Are You and Your Business Prepared for an Up and Down Economy?

Over the last couple of weeks I have posted a few articles on measuring key business indicators, How Do You Measure Success, and formatting a report for these indicators, What is a 12 Month Rolling Trend, so that you can look for important trends in your business.

One aspect of watching for business trends is to look at the general state of the economy so that you can ensure that your business is prepared for potential marketplace shifts. One of the best tools I have seen for doing this is from Peter Navarro and his book Always a Winner: Finding Your Competitive Advantage in an Up and Down Economy
. In this book he lays out and defines the following formula;

GDP = C + I + (X – M) + G


What is a 12 Month Rolling Trend?

In my blog post How Do You Measure Success, I wrote about the need to pick key business indicators that show important elements of the state of your organization. Once these key indicators are selected, the next question that needs to be answered is; “How will we report and view this key indicator?” A really good answer to this question is a Rolling 12 Month Trend report.

A Rolling 12 Month Trend report does not sound too exciting but it is a valuable tool for any organization to use to track its progress and to show trends. Essentially, it is a report that uses the running total of the values of last 12 months of an indicator. Each month, the indicator that is 13 months old is dropped from the total and the new month’s indicator value is added.

Why use this trend report rather than looking at the actual values? Well, the actual values are important for many reasons but they do not show any trends that can point to growth, flattening or decline.

Take the following chart for an example. This chart shows actual monthly indicator values over the last 8 years (the example shows revenue but it could be for any data type). Although you can see the data is choppy, it is hard to pick out any trends in where the data is going.