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.
Factor is 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.
If you’ve succeeded in growing revenue but aren’t seeing profitability keep pace, you aren’t alone. That was the position we were in for years, and it’s an issue for many companies today. In our case, we learned that relying on the typical, single-focus firm management systems for project tracking, resource scheduling, and other tasks wasn’t giving us the holistic perspective we needed to run our business effectively, grow profitability, and increase firm valuation.