David Ackert is the president and CEO of Ackert, Inc, the company behind PipelinePlus.
How do you know your firm is successful? Most of us answer this question by examining our revenue history. If the firm did better last year than the year before (and the year before that), we project an upward trend into the future and celebrate. But we don’t actually know if our growth curve will extend into next year until the numbers are in. That’s the problem when we use lagging indicators to predict the future.
Lagging indicators are historical signifiers of events that have already occurred. Our financial reports are full of lagging indicators, such as revenue received, billing rates, billable hours, write-offs, realization, overhead costs and profit margin. These data points give us a sense of where we’ve been and how we’ve done, but they don’t necessarily tell us where we’re going. For that, you would need to look at leading indicators. Leading indicators are predictive signals that show you trends before they have fully emerged.
If you want a picture of how your revenue will look next year, examine the win rate on your current proposals, referrals received, referrals given, non-billable BD hours and activities, web traffic on your bio pages, LinkedIn profile visits, cross-sells, media mentions, net promoter scores, and pipeline scores. (I provided a few additional examples in last week’s post.) These are all precursors to new business, and when they consistently trend upward, you will see your revenue follow suit in the months to come.
So, don’t get complacent just because your last revenue report was healthy, because tomorrow’s success is typically a function of the business development measures you take today. Choose a reasonable number of leading indicators and establish quotas that align with your revenue goals. Use tools like Practice Viewer to monitor progress so that you have peace of mind about your future success. Because using lagging indicators to predict the future is like using a rear-view mirror to steer your car down the highway.
Authored by David Ackert