Leading indicators of business performance

The Economist magazine recently published a fun article about reader suggested ideas for new leading indicators of the state of the economy. Their readers suggested ideas ranging from the use of veterinary services—which fall in a down economy--to the sales of stress related healthcare products such as antacids—which rise.

At Perkins, we encourage our clients to think about leading indicators that are more directly related to their business. Traditionally, most organizations have looked at their sales pipeline as their key leading indicator, but our clients have found that thinking outside the box leads them to valuable insights at different time horizons. We’ve helped them look at demographic change data by Metropolitan Statistical Area (MSA), local weather forecasts and building permit counts--all useful leading indicators at relatively short time horizons.

Another example might be to use easily accessible public data to track specific financial indicators for a basket of public stocks representing your customers. Seeing their inventories go down while their sales go up might be a valid leading indicator that they will need to place additional orders. As always, the best way to build demand models is by doing low-cost testing. At Perkins we are always testing for better leading indicators of unconstrained demand for our clients products and services.