Are You a Windshield or Rear View Mirror Leader?

​​​With all the unpredictable things that happen in your business in any given week, it’s sometimes hard to keep your eye on where you want it to go.

There’s a way to create a guidance system or GPS that can keep your company (and your people) on-track when you get distracted by the inevitable fires that come along.

It’s done with reports. Nothing fancy,  business owners don’t have time for long winded over-complicated reports. All you need are a few easy to scan snapshots to keep your progress aligned with where you want to go. That being said, it’s critical that those reports be more like a windshield than a rear view mirror. Here’s what we mean:

I often see some type of tracking of "sales closed" or "last week's production" reports. And, accounting usually keeps owners up to speed on how much money is (or isn’t) in the bank to make it through the week.

That’s good however, these types of reports contain “lagging indicators” or “lagging metrics”; because they tell stories you need to know about what’s happening in your business but only after the story is over… Which begs the question, how can you control what’s going to happen in your business when all you’re able to look at is the past?

The answer lies in creating reports that look forward. The data and info in these types of reports are called “leading metrics”. For example, if you’re tracking leads generated and the number of appointments or calls made by your sales team, you can predict future sales (as long as you know the average closing ratio across your sales team).
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That forward looking information from your sales department can be easily converted into usable data for your operations team affording them the ability to properly control needed staff and manage inventory levels to prevent over-spending among other things.

Once you have an idea about what sales (and collections from production performed by your ops peeps) will look like in the future, you can have your accounting department prepare a cash-flow forecast that will predict with accuracy what your bank account will look like well into the future.

A good cash-flow forecast will also double a great budgeting tool that can tell you if you can invest [more] money into marketing, or equipment, or people without putting yourself behind the eightball down the road by overspending.

So, look at the reports you are receiving from your team and ask yourself, “how much of this info is telling me what’s going to happen as opposed to what’s already happened”?

If you find your data is all rear view mirror stuff, get your people together and brainstorm how you can create some “leading metrics”… you’ll be so glad you did.For some tips about how to create more metrics for leading your company to more efficiency, productivity and profitability.