What is EBITDA and Why Does it Matter to Your Software Development Company?
November 18, 2020
As you can see, growing your EBITDA will result in a higher multiplier and create exponential growth in your company valuation. Consequently, any “investment” you make in better understanding and increasing this number is a good one.
Considering the Big Picture
It’s important to note, however, that while EBITDA is a useful financial measuring stick, it shouldn’t be the only indicator you monitor. Tracking and managing other numbers like cash flow, debt levels, and expenses are important and should be considered when looking at the larger financial picture of your firm.
One of the major benefits of using Factor is that it enables you to view many key performance indicators (KPIs) simultaneously. Metrics like gross margin, realized rate, and achieved multiplier are always visible to inform daily operating decisions, but they are also essential in increasing the same variables that will increase your EBITDA. Being aware of these numbers ensures that you understand the firm’s current financial status as well as the levers to pull to get to where you want to be.
Moving Beyond Keeping the Lights On
Depending on the stage of growth your business is going through, the main focus may currently be “keeping the lights on” and getting enough work coming in the door. In times of early and accelerated growth, it’s easy to ignore key financial indicators and just be happy that you have work to do.
But devoting some time and attention to understanding EBITDA and other financial metrics can be the first step in focusing your firm on the future. Factor provides the framework and tools that can help your goals evolve from completing projects to maximizing profitability.
Identify The KPI's That Matter
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