You Can’t Steer with the Rearview: Why Leading Indicators Matter Most

Imagine driving a car with a perfectly clean rearview mirror but a dirty windshield. You can see every turn you had made, every pothole you had hit, and every red light you had run. What you can’t see is what’s coming next.

That’s how too many business owners operate. They make decisions based on lagging indicators—revenue, profit, customer churn, P&L statements—that only tell them what has already happened. But if you want to lead your business, not just react to it, you need to start looking through the windshield. That means embracing leading indicators.

One of the first things I learned when I started my career on Wall Street trading equities was how to distinguish between leading and lagging indicators. For example, when the bond market begins to price in future rate cuts, that’s often a leading indicator for equity rallies—you act quickly and get ahead of the market. On the other hand, when a company announces earnings that simply confirm what analysts already expected, that’s a lagging indicator—and chasing the stock at that point is usually too late. Traders live and die by their ability to anticipate, not just respond.

As a Fractional CFO, I see this problem every day. Entrepreneurs and CEOs want to grow, adapt, or survive market shifts, but they’re flying blind. By the time their financials confirm a trend, it’s often too late to change course. That’s the cost of depending on lagging indicators alone.

Leading vs. Lagging: Know the Difference

Let’s break it down:

Leading indicators are predictive. They help you forecast what’s likely to happen. These include metrics like sales pipeline velocity, website traffic, demo bookings, quote requests, inventory levels, and employee satisfaction scores. Leading indicators are often messier and less precise, but they give you the gift of time—time to act.

Lagging indicators measure outcomes. They reflect performance after the fact. Think of them as historical records: revenue, net income, customer churn, gross margin, etc. They’re essential for understanding past performance but useless for predicting the future.

Why Do Businesses Over-Rely on Lagging Metrics?

Because lagging indicators are comfortable. They’re objective. They come from your accounting software, your CRM, your ERP system. They can be audited. They show up in investor/lender/board decks. But here’s the truth: by the time lagging indicators show distress, the damage has already been done. You need leading indicators to spot issues early and course-correct while it still matters.

The CFO Advantage: Turning Metrics Into Foresight

This is where a CFO—especially a forward-thinking, fractional one—can provide serious value. We work with business owners to:

• Define meaningful leading indicators tied to strategy

• Build real-time dashboards that surface early signals

• Translate data into decisions

Sample Dashboard: Leading and Lagging in Harmony

Area	Leading Indicator	Lagging Indicator
Sales	Number of demos booked	Monthly revenue
Marketing	Website visits, CTR	Customer acquisition cost
Operations	Orders fulfilled within SLA	Customer satisfaction score
HR	Employee engagement survey results	Turnover rate

The goal isn’t to replace lagging indicators. It’s to pair them with leading ones to create a full picture. Like driving, you need both the windshield and the rearview.

From Strategist to Historian

Many business owners pride themselves on being data-driven. But there’s a big difference between being data-proactive and data-reactive. Leading indicators help you shape what happens next. Lagging indicators make you reactive.

When I join a new client, one of the first questions I ask is: “What are the top three metrics you check every week?” If they’re all lagging indicators, that’s a red flag. It means the business is living in the past.

You don’t have to. Start small:

• Choose one area of your business (sales, ops, etc.)

• Identify a forward-looking signal (e.g., inbound leads, supplier delays, etc.)

• Track it weekly. Use it to inform decisions.

  
  

Over time, build a dashboard that blends both types of metrics. Empower your team to see early and act fast.

Final Thought

There’s a reason we’ve all heard the phrase: “Run your business—don’t let your business run you.” It’s a cliché because it’s true. But too often, business owners find themselves reacting to yesterday’s problems instead of steering toward tomorrow’s opportunities.

Monitoring leading indicators is how you stay in control. They give you the foresight to make strategic decisions before issues escalate—or before opportunities pass you by. When you consistently track the right forward-looking metrics, you gain the ability to guide your business with intention, not just instinct.  So don’t just work in your business. Lead it. And start by looking ahead.