While every business is unique, many go through three similar stages as they grow. It is a common misconception that these stages must be followed in a certain order to achieve success.
There are many ways to assess your company’s financial performance, profitability, and overall financial health. One of the most common is to look at EBITDA. EBITDA stands for earnings before interest, taxes, depreciation and amortization. In other words, it’s the revenue your company brings in minus standard operating costs like salaries. It’s helpful to look at this figure since things like interest, taxes, etc. are variable and can change over time.
Realized rate is total revenue divided by the number hours of work performed to generate it. The simplicity of that calculation and the positive impact that increasing the figure can have are two reasons it can be so valuable in helping you increase your firm’s financial performance.
Too often, companies that have the standard off-the-shelf firm management tools try to use all of the many metrics they provide to track, manage, and grow things like their revenue and profitability. That’s where we were many years ago — juggling dozens of figures without knowing which of them would have the biggest impact on our financial health.