When you’re looking through financial statements and assessing the overall health of a business, it can be easy to get fixated on things like profit margins, cash circulation, and the liquidity of your assets.
This focus is certainly justified - after all, these are all vital considerations for any successful business. However, they’re also generally considered to be ‘lagging indicators’, meaning that they only really tell you about the past, and whether things have got better or worse since then. This is why it’s also worth exploring other factors if you want to track and improve your business’s success more thoroughly. What we’re talking about here are ‘leading indicators’, which can provide you with information on what the future is likely to hold.
Sales performance data is a prime example. Take a look at the finer details of your income statements and other sales reports. This will allow you to identify differences across not only each of your sales channels, but also across your various products and your different audience segments. This will help you identify trends that you can capitalize on, and it’ll allow you to gain a deeper understanding of buying patterns and preferences.
Sales performance is closely linked to some other leading indicators you’ll want to keep an eye on, one of which is marketing effectiveness.
Marketing effectiveness is all about ensuring that you offer the right product, to the right shopper, at the right time. By cross-referencing your sales performance data with the data you have on marketing budget allocation, you can identify which mix of marketing activities would drive the most sales in the most cost-effective way.
Another leading indicator that’s closely linked to sales performance is inventory turnover.
Inventory turnover focuses on how long items remain in stock before being sold and delivered. Understanding sales trends and shoppers’ buying habits can help you predict demand and optimize your inventory management to help you cope with the number of sales. It also gives you the operational ability to deliver your products in a timely manner, while avoiding excess inventory that ties up cash unnecessarily.
It’s also worth keeping an eye on areas further up your supply chain, to ensure that your flow of product components remains stable. Coming up with contingency plans will also help you prepare for potential disruptions and reduce the negative impact these have on your business.
Keeping an eye on shopper satisfaction is also a vital part of measuring and improving the health of your business. The power of a positive experience should never be underestimated. After all, this not only drives repeat purchases, but often encourages positive ratings and reviews, which play an important role in persuading first-time shoppers to buy from a business. So, reading through and analyzing these reviews is time well spent, and sending out shopper surveys or asking for feedback can also be highly informative.
The final leading indicator on our list is competitor analysis. Your business should regularly explore its competitors’ products, prices, marketing tactics, and shopper experiences. Not only will this provide a crucial point of reference by which to judge your own success, but it will also help you stay ahead of new offers that could steal your market share.

Monitoring the Business

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