Financial Management

9The Role of Finance in Supporting Growth

Finance professionals are often viewed as impediments rather than contributors to growth. We often stand in the way with heavy process requirements and high-return hurdles. We have been trained to be risk averse and protect against the downside. While we should continue to be good stewards of the company's treasury and manage risks, we can actively contribute to efforts to grow revenue in support of value creation.

THE IMPORTANCE OF GROWTH

Revenue growth is the most important of the six drivers of long-term value creation, which is shown in Figure 9.1. While other drivers such as operating and capital effectiveness and cost of capital are important, there are practical limits and diminishing marginal returns for these drivers. Investors and owners place a premium on revenue growth and value those businesses at premiums over slower growth counterparts.

Revenue growth can also be projected and analyzed in terms of performance drivers. We can decompose expected or actual revenue growth into these drivers. While the drivers may vary from industry to industry, Figure 9.2 is a general representation for most companies. Drivers of organic revenue growth include:

• Introduction of new products and services.
• Retention and growth of existing customers.
• Acquisition of new customers.
• Develop new channels/markets.
• Generate market growth and competitive environment.

FIGURE 9.1 Value drivers framework.

FIGURE 9.2 Revenue growth drivers. ...