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What is a lagging indicator

Also known as: lagging metric

Definition

A lagging indicator is a number that shows a result after it happened, such as last month's revenue, and confirms whether a plan worked.

Why it matters

A lagging number is the verdict.

Common mistakes

Running the business on lagging numbers alone, so every problem is found after it happened.

Related terms

Worked exampleIllustration

Signed bridal bookings at a fictional hair salon

A fictional neighbourhood hair salon that serves brides counts signed bridal bookings every four weeks.

  1. May

    About 12 signed bridal bookings in four weeks.

  2. July

    About 7, the drop that June's fall in trial requests had signalled.

    (12 - 7) ÷ 12 ≈ 42%

  3. Now

    July's number cannot be changed. Those bookings were decided weeks earlier.

  4. August

    August's bookings will show whether June's message to past brides, asking for a recommendation, worked.

The lagging number is the verdict. It arrives after the chance to change it.

Illustration

The bookings arrive later

July: about 7 bookings in four weeks, about 42% fewer than the 12 of April and May. It is the verdict on weeks that are over.⁨April⁩⁨May⁩⁨June⁩⁨July⁩6123.57
Trial requests a weekSigned bookings, last four weeks

July: about 7 bookings in four weeks, about 42% fewer than the 12 of April and May. It is the verdict on weeks that are over.

The same two lines, the bookings in gold. They repeat the requests' drop four weeks later, when it can no longer be changed.

The signal and the verdict

Moves first, you can still act

Arrives later, the verdict

Trial requests a week

Signed bridal bookings

Enquiries and quotes sent

Revenue

Regulars who book again

Regulars lost over the year

later

Each row pairs a number that moves first with the result it foretells. Watch the first to act in time, read the second to learn.

Definition

A lagging indicator is a number that shows a result after it has happened: last month's revenue, bookings signed, net profit, or churn, the share of customers who left. It can no longer be changed, but it is the number that confirms whether a plan worked. Economists use the same word. The first indicator lists, drawn up at the National Bureau of Economic Research in 1937, sorted series into leading, coincident and lagging, and The Conference Board still publishes a lagging index beside its leading one.

Why it matters

It tells you whether last month's action worked, and it keeps a leading indicator honest: if enquiries rose and sales did not, the enquiries were not the signal you thought. Steering by lagging numbers alone means finding every problem after the chance to fix it, like reading last month's bank statement to decide today's order.

Directly related: Business Strategy, KPI, Leading Indicator.

Improvement tips

  • Pair every lagging number with a leading indicator that tends to move before it.
  • Review lagging numbers at the end of each month and quarter, and write down which action each one judges.
  • Use them to test your leading indicators: when the early number moved, did this one follow?
  • Count the same way every month, so this month compares with the last.

Common mistakes

  • Celebrating a good month without asking what caused it, and so not knowing what to repeat.
  • Changing how a number is counted, so this month cannot be compared with the last.
  • Reacting to one weak month as if it were a trend.

Related terms

StrategyBeginner

Business Strategy

Business strategy is the set of choices about which customers to serve, how to win them and what not to do, so money and time go where they count.

StrategyBeginner

KPI

A KPI (key performance indicator) is one of the few numbers a business tracks against a target and a date to see whether it is on course.

StrategyBeginner

Leading Indicator

A leading indicator is a number that moves before your results do, such as trial requests this week, so you can act before sales drop.

FinanceBeginner

Net Profit

Net profit is what a business keeps from revenue after every expense, cost of sales, running costs, interest and tax. It is the bottom line, not cash.

FinanceIntermediate

Churn

Churn is the share of customers, or of recurring revenue, lost in a period: those who left in a month divided by those at its start. 5% a month is 46% a year.

Quick check

Which of these is a lagging indicator?

Choose an answer

Frequently asked questions

What is a lagging indicator?
A number that shows a result after it happened, such as last month's revenue or bookings signed. It cannot be changed any more, and it tells you whether the plan worked.
What is the difference between a lagging and a leading indicator?
A leading indicator moves first and warns. A lagging indicator moves after and confirms. At the fictional salon on this page, trial requests fell in June and signed bookings fell in July, four to six weeks later.
What are examples of lagging indicators for a small business?
Monthly revenue, bookings signed, net profit, and churn, the share of customers who left over a period. Each reports on something that has already happened.
Why track lagging indicators if they cannot be changed?
Because they are the verdict. They show whether last month's action worked, and they test your leading indicators: a warning that is never followed by a change in the result is not a warning.
Where does the term lagging indicator come from?
From economics. In 1937 Wesley Mitchell and Arthur Burns at the National Bureau of Economic Research sorted US economic series into leading, coincident and lagging, published in 1938. The Conference Board still publishes a lagging index today.
How do lagging indicators help check leading ones?
Put the two side by side over a few months. If enquiries rose and sales stayed flat, the enquiries were the wrong kind, or the step between them is broken. Either way, the lagging number tells you where to look.
How often should I review lagging indicators?
Once a month for the numbers you steer by, such as revenue and bookings, and once a quarter for the bigger picture, such as net profit and churn.
What goes wrong when a business watches only lagging indicators?
Every problem is found after it happened. You might feel busy all month and learn at the end that bookings fell, when the drop in enquiries could have warned you weeks before.
How do I start using lagging indicators without stopping daily work?
Set aside one hour at the end of each month. Write down three numbers, compare them with last month, and next to each one note which earlier number moved first.
Is measuring lagging indicators complicated or risky?
Not complicated, most of them come from invoices and the booking diary. The risk is steering by them alone, or changing how you count them so months no longer compare.
Do I need an accountant to calculate my lagging indicators?
Not for most of them. Bookings and revenue come from your own diary and invoices. Your accountant already sees the financial ones, such as net profit, and can help you read them.
How is a lagging indicator different from a goal?
A goal is where you want to get, such as 12 bridal bookings a month. The lagging indicator is the count that shows whether you got there, such as the bookings actually signed in May.

Sources: Wesley C. Mitchell and Arthur F. Burns, "Statistical Indicators of Cyclical Revivals", National Bureau of Economic Research, 1938, James H. Stock and Mark W. Watson, "New Indexes of Coincident and Leading Economic Indicators", NBER Macroeconomics Annual 1989, pp. 351-409, The Conference Board, "US Leading Indicators" (with the Lagging Economic Index)

Last reviewed: 2026-09-25

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