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.
What we know from our work with A/E firms is that the “what” of the project manager role is simple; the “how” is incredibly complex. And because the job is so complex, firm principals are often hesitant to give PMs the responsibility and authority they need to be effective in their work. The work gets done, but the principal ends up being far more involved than they need to be because they are the ones who have the necessary information about the project.
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.
As we?ve learned from our work with architecture/engineering (A/E) firms, there are relatively few absolutes when it comes to operating them. But, here?s one: If you aren?t managing projects well, you aren?t going to be successful. And while there are many aspects to effective project management, spending less money than you have budgeted for them is a core competency for any firm.
The average architecture/engineering (A/E) firm has fewer than 20 employees. If your company meets that description, you know that to be successful, most of your team members have to maximize their billable hours. This doesn’t leave much time for managing the accounting side of the business, which can be a problem since the people tallying the numbers typically don’t have a financial background.