The "Trailing Twelve Months" Tool
A CEO recently told me his company’s sales fluctuated from month to month. He was concerned because he could never tell if they were making progress in sales growth until the end of the year.
This is just the type of situation that calls for the Trailing Twelve Months (TTM) tool. When you look at revenues month to month, normal business cycles can hide trends-either positive or negative. With a TTM you can easily spot trends, especially in revenues.
A TTM is a rolling annual total tracked monthly. Each total (or point) covers the previous 12 months and is, therefore, comparable to every other point. So a TTM is a moving measurement of the past year.
Because a TTM eliminates seasonality, charting it will show you at a glance if your numbers are moving in a positive or negative direction. If the numbers trend downward, it’s time to investigate and find out why.
Using Your Own Trailing Twelve Months
Take a look at your monthly revenue history over the past 3 years and calculate a rolling annual total for each month. Chart the totals and look at the trend lines. Did you notice the trends at the time? If not, give some thought to possible causes and ways to take corrective action in the future.
Continued use of TTM will keep you on top of critical numbers as your business changes and markets shift.