News & Updates

The Hyper-efficient Business Model

Yujie Z.
Yujie Z.
Operations

It’s often said that talent is more scarce than capital, which is why technology companies have spent the last decade pouring millions of dollars investing in their people. At Aptible, we also hold strongly to the belief that our people are our most valuable asset. However, we’ve taken a thoughtful and lean approach to maximizing the value of all of our resources.

Human Capital Efficiency — hire with the intention of growing your business, not just growing your team

In the realm of SaaS metrics, there’s a metric called Human Capital Efficiency (ARR / average headcount). In layperson's terms, this is commonly known as the net revenue per employee, or simply how much each employee brings to the business.

At Aptible, when we say we’re a team of 20 operating as a team of 100, we don’t mean that each person does the work of 5 people. What we mean is that each team member generates the approximate value of 5 team members. Aptible is profitable, with a lot of revenue and an infinite cash runway. This makes us resilient during tough times and allows us the freedom to build, take risks, and seize opportunities for growth. We are fortunate to be in this position because we’ve been thoughtful and deliberate with our resources - whether it’s financial capital or human capital.

As much as we invest in our hiring, even a small number of new hires is significant to us, because of the high expectations we have for each new member. When we consider our human capital needs, we start from first principles: what resources do we really need to build, maintain and grow our product for our customers?

When we feel the urge to hire, we ask ourselves a couple of questions:

  1. Is the purpose of this hire to move faster in building product, fill a necessary skill/knowledge gap, or is it to seemingly make our lives easier? (e.g. we do not have a product designer vs. we need an additional analyst on the team)
  2. If the latter - what’s the problem or pain point creating the need for this hire? (e.g. we have too much work on our plates)
  3. Is there anything we can automate, optimize or prioritize to solve this problem before resorting to hiring?
  4. If we were to invest in automating, optimizing or prioritizing our time, what are we sacrificing?

It sounds tedious, but in practicality, this model of decision-making doesn’t slow us down in hiring - rather, it gives us clarity and validation over the importance and value of each new role we create, and ensures they will have the best opportunities to thrive at Aptible.

We care about operational infrastructure

In addition to being thorough with our human capital, we manage our financial capital by investing significantly in our financial reporting (past and present), forecasting, and modeling (future). But each of these finance processes doesn’t exist in a silo. They’re shared openly with the team and used to align us with value creation.

Financial Reporting

Twice a month, on the 1st and 15th, we share financial updates internally:

  • On the 1st of the month immediately following a month-end, cash balance, cash burn/flow, as well as revenue growth are reported.
  • By the 15th of the month, a full month-end business report is shared, which includes our full month-end accounting close, revenue, profitability and cash projections for the next month and quarter, go-to-market progress, and a deep dive into our margins, growth trends, and projections to actuals.

This routine process is important to our business for a couple of reasons. Firstly, executives are empowered by never having to make decisions blindly with no expectation of how those decisions will impact our financial stability. By having two touch-points each month on financial data, we avoid unnecessary surprises from unforeseen changes in our operations and customer base.

Moreover, team members are never kept in the dark about significant changes to our financial performance. If revenue is declining as a result of macroeconomic setbacks, this information is shared with the team in a way that allows us to come up with solutions together. If cash or profitability is suffering, we immediately come up with an improvement plan for teams to work on in the next month or quarter. For example, when we noticed a slow but steady increase in our infrastructure costs, Ashley (VP of Engineering) and Alex (Site Reliability Engineer) were looped in and promptly worked together on margin improvements before the costs escalated to having a noticeable impact on our bottom line.

Forecasts and Modelling

We built our own financial model in-house because it’s the best way to get the exact level of granularity and accuracy we need. Forecasts are updated during each month-end close, and model assumptions (e.g. our hiring roadmap, customer churn and contraction expectations) are updated on a regular basis throughout each month as new information comes in. This cadence, combined with our reporting process, results in over a 92% average forecast accuracy of our cash, revenue and profitability. And the variances are almost always because we performed better than we expected.

Alignment matters

As a team member at Aptible, you can expect to hear and learn about financial metrics regardless of whether you are an engineer, designer, marketer, or any other non-finance role, because finance at Aptible is not just a cost-center that reports numbers. It is a function that uses metrics and data in order to align our team on how we should operate strategically. For example:

  • All team members know and understand net dollar retention (NDR), and how our customer experience function and product features contribute to customer retention, thereby increasing expansion revenue. We set NDR goals and prioritize product feature releases to hit those goals
  • We talk about model/market fit and leverage understanding our total addressable market (TAM) to align our product and engineering teams on the personas of customers we should build products for, and our go-to-market teams on what companies or audiences we want to target and generate awareness with.
  • By monitoring our financial performance and improvements in unit economics relative to our R&D and GTM efforts, we use this data to align on whether we’re focusing on the right areas of our business, whether our time and GTM efforts are paying off, how we should allocate our engineering resources and capital, etc.

This alignment is something that everyone on the team is involved in because the actions and impact of each person on our team affect our revenue and profitability, which directly impacts the value of Aptible. And because every team member receives an equity component in their compensation, we all co-own and benefit from this value-creation and success of Aptible. It’s just another part of what it means for us to take our seats at the table.

1 Based on 2021 KeyBanc Capital Markets survey results of 350 companies’ upper quartile (75th percentile) HCE of 226k per full-time employee.