Measure Twice, Cut Once: How data-crunching reduced my stress and doubled our revenue.

May 28, 2014 Mike Dershowitz

When MODsolar first began in my home office with one laptop and my pet dogs sleeping at my feet, the dogs didn’t really care very much about operational data. As with most startup companies, when you only have two or three staff members working together in the trenches it is difficult to be objective about what you are achieving. So how did we begin changing into a data-driven company and why is this important?

Through most of 2011 and 2012, the MODsolar team was focused on finding more customers and building more and more functionality into our platform. And we were pretty good at it. The problem was that we had no standard operating procedures and although we had begun to measure some things within the software platform, we had very little idea about what insight that gave us. As the company grew, things became a little chaotic. If you have ever been involved with a startup company, you will know that this kind of chaos tends to take up valuable brain space.

It was clearly a problem.  But how should we deal with it?  After studying the problem, it was clear that finding the right data, and being objective about what it told us, was the clearest path to really understanding our business.  But where to start?

To begin to deal with this problem, the first step is to build a set of numbers that will help you to understand your financial position. It is important to look at standard metrics such as profit and loss, but it is also valuable to consider more detailed budget outcomes. How many days worth of operating cash do you have on hand? What is your accounts-payable to accounts-receivable ratio? No matter how wealthy you are, if you don’t know the answers to these basic questions about your business, it can quickly become very difficult to operate, and very stressful for you personally.

Using these numbers as a base, the next thing that MODsolar began to measure was customer satisfaction. Depending on your product, this can be difficult because it may only be possible to measure this subjectively (i.e. did you client tell you they were satisfied with your work). In our case, because our product is software, we were able to get very quantitative, and one of the things we record every single week is the number of proposals generated by our platform. Our contract with our customers is to help them to close deals (since all closed deals begin with our customers giving a proposal to a buyer who wants to buy solar).  If we know that they’re always generating more and more proposals with us, then we know that we are fulfilling our promise to them and they will keep paying us.

Today, MODsolar has developed into a truly data-driven company. In addition to using data to analyze our finances and customer satisfaction levels, we now use numbers in every aspect of our daily operations. Everyone has two or three things that they need to keep track of. For example, our software development team measures hours spent on tasks, they count the number of errors that occur within the system, they measure how long it takes to fulfill a request to a browser a transaction when somebody clicks on a button in our software.

All of this, of course, is only a guide. Although there are some basic and extremely valuable metrics that every business should be looking at, each company is unique. In some cases, only you can figure out what you need to be measuring. Being flexible with these metrics is another key to data-driven success. Over time, your business will change and grow. The numbers that were vital at the beginning may wane in importance as time passes. Equally, numbers that you hadn’t even thought about before may become a central part of your data, and thus your life.

One important thing to note is that in order to effectively collect and utilize data, automating the process as much as possible is really worth thinking about. One of the ways that companies shoot themselves in the foot with their numbers is that they have a person copying data from one place to another. Every time you do that, you’re taking a risk that your numbers could be flawed. To combat this, we integrate as much as we can. Our software platform (that is our product) is linked with our CRM system which is all linked to our accounting system, and so on.

The key thing that I have learned over the last 3 years is that if you put some work into creating a set of metrics that are really effective for your company, it will help you to make objective, smart, data-driven decisions and free up your mind to move on to new opportunities for growing your business. I believe this has been an important factor in doubling our revenue last year and hopefully much more in the future!