I have Kraig Kramers to thank for describing how this tool works. The tool is called a ’Trailing 12 Month’ chart. You can find a lot of useful tools for managing a firm at his ceotools.com website.
What does a Trailing Twelve Month [T12M] Chart do?
Hopefully, you are tracking how much new work you sign up each month. This is good data, but there can be many, many reasons why a given month is either up or down when compared to recent months. So the idea of the T12M chart is to also look at the total sales for the past 12 months by simply adding up the past 12 months.
What's the benefit of the T12M?
By totaling the past 12 months, these ’reasons’ for ups and downs month get wrung out of the data and you are left with the trend. An increasing or upward trend is good, and you want to keep doing more of whatever you are doing. A decreasing or downward trend means corrective action is required right away. The 12 month total for sales is like looking at your batting average for the season. There is no positive story that explains a lower batting average. It simply needs work.
How does it work?
As the example in the image shows, you simply record three bits of data every month - the amount of sales, the month-year, and the total of the past 12 months. This last piece of data is calculated by a simple SUM formula. Each month ’fill’ the formula into the new month’s 12-month-total-cell. Very simple. This example shows the process step-by-step. The only tricky part is setting up the charts to display the graphs. The graphic above came from the ceotools website. You can also buy the XLS spreadsheet already set up and awaiting your data ($20).
The beauty of the T12M chart is its ’early warning system’ effect. A downward trend will always predict a cash flow or loss of profit. Immediate action will minimize the situation. And of course there is no end to the things you might want to track - monthly revenues, monthly number of blog posts, client contacts, ...