Brex x Rippling | Creating a financial checklist for your office’s reopening
As states and businesses begin to reopen following COVID, the path to recovery is uncertain and employers are faced with many new financial decisions. Rather than a linear process, navigating these decisions can feel like navigating a maze. Key considerations include office leases, headcount, runway, and realignment around growth and goal setting. Brex CFO Michael Tannenbaum and Rippling CFO Adil Syed recently discussed five steps finance professionals can take to help navigate the imminent economic reopening—whether returning to the office or remaining remote.
Be conservative in your financial planning, and protect your company for the long-term
The world is beginning to emerge from months of uncertainty, and companies are grasping for reassurance—but hoping for the best may not be enough. Prudent and proactive iterative financial planning is now a necessity, and businesses that fail to shift gears from growth to cost cutting and retention will be left behind. Depending on your industry, product, and financial robustness, playing a defensive game while positioning yourself to be offensive when the time comes can pay off in spades. Lean into austerity measures, even as optimism becomes the norm, and use this down time to pressure test the resources needed to achieve your year-end objectives. This will teach your company to plan for the hard times, while remaining poised to capitalize upon recovery when it happens. Seek out flexible solutions that can be undone or modified easily as you pivot, create a compelling story for your business, and ask yourself what you need in order to gain traction with customers and investors when the market re-opens. Until there are clear signs that the economy and fundraising have resumed, remain financially conservative—and be the bulwark in your organization against aggressive spending.
Rely on data to inform your decisions during a crisis
Long-term investment in a robust data structure will allow you to make decisions down the road about where to accelerate your business and where to cut back. Start with a commitment from leadership to improve data visibility, and help your teams understand the resources and priorities to achieve their goals against established metrics. Create a strong measurement framework and clear North Star Metric (NSM), set ambitious but realistic milestones, and measure progress against the data. Understand how the economic environment has impacted your NSM, and reassess Lifetime Value (LTV) and Customer Acquisition Cost (CAC) to make sure they still hold true in current and future contexts. Ensure alignment across functions so everyone is focused on the same goal, and adjust spending in light of reduced lifetime customer value. Use cost scenarios to chart out multiple paths, while acknowledging that those may evolve over time. Understanding customer and market dynamics and upleveling data visibility are essential to properly allocating capital in an uncertain environment.
Manage and optimize your P&L and cash balance sheet
When protecting your business during a crisis, P&L optimization and improvements to expense management tools are a straightforward and actionable first step. Review headcount needs and people costs, and take advantage of the remote reality to reduce spend and procure talent in other cities at a lower cost. Re-evaluate professional services and consultant agreements, and determine how—and whether—those agreements adequately bridge gaps between full-time hires in a cost-effective way. Streamline your expense management processes, and deploy new tools to improve vendor approval, cash flow visibility, and commercial contract review. Build in scalable expense systems now while teams have time to focus on optimization, and review those systems for overcharges or overlaps in spend. Look for opportunities to re-negotiate software and service agreements, pinpoint and minimize the highest monthly cost for SaaS applications and subscriptions, and tap existing vendors for new COVID-generated discounts. Outside of headcount, break down costs into three categories to identify potential cuts:
- Things you shouldn’t have been doing before
- Things that used to make sense and no longer do in the current environment
- Things that you can’t cut—or should spend more on
When making cuts, do so quickly, deeply, and deliberately to maintain team culture and morale, and ensure leadership buy-in on every business decision.
Find creative ways to increase sales and marketing efficiency
When emerging from an economic downturn, it is critical that companies re-evaluate their S&M strategy. Reviewing sales and marketing productivity with a frugal mindset will build a long term competitive edge. Assess each channel, and confirm that they still make sense in this environment—and will make sense in the future regardless of outcome. Consider the immediate and long-term spend impacts when deciding whether and where to cut, and don’t assume the present environment will last forever—for better or for worse. Uplevel customer communication, adjust creative messaging to reflect the circumstances, and use non-retractable OOH agreements to generate trust. Rippling and Brex both repurposed their OOH assets to convey a customer focus, reiterating their respective narrative shifts from growth to gratitude. If you can’t cut spend in this category, use it to set you up for success.
Review your office space strategy, and find ways to cut costs
The 11th Commandment is not Thou shalt be in an office. An all-in workplace concept has long been the assumption, but COVID has revealed that a physical office is not essential to company success—and may even be cost-prohibitive. In the context of financial planning through crisis, view the office as a perk, and consider its value relative to other more impactful things the company could offer in its place. Office leases represent roughly 10% of total business costs, presenting an opportunity for dramatic savings. For further cost-savings, access additional funds by re-negotiating your security deposit burn down and seeking out discounts and deferments. If you are uncomfortable with your landlord’s financial position, ensure you get your security deposit back to retain those funds. When deciding whether to return to the office or remain remote, consider culture, onboarding, roles, and office engagement, as well as acclimating new employees. The paradigm is shifting, and companies must decide where they fall on the spectrum. But whether all-in office, office-first, remote-first hubs, or all remote, don’t make drastic long-term decisions without considering all ramifications.
When deciding whether and when to reopen your office, consider the following financial items:
The Great Reopening is on the horizon, and it’s generating a lot of excitement—as well as concern. Scenario planning for your company’s future requires a suspension of your own beliefs about the macroeconomic environment in favor of deliberate decision making and conservative financial planning. No one knows what the immediate or long-term future holds, but with the right measurement foundations and creative problem-solving—and a handy financial checklist—businesses can set themselves up for success on the other side.
Brex is reimagining financial systems so every growing company can realize its full potential. With an innovative approach to corporate credit cards and cash management, Brex creates a radically better way for their customers to save and spend money.
Rippling simplifies HR & IT to manage your employees’ payroll, benefits, devices, apps, and more—all in one platform.
Adil Syed is the CFO of Rippling, where he leads business strategy, accounting, and investor relations. He was previously Head of Strategy & Operations and FP&A at Snapchat, and an early and growth stage investor at Redpoint Ventures.
Michael Tannenbaum is the CFO of Brex. Prior to Brex, he served as VP of Mortgage and Chief Revenue Officer of SoFi. He was previously a private equity associate at Hellman & Friedman and investment banking analyst at JP Morgan Chase.