The Transformational Power of "One Metric That Matters"

June 15, 2016 Andy Haynes

Growing a successful company can feel like pushing a boulder up a hill. But successful software development companies shine a light on how to do it well. The key? Pick one performance metric. Use it to focus the entire firm in that one direction.

Here’s how it works.

The Antidote to Complexity

In the software development world, business metrics are looked at through a unique lens. They adopt a performance focus. Sometimes called the OMTM—the One Metric that Matters approach.

The idea is to look past all of the data points you normally gather. Reduce complexity by keying on only one metric, and focus the entire firm on it. For instance, a firm may identify acquiring new clients as its biggest challenge. So they set a target - say it’s 20% more clients. No matter what, they strive to reach that target. Everyone mobilizes around the growth goal - marketing, sales, product.

Your firm may not have defined marketing and sales departments. But the general principle holds. Your accountants, bookkeepers and staff should all be committed to solving your biggest issue. For instance, your bookkeepers can look for referral opportunities when talking to current clients. They can also look for ways to work more efficiently. Which frees up time so they can take on new clients. Pick a metric and measure it.

Which metrics matter?

Choosing the right metric for the moment depends on the age and stage of your company. Many firms run on a model similar to a SaaS company. So similar things would be important. But your vision for your firm may be different. So think about what is really crucial for you in this stage of your business.

Efficiency? Consider metrics like turn-around time. Number of touches on a client file per month. Revenue per employee.

Expanding your client base? Consider new client growth. Leads. Sales calls. Referrals and introductions.

The bottom-line? Target profit per client. Gross margins. Number of services per client.

Revenue Growth? Consider revenue. Client retention. Revenue per client. Lifetime value of a client.

Attack the metric

Once you have chosen the metric you will focus on, the question is how best to tackle the problem. It all starts with setting a firm target for success. This goal can be an absolute number, like a dollar-figure. Or a percentage improvement.

Once you have your target, identify the strategies you’ll put into action to get you there. Don’t forget every part of your firm will be engaged in this process. How can accountants, bookkeepers, marketing and admin all contribute?

Finally, make sure to share your target and strategies with all stakeholders. And clearly assign responsibilities.

When to pivot to a new metric

Going forward, the key to success is to keep a constant focus on your metric and your performance against it. Monitor results daily, weekly, monthly. Keep the entire team in the loop with regular updates and feedback. As you go, reflect on what is and isn't working. Adjust your strategies and activities to compensate.

Keep in mind that this is an iterative process. Say you’ve acquired the new clients needed to hit your goal. Success! Except now you have a new challenge. Some of those new clients will have great client experiences. Some less so. So now you pivot. Choose a new performance metric to focus on. Maybe client churn.

Wrap up

To boost your business growth take a One Metric that Matters approach. It’ll give you and your entire firm a tight focus on fixing the largest issue in your business. Identify what the key metric will be. Set targets and define strategies for hitting them. Then monitor and adjust as you go. And when you hit your target, pivot to a new metric and a new challenge.

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