“If you’re not grow­ing, you’re dying.” The first time I heard this phrase I was fresh out of col­lege, and I knew EVERYTHING. I did not like this phrase. I felt that I had done all of my grow­ing and I was ready to put my knowl­edge to use. Boy was I wrong! I now use this phrase all the time and in all aspects of my life.

If you are not striv­ing to be bet­ter, you will soon be obso­lete. In our per­son­al lives, it might be hard­er to mea­sure growth because so much of it is more of a feel­ing than a num­ber. In busi­ness how­ev­er, we can mea­sure growth by look­ing at num­bers and finan­cial trends.

At Mack­ey Advi­sors, one of our favorite tools to mea­sure growth is trail­ing or rolling twelve months. Look­ing at rolling 12 month finan­cial trends is a great tool to see how your busi­ness is REALLY doing.

But what is rolling 12 months? It is a time­frame of the past 12 months used for report­ing finan­cial infor­ma­tion. A company’s trail­ing 12 months (TTM) is a rep­re­sen­ta­tion of its finan­cial per­for­mance for any 12-month peri­od, not just fis­cal or cal­en­dar year end.

Why look at your busi­ness on rolling 12 month basis ver­sus actu­al val­ues? Most busi­ness­es are cycli­cal, mean­ing that there are months where you are busier than oth­er months. For exam­ple, if your busi­ness is a school sup­ply store, then you are more like­ly to be busy in July and August than you are in Decem­ber and Jan­u­ary. The fol­low­ing chart mea­sures your actu­al rev­enue. At first glance it may look like your rev­enue has declined between August and Sep­tem­ber, but this may or may not be the case. The next chart, which mea­sures on trail­ing 12 months, takes the sea­son­al­i­ty out of the val­ues. Using this tool you can real­ly see where you are heading.

Am I Growing - Actual Revenue

Although you can see the data is chop­py, it is hard to pick out any trends as to where the data is going.

Am I Growing - TTM

Now you can eas­i­ly see that your month­ly key indi­ca­tor is climb­ing (a good thing in the case of rev­enue) or stay­ing flat or falling (both not so good things for revenue).

There are many indi­ca­tors that are good to track on a trail­ing 12 months. Exam­ples include:

  • Rev­enue
  • Net income
  • Return to owner
  • Gross prof­it

Now, I want to ask you…”Are you grow­ing or dying?”