Everyone knows that to run a successful business you need to be tracking some key metrics. Business management guru Peter Drucker is often quoted as saying “you can’t manage what you can’t measure.”
As a result, most financial planning firms measure loads of metrics.
However, not all metrics are created equal.
For example, you set a goal to achieve £1M of annual revenue this year. You establish milestones along the way; let’s say £250,000 of revenue per quarter, £83,333 per month, and £19,231 per week.
Brilliant. Now it’s broken down into bite-sized chunks.
And then you track it, week to week, month to month and quarter to quarter.
But what happens if you get behind on your goal? Now what?
Let’s work harder. Do more. Focus on the goal daily.
I know firms who set these types of goals and track these types of metrics, only to miss the goal year after year.
Because they’re tracking what are referred to as ‘lag’ metrics. And sales results or revenue are classic lag metrics.
They’re the end result of a lot of other inputs.
Smart businesses spend more time tracking ‘lead’ metrics. That is, the activities that occur before you achieve your sales or revenue result.
As I covered in my blog Track Your Pipeline Properly, it’s important for all businesses to know how much work is in their pipeline, so they can forecast future income 3, 6 or 9 months ahead. Your pipeline (as I’ve described it – and that’s different to how many firms I’ve met actually measure it), could be considered a lead metric for your final sales results.
If you track and respond to your pipeline metric appropriately, you can avoid waking up 6 months from now with poor cashflow and not enough in your sales funnel.
The oil light on your car’s dashboard is a lead metric. When it glows red you need to do something. Not immediately in that split second, but relatively quickly. If you react to the glowing red light and add some oil to the engine, you avoid major problems down the line (apparently – I know bugger all about cars).
So lead metrics are really valuable, because they alert you to a problem before it becomes a major problem.
Typical metrics I see tracked in financial planning firms are:
- Sales figures
- Recurring revenue
All of them are lag metrics.
Sure, I want to track them, but I don’t want to kid myself that they’re getting me to my business objectives.
The simplest way to identify some suitable lead metrics is to look at the outcomes (lag metrics) that you are trying to achieve and ask yourself, “what happens just before that?”
For example, let’s consider a goal based on new business revenue.
If you want to generate £xx,xxx of new business revenue, what happens just before that?
Well, a client needs to agree to pay you for some advice. It could be ongoing advice, one-off advice, or both.
Depending on what your marketing funnel looks like, you might have:
- Contacted a professional introducer who is part of your network
- Sent a newsletter or blog to your client list
- Run a seminar
- Held a client event
- Run some Facebook ads
- Created and published some podcasts or videos
- Received a lead from an online directory like Unbiased or Vouched For
Can you see that you might track some of these lead metrics to give you an idea of whether you are on track to achieve your lag metrics (your results)?
We’ve identified a lot of possible metrics, but you might elect to choose only a few of them as a proxy for how things are going.
For example, maybe you decide to track the following:
- Contacts with professional introducers each week
- Client newsletters sent each month
- Leads generated from online sources
- Vouched For
- Facebook Ads
These are your early warning systems. Once you get to know what business-as-usual looks like for your business, any changes (up or down from normal) are worthy of investigation. What are we doing differently that’s creating a better or worse result than usual?
You might also track the next stage of lead indicators, your sales activity:
- Sales pipeline number
- Number of first meetings held
- Number of presentation meetings held
- Number of sign up/implementation meetings held
If client referral is a key source of your new business then you could go through the same process.
“I just got a client referral.”
What happens just before that?
And the answer could be a range of things that you might decide to track, like:
- Specific referral conversations with clients
- Seminars or client events held
- Newsletters/blogs emailed
- Amazing service experience delivered
- Asking more interesting questions at review meetings
- Sending a thank you for a kind review or comment posted by a client
When you start to look at everything you might track, there’s a ton of stuff to go after. The key is identifying where it occurs in the sales funnel, and how useful it is for predicting results further down the line.
What lead metrics are you going to track going forward?
Let me know how you go.
The simplest way to identify some suitable lead metrics is to look at the outcomes
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