Every company has resources to allocate, but not every company allocates them efficiently. On this episode of the MarketScale Retail Podcast, Mike Murphy, Chief Financial Officer for Personiv, sat down with host Sean Heath to break down a few ins and outs of intelligent resource allocation.
There are three primary areas in which a company generally spends its resources: customer acquisition, product/service delivery, and G&A (General and Administrative). They are not of equal importance, explained Murphy.
“When you’re looking at the G&A function of the business, that’s generally where I want to spend the least amount of my money. If I can spend more money acquiring customers and more money delighting my customers, the better off overall I’m going to be, in terms of the value I’m returning to my shareholders,” he said.
The size and development stage of a company is, generally speaking, a contributing factor to the functional efficiency of its allocation practices, said Murphy.
“It’s the companies that are smaller or kind of earlier stage, where they’re starting to win customers, they’re starting to get growth. That’s an area where you can just imagine, they’re throwing money at different initiatives to try to grow the business. They continue to put money in areas that may not be producing the ROI,” he said.
Murphy also described that the way to leverage the most valuable resource any company has, good employees, is by using resources to free them for other tasks.
“What you’re basically doing is kind of flipping the switch a little bit. You’re trying to empower that person by providing some less expensive resources, that can do the transactional work so that he or she can be spending their time focusing more from a strategic perspective,” Murphy said. “That’s what a good CEO, and that’s what a good board is going to be looking for: somebody who is able to deliver that.”
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