When I’m mixing and mingling with other business owners, one of the common things I hear is: I don’t really understand my numbers. I have a passion for my business, I love my customers, I love my product or the service I provide. But when it comes to the numbers, I have this little sort of queasy feeling down here and that’s for my accountant and someone else on my team to worry about. I’ve got to tell you this has got to change. If you really want to own being a business owner and you really want to experience success in your business, the one thing that you really have to understand is the numbers that drive your success. So I’d like to take you through Leading Indicators and Lagging Indicators and how understanding them and applying them to your business can really help you build momentum.
So first let’s talk about Leading Indicators. Leading Indicators are numbers that indicate what your future success will be. So we’re talking about the future here. We’re talking about numbers that indicate the level of the activities that you have to do that will lead to your success. For example, my business is a car dealership. One of the great Leading Indicators for us to sort of see if we’re on track is: how many test drives are we doing? So we’re not talking about sales right now and how many cars we sold, we’re talking about how many test drives have we done today and if we’re tracking that test drive number, that’ll help us to know if we’re on track for our ultimate end goal of how many cars we sold. Does that make sense to you? Another idea or way of looking at this is the number of website visitors. So, if you’re in a business where you’re selling an online experience service or a product, understanding your website metrics are going to be very important to you and understanding the ones that lead to a sale or Leading Indicators, are going to be very valuable. So that could be website visitors and that’d be a good indication of: do you have the traffic on your website that’s going to eventually lead to the outcome that you ultimately desire, which is perhaps a purchase from your website? For businesses that are more industrial or commercial focused and have a larger sort of a longer time frame in terms of selling something, often the number of proposals that you bid on or the number of RFP’s that you respond to, are going to be an excellent Leading Indicator of the future health of your business. My challenge and encouragement to you is to figure out what is that one leading indicator that would, if you understood it, and if you measured it, and monitor it, would be able to drive the outcome that you so desire.
Next is Lagging Indicators. This is the thing that most of us are more comfortable discussing because it’s a measurement of something that happened in the past or an activity that happened in the past. This is recording your sales. When you ask your account, “well how did we do last month?” And they tell you, “well you sold you know this amount of dollars in sales or you sold this number of products or you had this amount of net income.” Those are all Lagging Indicators. There is no rewriting history here, unfortunately. You can’t go back and redo the month before, but they’re important to know. And again, my encouragement to you would be to figure out what is that one Lagging Indicator that is most important for you to keep an eye on that most accurately sort of, depicts the success that you’re currently driving for in your business and make sure that you’re able to track that, on a time interval that makes sense for you. Perhaps it’s monthly, perhaps it’s weekly, whatever makes most sense for you in your business.
Getting a really good understanding of Leading and Lagging Indicators can really help you to drive the results that you’re searching for in your business. If this video resonated with you and you found value in it, perhaps you know someone else that would also benefit. Consider sharing this video with them or tagging them in this post.