Amid ongoing economic volatility, and rising cost pressures, CFOs should evaluate four financial strategies to drive efficient growth, according to Gartner, a business and technology insights company.
A Gartner analysis of more than 1,500 companies across the S&P 500, S&P 400, and S&P 600 has identified 105 “efficient growth” firms that achieved 51% total shareholder return (TSR) premium from 2014 to 2024 by employing these four interconnected financial strategies. Gartner defines this efficient growth as the ability to simultaneously achieve above-industry revenue growth, margin expansion, and capital efficiency.
“Volatility and economic shifts make profitable growth increasingly elusive for most CFOs,” said Randeep Rathindran, Distinguished Vice President in the Gartner Finance practice. “To succeed, CFOs should try to emulate efficient growth companies by linking liquidity management, structural cost of goods sold (COGS), and sales, general and administrative (SG&A), and disciplined debt use into a self-reinforcing growth strategy.”
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Paying Suppliers Sooner to Boost the Bottom Line
“Counterintuitively, efficient growth companies exhibit a longer Cash Conversion Cycle (CCC) than their non-efficient growth companies,” said Rathindran. “While this may appear to be a weaker liquidity discipline, the underlying strategy is intentional.”
Efficient growth firms often intentionally expedite supplier payment and lengthen the CCC to secure favorable supply terms. This strategic approach balances working capital velocity with long-term cost advantages, especially for industries navigating supply volatility and inflationary pressures.
For example, a semiconductor firm agreed to shorter payment terms and paid premiums and deposits to secure semiconductor capacity for future growth, ensuring continuity in a market where supply constraints could derail revenue plans.
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Invest in Areas Competitors Can’t Copy
“Efficient growth companies are more successful than peers in lowering their cost of goods sold (COGS) as a percentage of sales and reallocating those resources towards value-driving areas, such as R&D, customer experience, or AI transformation,” said Rathindran.
Lowering COGS often involves divesting high-cost operations, consolidating manufacturing footprints to unlock scale efficiencies, and deploying advanced analytics and automation to improve throughput and reduce waste.
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Zero-Based SG&A Redesign
Efficient growth companies started the last decade with higher SG&A expenditure as a percentage of revenue compared to the non-efficient growth companies and control peers with similar revenue profiles. By the end of the pandemic, efficient growth companies had executed a significant reset, reducing SG&A from 20% of revenue in 2014 to approximately 15% in 2024 while other companies had reduced just one percentage point in the same period.
“This wasn’t a result of zero-base budgeting, but rather zero-based design – a fundamental rethink of SG&A function structures, processes, and teams in the light of AI-native workflows,” said Rathindran. “Significant structural changes included radical adjustments to corporate real estate footprints to reflect hybrid work patterns, selective adoption of AI for operational workflow, and headcount optimization informed by productivity analytics.”
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Intentional Debt Deployment
“Efficient growth companies consistently maintained lower Total Debt-to-Equity ratios than non-efficient growth companies throughout the period of this analysis,” said Rathindran. “However, low leverage does not mean zero leverage; these firms still carry debt-to-equity ratios of around 50%.”
While many CFOs rely on debt as a lifeline to cover operating shortfalls, efficient growth firms take a holistic view of capital structure, balancing risk and opportunity by deploying debt selectively for initiatives such as acquisitions, capital investments, or transformative projects: providing flexibility beyond the pace of organic cash generation and enabling swift action on high-confidence opportunities.
