Too often, NYC entrepreneurs fall victim to the idea that success and sales should be measured through monthly revenue rather than through leading indicators of progress. This can have terrible consequences for a small business CEO and their future, but luckily, it can be easily resolved through the measurement of various specific indicators relating to your industry.
In my own experience, before Vistage NYC, I found that my business was suffering because I didn’t measure its performance with a key metric. However, I learned from Vistage how to become a successful CEO, and this meant creating accurate, successful measurements to predict what the future would hold for my business. What can be most helpful to a CEO is getting ahead of the curve and figuring out where you can improve.
At Vistage NYC, we like to say that “you can’t manage what you don’t measure.” It is crucial, for this reason, to measure the correct things. That’s why the best way to improve sales is by measuring leading indicators in respective industries.
While it is true that there are typically multiple factors that influence the individual success of a business, most successful businesses boil down to one variable or one leading indicator that demonstrates what a business is doing correctly.
Here are some examples of variables or the leading indicators that affect a company:
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For a business:
- Number of telemarketing calls or email hits per week
- Number of new customers per month
- Number of qualified leads per week
- Number of proposals per month
- Number of bids submitted per month
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For a manufacturing company:
- Number of new products introduced per month
- Number of distributors or dealers per month
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For retailers:
- Number of transactions per day or per week
- Number of new customers per month
- Number and quality of point-of-sale encounters
- Number of referrals per week or per month
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For a distributor:
- Number of new customers per month (and what causes this)
- Percentage of repeat customers per month (and what causes this)
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For a restaurant or new business:
- Number of referrals
- Number of national television or radio advertisements
- Number of repeat customers
- Wait staff and chef performance
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For another business:
- Number of direct mailings
- Number of ads
- Number of internet hits
These variables can reveal tremendous amounts of information to a CEO or Key Executive and help them to predict future patterns of business, including regarding sales.
Another important system is something we call the Seven Dimensions. The Seven Dimensions includes measuring categories of finance, growth, people, quality, service, compliance, and community. Our system is separated into these seven because they have proven to be the most indicative of individual levels of performance for a business.
To evaluate the metrics within each of these categories and apply them to your own business, you can hold a weekly management meeting. These meetings are designed to help organizations and teams stay focused, accountable, and productive.
In addition, Chris Comeaux, a successful CEO, advises leaders to use what he calls the Prow of the Ship questions, which can help predict future patterns and areas that need improvement. Some examples of these types of questions include asking about the spirit of the workplace as measured by the minds and hearts of the employees and clients and asking about the quality of the people coming into the company as compared to the quality of people leaving.
Making sure to ask these questions on a consistent basis ensures that you can look back at previous answers and compare them to where your company is now. This makes it easy to track patterns of leadership and progress. It is important to ask these types of questions in order to manage not only future success but current progress.
Another useful tool for measuring is the Trailing Twelve Month Chart or TTM. This was conceived by Kraig Kramers, a former Vistage expert speaker, and CEO of multiple companies. TTM can be applied to any indicator in order to give yourself a clearer view of what is going on in your company, both presently and in the future.
What’s unique about the Trailing Twelve Month Chart is that it includes the consistent factors that really affect a business. Regular monthly sales charts can include all sorts of factors that differ, such as holidays and length of the month, which can make it difficult to accurately track your business and determine what can be attributed to the business itself, as opposed to seasonal changes (see below examples of actual sales compared to the TTM). The TTM tracks data in equal blocks, clarifying the changes in ways that can be easily interpreted.
While these trends may be either positive or negative, it is important to recognize them quickly in order to implement the necessary changes. I think of a quote my grandfather used to say, that “the good news is to discover the bad news early,” which can be applied to this method of using different indicators to track progress over time.
Members of our Vistage business groups often share their Trailing Twelve Month Charts within our Vistage meetings, which can lead to insightful discussions as our members analyze their trends as a collective.
A member of Kraig Kramer’s Vistage group, Barry Mirkin, described the perks of the Trailing Twelve Month Chart, stating that “the greatest killer of business is the lack of responsive tracking, and, in turn, lack of anticipatory action.”
Like my grandfather, Barry Mirkin understands the importance of accurate, cohesive tracking and what it can mean for a business. The purpose of the Twelve Month Chart is that it is easier for CEOs and Key Executives, especially those within the Vistage groups, to see how another Vistage member is really doing and help them get ahead of any possible challenges their business may be facing.
Once a Vistage leader is aware of what causes their sales to rise or fall, they can anticipate future patterns easier. In my business specifically, the Trailing Twelve Month Chart and its accurate data tracking helped me realize that my revenue correlated with the proposals that were sent out.
You can use the charts and the leading indicators to track various factors and determine future patterns to figure out what factors affect your own business. In other words, what can indicators show you about your business for both present and future success?
Bottom Line
There are many variables that affect a business, but the reality of the industry is that you can use leading indicators specific to your business rather than monthly revenue in order to determine your sales. Once you determine the variable responsible through accurate tracking, you can use it to your advantage and implement positive changes to your business.
It is crucial for a business leader to be aware of all of the various factors that can affect their company, but by utilizing the resources available to you, there is no reason that a CEO, Key Executive, leader, or entrepreneur can’t make the necessary changes.
