Balancing act:
Can you save and spend concurrently?

Don’t let a crisis go to waste.

For the executive team at Mambu, a fintech company founded in Berlin and headquartered in Amsterdam, the war in Ukraine and rising inflation across the globe were wake-up calls that triggered two seemingly opposing impulses: It was time to take a closer look at spending patterns and a time to begin looking for opportunities to expand.

“I like to say, never let a crisis go to waste,” says Tripp Faix, who joined Mambu as CFO in May. “A lot of companies’ gut reaction to a crisis is to reduce expenses, but I also think there’s incredible opportunity in uncertain markets to scale and grow with customers.”

It helped that Mambu, whose SaaS platform offers core banking services to both financial and non-financial institutions like telcos and retailers, had a strong balance sheet, having raised €235 million ($237 million) in late 2021. Faix says the company is “very grateful” to have completed the round of financing last year, as the cash infusion “affords us a different mindset of growth and scale. We are in a position of strength and are grateful to our investors who trusted us with their capital to grow and scale this business.”

Faix’s conversations with board members have centered on being thoughtful in deploying some of that cash, whether by expanding the company’s go-to-market capabilities, attracting more customers, or hiring more engineers.

That doesn’t mean the kind of unbounded spending some startups indulged in during the easy money of 2021. “You still need to be very purposeful and intentional in your decisions,” Faix says. To guide those decisions, and to balance financial discipline and investment opportunities, he uses a clear benchmark: making sure Mambu’s expense growth rate stays below its revenue growth rate.

Adhering to that requires him to be nimble and rely on the levers that any good CFO knows to pull if financials come in either better or worse than projected. That could mean using Mambu’s pricing power thoughtfully to boost the top line as new products are delivered to customers, or reevaluating expenses like hosting, hiring, and customer acquisition costs.

Faix says this kind of prudence is not something to resort to only in hard times. “Throughout the company, we want to always be mindful and rigorous around investment discipline,” he says. “I don’t think that’s just associated with times of crisis.” Indeed, Mambu has long made financial discipline a part of the culture. It’s underscored by the company’s “one Mambu” value, part of which encourages everyone to be accountable for spending, whether it is for travel, new contracts, participation in a sales or marketing event, or anything else. Says Faix: “One way to think about that value is for everyone to spend the company’s money as if it’s their own.”

Staying focused on a North Star.

In uncertain times, the startup mantra of “grow at all costs'' begins to fall apart. So as the impact of rising interest rates expectations materialized in early 2022, Brex focused on developing a model for sustainable growth that focused on new key metrics, non-traditional avenues for growth, and people.

“It’s important to not get so far into the expense cutting,” says Michael Tannenbaum, Brex COO and CFO. “You need to protect long-term franchise value. You have to have some sort of North Star around what is the long-term metric.” That metric, Tannenbaum says, was net revenue, rather than gross revenue, as it helped to reinforce the goal of maximizing profit potential in the long run.

“How do you maximize that?” says Tannenbaum. “You’ve got to make investments to get there. It’s not just about tomorrow or next year, it’s about some future that’s further out.” To evaluate the investments, Brex prioritized spending against these new metrics, starting by refocusing on projects that drove ROI and fit with the company’s picture of slower, surer growth.

Informing the team: Be clear and open.

Another shift has centered on new ways to generate growth. For instance, the same forces that made borrowing more expensive — higher interest rates — opened up a new opportunity: earnings from the money Brex had in the bank. “Now, it could be a needle mover, right?” Tannenbaum said. For a billion-dollar company like Brex, a 3% interest rate could translate into passive income that can help fund a new initiative.

To make sure employees weren’t blindsided by the subtle shift in priorities, Tannenbaum and others have made a point of communicating clearly, asking for feedback and being transparent about the reasoning behind some of their tough choices to redirect spending from some projects.

Tannenbaum says this is critical for employees who have been working on a project for a long time and may struggle to understand why it’s suddenly deprioritized. “It's not because people are heartless, it’s not because we didn’t know what we were doing before,” he says. “It’s just because things are different now.” That can go a long way toward making them feel supported rather than dejected, and instead focused on the success of the company.

Coping with rising talent costs across the globe.

With Qualfon’s workforce spread across 10 U.S. states and seven countries in Latin America and Asia, the global economic crisis amplified a perennial concern for the call center and business process outsourcing company: talent. “Our No. 1 challenge is the labor shortage,” says Krishnan Subramanian, the company’s senior vice president of finance. “Because of inflation, other companies are increasing their labor rates and are more flexible about people working remotely.” That made hiring and retaining workers harder and more expensive, Subramanian adds.

Qualfon’s approach to the talent crunch was multifaceted. The company raised wages to stay competitive. But to keep the wage hikes in check, it also devised cost-effective perks and incentives aimed at retaining employees, such as raffles with prizes, professional development opportunities, and flexible work-from-home policies. In India, where some workers faced long commutes, the company teamed up with transportation services to make it easier to get to the office. “Employees appreciated not having to take care of their own transport,” says Subramanian.

Qualfon also sought to offset some of the increased labor expenditures through a series of cost-saving actions, such as backfilling job openings with existing staff to limit hiring and consolidating vendors. It also automated time-consuming processes with new software platforms, Subramanian says. Finally, the company was successful in passing on some of the increased costs to its customers. “We were able to go back to our customers and ask for an increase in our billing rates,” says Subramanian. “Most of them were totally understanding and supportive.”

Creating a culture of financial discipline.

Talent costs aside, Qualfon has also been working to reinforce a culture of disciplined spending that’s rooted in a balance of empowerment and accountability. The company’s managers are given independence over budgets and are evaluated based on financial performance.

“I don’t tell my team members whether they can travel or not,” Subramanian says. “They travel only when they have to. That’s built into the culture.” Pay is heavily affected by managers’ ability to meet objectives such as revenue and profit targets and customer and employee satisfaction. “Their bonuses, which are a substantial percentage of their compensation, are tied to these metrics,” he adds.

Subramanian says Qualfon plans to approach 2023 with caution. The company has grown through a series of acquisitions in recent years. It is still eyeing opportunities to keep expanding through strategic mergers, but more cautiously than before. While its strong history with banks could help it secure lines of credit to finance expansion, banks have grown more cautious and borrowing costs are higher. And while raising prices has been an effective tactic, the company is now prepared to absorb some higher labor costs to keep its customers, who are facing financial pressures of their own, happy. “It’s a little scary,” he says. “The supply chain isn’t hurting us, but it’s affecting some of our customers. We don’t want to keep raising our prices, so our scenario planning is open to revenue being flat or even reduced in 2023.”