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Your CFO Will Never Fund Your Digital Transformation Project

We are all selling to CFOs today—and need to avoid landmines when buying software.

It’s a scene that’s happened frequently over the past year: a dedicated team is tasked with leading their company’s digital transformation initiative, they have selected the best technology provider to deliver the needed upgrades, pricing, and terms have been agreed to, and at the last minute the Chief Financial Officer squashes the deal.

The team mandated with upgrading the company’s tech stack is left scrambling to understand how they can complete their digital transformation journey without their selected technology partner. Their company continues to struggle with outdated technology that does not meet the needs of their business leaders. And the technology provider is left wondering why a slam dunk deal fell apart for what seems like no good reason. 

This has become commonplace because CFOs are increasingly under pressure to rein in spending. Layoffs, budget cuts, and inflation-induced margin pressures are just some of the issues they are grappling with. But CFOs aren’t the boogeyman waiting in the shadows to take a sledgehammer to every purchase that requires significant upfront investment. They are the stewards of the business, ensuring the company will have the balance sheet to remain a viable, growing entity for years to come. 

When a CFO says no to a deal late in the negotiations, it’s usually because they don’t understand how the investment will pay off. Or worse, they understand the numbers but don’t believe them. If you are a technology buyer, you should consider your CFO a key stakeholder in the process and understand their decision-making process. This will help avoid any last-minute surprises and keep your deals on track.

Think like a CFO

You must understand the CFO’s world if you want to work with them effectively. Many CFOs will approach an investment by asking three questions:

  • Do we have the cash to invest in a project?
  • Is the investment ROI-positive?
  • Should we invest our limited resources in a different project with a higher ROI?

The first question is fairly straightforward. Is there enough cash on hand to invest in new technology? If not, the company is probably in bad shape and you should consider leaving. This is different from a company clamping down on expenses to maintain a strong balance sheet. That is actually healthy because it provides more cash on hand to invest when the time is right.

That brings us to the second question. ROI, or return on investment, is a fairly straightforward concept that can be difficult to quantify because it relies on forecasts that may vary by person or department. In its simplest form, ROI asks how much profit (more revenue and/or less cost) an investment will generate. If the project generates more profit than the investment, it is ROI-positive and worth consideration. If it’s ROI-negative, the project should be shelved.

The third question is trickier. Opportunity cost represents the profits a company could earn if it invested the same amount in a different project. CFOs looking to maximize efficiency and returns will always ask if the money could be better spent elsewhere. 

Technology buyers should partner with their CFOs to understand how their finance teams are approaching these three questions. They should understand how much money is available for technology investments, what other investments the company is considering, the expected ROI of the projects, and the criteria or framework used to determine if a project is ROI-positive. 

Understanding this lay of the land will go a long way toward getting your CFO’s signature on the bottom line.

Digital transformation is the means, not the end 

Notwithstanding all of this, one of the biggest problems CFOs have with digital transformation is that they don’t understand how the company benefits from the investment. That’s because digital transformation can be a nebulous concept that means different things to different people. 

Many companies recognize the pain of outdated technology and manual processes—that’s why many begin their digital transformation journey in the first place. But investing in technology for the sake of updating your IT stack is not a winning strategy. It’s a surefire way to run into that CFO buzzsaw because they won’t understand the economic benefit of the investment.

The most successful digital transformation strategies tie IT investments to a business outcome, which in turn can be used to calculate the ROI of that investment. Based on our customer successes, Propel recommends the following five-point process that works backward from a common business goal:

  1. Start with the desired outcome for your customer, patient, or buyer. 
  2. What are the products and services that will deliver that desired outcome?
  3. What teams and people are needed to deliver those products and services?
  4. What processes are needed to support those teams?
  5. What technology is needed to make those processes a reality?

Note that technology is the last of the five bullets. We know from Gartner’s 2022 survey on the “CFO Perspective” that the priority on “products and services” grew by 161% among CFOs year over year. CFOs know their companies need to build products to grow revenue, and they know those products require technology to be successful. But technology is just the enabler for the team and processes needed to deliver the products and services that buyers value.

Technology should never be the first step, because you will miss the real value of your investment. 

The desired outcome for your customers will allow you to determine if there is real value at the end of the digital transformation process. And connecting those dots will help get your CFO on board and ensure their signature when the contract is ready.

In the current environment, we are all selling to the CFO. Just remember that CFOs are key stakeholders who simply want to do what’s best for the company. Working with them from the beginning and understanding their world will make your life much easier—and ensure your digital transformation project kicks off and is completed on time. 

For a comprehensive guide on broaching this discussion with your CFO, take a look at The Proven Framework for Business Transformation.

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Post by
Dario Ambrosini
CMO, Propel

Dario is a senior marketing and operations executive with 10+ years of venture-backed SaaS experience. He has held roles in enterprise and small business marketing at Manta, Switchfly, Yahoo! and American Express.

Fun Fact: He grew up in the United States and Italy.

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Dario Ambrosini