When you are looking at P&Ls or balance sheets, you are looking at history.
A P&L tells you what happened last month.
It is not telling you what is likely to happen next month.
And relying too much on historical information is risky!
When you work with me, we will spend a lot of time “designing” the right metrics.
We will design Leading Indicators and Lagging Indicators.
Metrics That Predict the Future
Lagging indicators tell you what happened
Leading indicators tell you what is going to happen.
For example, if your goal is a 98% Occupancy Rate, and each week and month you report the Occupancy Rate, you are not providing useful guidance.
How to Predict Occupancy
Occupancy can be predicted by Leading Indicators such as:
- Number of Leads
- Number of Applications
- Number of Move Out Notices Received
- Number of Leases Ending in 30 Days
These are examples of Leading Indicators, And at least some of these need to be tracked. Another example is Number of Leases Signed.
Leading indicators that can predict the Number of Leases Signed, are
- Number of Showings Conducted
- Number of Applications Received
- The ratio of how many applications you convert to leases.
- And so on.
Lagging indicators tell you what happened.
Leading indicators tell you what is going to happen.
In order to produce the right outcomes,
You want your teams working on the right activities.
Therefore, measuring the Leading Indicators is essential for future success!
If you would like to discuss the right metrics for your business, you are welcome to call or make an appointment.
Please share which metrics you find to be useful predictors of future outcomes.
