Kayla’s simple decision process

Kayla is facing a decision that many CFOs encounter.

She is the CFO of a SaaS company and has to choose between two different projects: expanding the sales team or implementing a company-wide ERP system.

Both projects are solid.

The sales team expansion plan consists of hiring two full-time representatives. These hires are not the result of an impulsive decision: Kayla has been monitoring the sales pipeline for six months. The company’s Annual Recurring Revenue (ARR) has been growing slowly and steadily. More and more prospects started scheduling time for demos. Conversions followed.

The implementation of the company-wide ERP, on the other hand, will bring efficiency across the entire company. Procurement, operations, and accounting will be streamlined. HR, legal, and finance will be interconnected when an employee joins or leaves the company. Every department head will have a tailored dashboard. The software will save time and allow the company to take on more work.

Both projects’ cost of capital is the same. And both will add value.

It is expected that the sales team expansion can increase net cash flow by $100,000 annually, whereas the company-wide software will bring efficiency in the shape of not needing to hire more administrative people of $500,000 annual net cash flow.  

Kayla also knows that sales are more visible than efficiency. They will make her more popular, too. They will pop up in financial statements, sales reports, and the quarterly investor’s report.

But Kayla knows exactly what to do. Her decision is, believe it or not, easy.

She will decide in favor of the software, because it’s the decision that increases shareholder’s value the most.

Though, not the most popular is the right choice.

 “You will never regret doing the right thing”, she thought, and signed the ERP contract with a smile.