How is 2015 going?Chia-Li Chien
Chia-Li Chien | Apr. 16, 2015
Using the power of numbers, let your first quarter results be your guide for the rest of the year.
As hard as it is to believe, the first quarter of 2015 is gone and (should be) in the books. While economic indicators can help us adjust our predictions for the rest of the year, you also might have a set of assumptions for the year that helps you see how the first quarter of 2015 is on track with your yearly forecast or plan.
Numbers are sometimes difficult to understand, but as long as you know what to look for, what to compare and benchmark against and what it means to your business, you can leverage the power of these numbers to ensure your probability of success in the remainder of 2015 and beyond.
Begin second quarter with a focus on external assumptions to help you predict accurately the success of your plan or forecast. Start with the 2015 economic outlook.
Do you need the economic outlook (or forecast) in your number assumptions? Well, the growth rate you assume in sales will be impacted by changes in the economy throughout the year (unless your business is not impacted in general by the economy).
As a rule of thumb, there are two areas to leverage for an accurate economic outlook: either historical data or forecast data:
Forecast macro-economic data: When external factors change, knowing annual macro-economic forecasts will help you track with the economy and/or get ahead, while not being blind-sided.
The industry you are researching will determine action; i.e. higher education typically goes against the economic cycle. When the economy is down, more people enroll. On the other hand, the auto industry tracks with the economic cycle. When the economy is good and interest rates low, people are more inclined to buy big ticket and luxury items such as automobiles.
For forward-looking macro-economic data, The Wall Street Journal surveys world economists on a regular basis and gets their predictions. On their website, you can find three-year predications for GDP and other factors.
Historical macro-economic data: To find general macro-economic historical data, start with the Federal Reserve Bank (FRB). The FRB provides data sets such as Gross Domestic Production (GDP), Housing Prices, Housing Starts, Consumer Price Index (CPI) or inflation, unemployment, building permits, vacancy rates, etc. Do an online search for the FRB in your area and you’ll find national data as well as local data. For global operations, visit World Bank Group, which provides similar sets of data from what you find at the Federal Reserve Bank. For industry specific data, such as the Industrial Producer Price Index (IP), find better information at the U.S. Bureau of Labor Statistics site.
Key Performance Indicators
Now that your 2015 plan is in motion, how are you measuring against your set performance measures, aka Key Performance Indicators (KPIs)? KPIs help you monitor progress throughout the year. Determine how and if the KPIs need to be adjusted and how first quarter measured up. KPIs should give you an indication of what makes the most sense to track for the remainder of 2015 and what to stay focused on while executing the plan.
There are two types of KPIs: Leading KPIs and Lagging KPIs. Leading KPIs are indicators that you and your team still can affect or contribute to in order to improve performance in 2015. Lagging KPIs are the results of your Leading KPIs, such as the number of prospects or quotes per week, conversion rate of prospects to customers, customer retention ratio, customer repeat sales or up sell numbers, etc. Examples of lagging indicators include weekly sales dollars, monthly gross margin, monthly operating income, etc. These are good indicators of the successes and challenges of your first quarter this year.
How do you benchmark? It’s best to have numbers from past months, quarters and years, number goals and exit plan objectives to mark your progress. These are your key performance indicators (KPIs) and should help you benchmark against your own industry, your region, etc. Otherwise, you cannot know whether you are ahead or behind the industry curve. Without regular benchmarking, banks and financial institutions may not listen when you need them. It’s just smart to get familiar with your numbers so there are no surprises.
As we enter second quarter 2015, find a way to leverage the power of numbers and get closer to your target numbers. This set of numbers could help you sustain or increase your market shares, as well as cost effectively execute and reach your 2015 goals.
If you are concerned with your first-quarter results, or happy and want ideas on how to capitalize on your success, schedule an appointment today.