Tracking the critical numbers and indicators in your business is one of the best, and most important things you can do as a business owner. What is not measured cannot be improved, but in keeping a financial dashboard that tracks core figures, you can carve a niche for your business that fosters a competitive advantage.
There are two sets of numbers that every business owner should keep and look at on a very regular basis: lagging numbers and leading numbers.
Lagging numbers, or indicators, are historical in nature and do not give much visibility to the business. Lagging numbers include gross revenues by day, week, month, quarter and year, gross margin; and net profit.
These are important indicators and all business owners should closely monitor them because they reveal a business’ overall trajectory and level of success.
On the other hand, leading numbers inform a business’ performance. Examples of leading numbers include:
- Money spent by clients per year
- Number of new leads and how they were derived
- Percentage of leads that converted to clients
- Marketing cost to attain leads
- Marketing cost per clients
- Projected revenues
- Projected expenses
Leading numbers give more insight into the business as a means of making good, day-to-day decisions. In other words, these are indicators of what is happening, magnified so you can clearly see and understand.