance deadlines while putting ESG on private companies’ radars. Collectively, businesses are approaching a regulatory environment that touches greenhouse gas emissions, climate risk, cybersecurity, human capital management, human rights, and more.

Given that the most prominent regulations will likely not take effect until 2026 and beyond, thoughtful CFOs are treating 2024 as a staging area. This is the year to begin establishing data collection processes, developing internal controls, and testing out reporting capabilities. For many companies without existing ESG programs, this exercise in testing the waters will be daunting. Developing audit-ready ESG reporting capabilities is no easy task, and CFOs and their teams will need to stay vigilant about making process and following a climate-reporting gameplan.

Tell a compelling growth story

Companies with growth on the agenda will need to carefully communicate the nuances of their strategies with investors while continuing to give the right attention to compliance issues and disclosures. A refreshed story will be key to keeping investors on board for the exciting journey ahead.

Need help executing against strategic and messaging priorities? Give us a call to see how Riveron’s strategic communication experts can assist with delivering the right messages, in the right places, and the right times.