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by neurotixz
4325 days ago
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Thanks for the reply, which business fields is this experience coming from? I could be biased by the industries I worked in (telecom, engineering, banking), there was a constant push to bring down opex spending, by squeezing suppliers on maintenance fees, reducing headcount and improving efficiency (especially in IT). The target is recurring costs. In those businesses capex looks good in annual reports as they tend to show investment in infrastructure, security and business support tools and software (we invested X$ to improve our telecom infrastructure, call center or any other field of the business). It shows a willingness to stay current, ahead of competitors. It just shows that knowing how your potential customer are structured is important. Especially for large enterprise customers. Your business model needs to follow those trends. |
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Boards are very happy demonstrating a desire to achieve strategic change over the long term by making large capital investments. They have authority over the management accountants who can create a special budget for those exceptional items (and amortise capex over a long period of time), access to external finance if they need it, and responsibility for deciding exactly what their targeted return on that investment is and when its forecast to happen (sometimes after the fact...)
Much of the operational expenditure comes out of the budget of the responsible department which has annually or quarterly targets the Board has set for it based on existing recurring costs and revenues, so any new items of expenditure had best yield revenue pretty quickly or else cut costs in other areas. Of course, if that department truly believes there will be a longer term payoff they can always go to the Board...