Leading vs. Lagging KPIs

When asked what metrics matter most for a business, most leaders point to “revenue” as their top KPI.

And, certainly, how many runs you get in each game is of great importance.

If you dig deeper, you can start to uncover “leading KPIs” for your business that precede the collection of revenue. These are those items that get you “on base” or could even be broken down into “hits”, “at bats”, or even “swings”.

Once you understand the process through which revenue is derived, you can start to identify levers you can pull that if measured correctly, can be points of engagement into which you can invest time and money to consistently drive that more “lagging” metric – revenue.

Here’s an example.

A PR firm is looking to bring in $1M per year of service-based revenue.

In the interest of simplicity, let’s say that their average job goes for $10000.

So, over the next year, they’ll need to bring in 100 clients to reach the $1M mark (again, assuming no repeat business, for simplicity’s sake).

Now, let’s back out a channel of activities that lead to a single sale.

If the next step back from a sale is a proposal presentation meeting and their close rate is 50%, they will need to create 2 proposals for each sale to occur. So, overall, they’ll need 200 proposal opportunities during the year.

What activity produces a proposal presentation? Let’s suggest that it’s demo meetings, again with a 50% “close” rate from a demo that leads to a proposal. Therefore, they need to book 400 demo meetings per year.

Perhaps demos are driven through a number of avenues but they want to focus on demos that come directly through traffic to the site from an ad they run on LinkedIn. The landing page for this ad converts at 25%. So, to get 400 demos, they’ll need to send 1600 clicks to that page.

Stepping back one more level, they know their ad gets a 10% Click-thru Rate (CTR). Therefore, they need to invest enough to get 16000 ad views (impressions) to drive the desired volume of activity.

At this point, we’ve identified a “throttleable” activity to measure – ad impressions – and can fairly confidently assume that increasing our investment in the proven ad spend will result in more impressions, more clicks, more conversions, more demos, more proposals, and therefore, more sales.

This is the power of finding your “leading KPIs” (activities) that drive sales vs. focusing just on sales. There are usually many ways to gain predictability in what methods will work for you. Perhaps it’s posted on LinkedIn, networking events, coffee meet-ups (Though, how do you get these scheduled? That would be your *real* leading KPI to measure), postcards sent, cold calls, etc.

Find out what activities have led to sales in the past and see which of those is scalable. Once you figure out what levers you can pull to get to the plate, you will reap the revenue rewards.

Want to talk about how you can get more “at bats” for your business? Drop me a line and let’s chat. The first conversation’s on me.