The Mind 🧠 of a CFO

Read time: 4:17 minutes

♻️ CFO’s Quarterly Re-Take - Leading KPIs: Indicators You Should Track for Your Business

Why Measure Leading KPIs?

One of the primary reasons for measuring leading KPIs is to track and assess performance in areas that have a significant impact on achieving business goals.

However, because each individual business has its own set of goals, each business will also have its own set of KPIs to track. The KPIs you choose should be able to help your business gain insight into how you can improve operations and stay ahead of your competition.

With that information, you’ll be able to:

• Make data-driven decisions

• Improve business performance

• Achieve your long-term goals

Forecasting Your Backlog

Forecasting your backlog means taking a look at your projects and determining how long it will take to complete them. Based on this analysis, you can estimate how much work will be remaining in the backlog at any point in time.

When you understand this, you can forecast how much revenue will be coming in and when.

At a minimum, it’s essential to know how much revenue you will generate in the next 3-6 months. With this information, you can make better-informed decisions on when to add or reduce resources in your business.

Forecasting your backlog also gives you an idea of when you can hire. It lets you lay out how many clients you have per person, allowing you to capacity plan more efficiently.

Finally, forecasting your backlog gives you a measurement for when it’s time to increase prices. For example, as you backlog grows and capacity shrinks, it may be a good time to look into value pricing. We discuss more on value pricing here.

Net Promoter Score

The Net Promoter Score (NPS) measures client loyalty and satisfaction. The score is based on a simple question: "On a scale of 0-10, how likely are you to recommend our product/service to a friend or colleague?"

Based on their response, customers are then categorized into three groups:

• Promoters (score 9-10): These are customers who are extremely satisfied and loyal to your business. They are likely to recommend you to others and contribute to positive word-of-mouth marketing.

• Passives (score 7-8): These are customers who are satisfied with your business but are not overly loyal. They may recommend the brand to others, but they aren’t as enthusiastic as people who score 9-10’s.

• Detractors (score 0-6): These are customers who are unhappy with your business and are likely to spread negative feedback.

To calculate your NPS, you subtract the percentage of detractors from the percentage of promoters. The score can land anywhere from -100 (if all customers are detractors) to +100 (if all customers are promoters).

A positive NPS shows that your business has more promoters than detractors, while a negative NPS shows that your business needs to improve its customer experience.

At A2 advisers, we keep it simple by asking clients at the end of each meeting what they would rate it on a score of 1-10. You can do the same!

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Brain 🧠 Food

Thanks for reading, Luke Templin!

P.S. There are two ways to work with Luke to grow your business profitably.

1. Virtual CFO Cohort for service-based entrepreneurs with $250k - $1 million revenue.

2. Fractional CFO for service-based entrepreneurs with over $1M in revenue.