Do you ever wonder how to make data driven decisions for your home service business?
Using leading indicators and trailing metrics is the answer. You want to compare your sales goals vs. actual performance.
In this article we are going to discuss what leading indicators and trailing metrics are, how to find the GAP and show an example of what this looks like.
Leading Indicators
So what is a leading indicator? A leading indicator is a number you are trying to hit.
A great example of a leading indicator is your budget. Let’s say that you are budgeting 25% for labor, you are going to plan jobs and pay your employees in ways that are conducive to hitting that goal.
Another example would be your marketing calendar. Check out our blog, Building a Winning Marketing Calendar for your Home Service Business for step-by-step instructions on creating your marketing calendar.
Trailing Metrics
A trailing metric is data based on something that has already happened.
Your profit and loss is an example of a trailing metric. In our example we said you are budgeting 25% for labor. If your P&L comes in at the end of the month and your labor rate is 30% you know you have a problem.
Pro Tip: If you don’t have an accurate P&L, reach out to our friends at Yeti Books for professional home service bookkeeping.
Analyzing the GAP
A GAP analysis is when we look at the leading indicators and compare them to the trailing metrics.
The GAP tells us whether or not we hit a number and why.
For our example we said we have a labor budget of 25% (leading indicator) and our profit and loss statement showed that our labor ran 30% of our budget (trailing metric). That means our GAP is 5% over budget. Now we can make a data driven decision to raise our prices, train employees better so the job takes less time or whatever else the data tells us we need to do.
An Example….
Let’s look at an example of what we have learned when it comes to marketing and these metrics.
You have never used EDDM before so you are not sure how many mailpieces to send out to reach your $25,000 sales goal next month.
The data you do know is that your average ticket is $1,500 and your sales people can close 50% of the appointments they go to.
Based on that you need 33 leads from your EDDM campaign to reach your goal. That is your leading metric.
You decide to send out 5,000 mailers and at the end of the month you look back at your data and it shows you only received 17 leads from that campaign. That is your trailing metric.
Based on that data you now know that you need to send out 10,000 mailers to receive 34 leads and hit that goal. That is what you have learned by looking at the GAP in this situation.
Comment below if you’d like more information about any of the metrics mentioned and we’ll respond 🙂
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