Unless you are reversing, you wouldn’t try and drive your car whilst only looking in the rear view mirror would you? SO why do so many business owners drive their businesses in this way when it comes to performance metrics (KPI’s).
The Backwards-Looking Trap
I recently responded to a friends post about KPIs, and it sparked a thought: why do so many small and medium-sized businesses focus exclusively on lagging indicators like revenue and margins?
The issue with this approach is glaring—these metrics show you what’s already happened. They’re historical data points that you simply cannot change. While they’re certainly important to track, they represent only half of the performance picture.
A Complete View Requires Two Perspectives
To effectively steer your business, you need both lagging AND leading indicators. Think of it this way:
Lagging indicators are your rear-view mirror—they show what’s already happened. These include:
- Quarterly revenue figures
- Profit margins
- Customer retention rates
- Cost of goods sold
They’re excellent for confirming whether your strategies worked, but they only tell you about the past.
Leading indicators are what you see through the windscreen—they show what’s coming next and allow you to anticipate when to change direction, accelerate, or brake. These include:
- Website traffic trends
- Quality of your sales pipeline
- Customer engagement metrics
- Pre-booked consultations and meetings
- Proposal conversion rates
These forward-looking metrics give you early warnings of potential problems or confidence that you’re on the right track.
The Value of Looking Forward
Surprisingly, most businesses fixate only on the rear-view mirror. This backward-looking approach limits your ability to make proactive decisions about pricing, cost management, and value delivery—the very levers that most significantly impact profitability.
When you incorporate leading indicators into your business dashboard, you gain the ability to:
- Anticipate market shifts before they affect your bottom line
- Adjust pricing strategies proactively rather than reactively
- Identify cost-saving opportunities before they become urgent necessities
- Recognise shifting customer preferences while there’s still time to adapt
Balancing Your View
You absolutely need to know where you’ve been—historical performance provides essential context and confirms whether your strategies are working. But more importantly, you need to know if you’re heading in the right direction.
The businesses that thrive are those that maintain this balanced perspective. They acknowledge past performance while prioritising the indicators that give them control over their future.
Next time you’re reviewing your business metrics, ask yourself: “Am I spending as much time looking through the windscreen as I am checking the rear-view mirror?”
You can join the discussion about this topic on LinkedIn here
Leave a Reply