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Moving to Metrics: Using Factor To Guide Business Decisions
November 7, 2019
We’ve blogged previously about what Factor is. It’s a firm profitability tool that gives you all the tools you need to manage your firm but with a focus on metrics that empowers you, at the same time, to grow your firm. But many companies that are considering Factor want to know the backstory — in other words, not what Factor is but why Factor is. We love getting that question, because the people who ask it already have an awareness of the importance of monitoring the right metrics and are taking steps toward more profitable operations.
“Aptera, We Have A Problem.”
To explain why we developed Factor, we need to turn back the clock. We founded our software development firm, Aptera, 15 years ago. We had big long-range plans for creating a world-class company. But, like all agencies we had bills to pay, which meant we had deals to close, work to perform, customers to keep happy, a reputation to build, etc. In short, we were busy. Very, very busy.
"Our revenue and our company had been growing steadily, but we couldn't say the same about our profit margin, and that was a concern."
If you operate a small or midsize agency, you can relate. We won’t go into all the details — late nights, lost weekends, significant mistakes (aka “learning opportunities”), tremendous successes — but suffice it to say we spent our waking hours heads down and working hard. That effort paid off, and finally we reached a point where our management team could step back and take a more “big picture” look at our agency.
In particular, we focused on profitability. Our revenue and our company had been growing steadily (we’ve gone from two employees to nearly 100, as just one measure of this growth), but we couldn’t say the same about our profit margin, and that was a concern. When you have that kind of realization you can either ignore it and keep your eyes on making payroll and paying your bills, or you can take action to understand why profitability is lagging and develop a strategy for improving it.
We chose the latter approach, and through some self-reflection, here’s what we learned:
● We had invested in the typical tools for handling our operations (project management, resource scheduling, time tracking etc.) but they didn’t seem to be helping us be more profitable.
● The standard accounting practice of focusing on increasing revenue, controlling expenses, assessing profitability at the end of the fiscal year, and hoping course corrections would have a positive impact in the year ahead didn’t work for us.
● Our mindset that we were “too busy working on projects” to deal with growing our profitability was both incorrect and unhelpful.
● With the right technology, it’s possible to expand an agency and improve profit margins simultaneously.
Going Beyond Your “Gut”
To sum up all the insights we gained from assessing our operations, we discovered that even though we were using the popular business management tools, any efforts we were making to operate more efficiently and increase profitability were based solely on “gut feel.” For example, we hired additional team members when it seemed like that would help us be more successful.
What we came to recognize is that the more effective approach is to let the numbers drive business decisions, with hiring being just one of many choices that benefit from a more analytical approach. This new perspective was first explored by our company’s leaders and then we began asking our managers to adopt a metrics-first approach to operations. We gave them a limited number of key indicators to focus on so they could quickly determine how to impact them and drive up profitability.
Then, as this new strategy proved successful, we knew we could amplify its impact by giving our teams a powerful system with the operational functionality they needed along with the business guidance we were missing. The result was Factor, a new take on firm management and profitability that has been at the core of our company’s success ever since and that is now available to you.
Get on the Path to Higher Profitability
The first step in streamlining your operations and achieving your business goals is learning to look at profitability differently. Get started today!