Josh Hadley noticed a costly contradiction: his supply-chain team’s leading indicators were all green, yet inventory was growing faster than sales. In this episode, he explains how tracking the wrong “green” metrics can hide trouble until it shows up in revenue and profit and how comparing weekly actions with monthly financial results helped expose the problem before it got worse. He shares practical examples from ad production, including targets for new concepts, AI videos, static images, and winning ads, then shows how to test whether those activities actually predict results. He also explains why inventory can become an e-commerce brand’s Kryptonite and why revenue and profit may reflect decisions made six months earlier.

Bullet Points:

Timestamps:

00:00:00 Leading Indicators vs. Lagging Metrics
Introduces why businesses should track leading indicators to predict revenue and profit.

00:01:01 A Weight-Loss Example of Leading Indicators
Uses calories, food choices, and steps to show how actions can predict changes in weight.

00:03:05 Revenue and Profit as Lagging Indicators
Explains why financial results can take months to reflect business decisions and introduces the weekly High Five tracker.

00:04:16 Tracking Media-Buying Actions
Shares weekly targets for ad concepts, AI videos, static images, and winning ads.

00:05:22 Testing Whether Indicators Predict Results
Recommends using hypotheses and AI to identify leading actions, then checking whether they produce the desired outcomes.

00:06:49 Responding to Gaps Between Indicators and Results
Describes how mismatches can reveal problems and why businesses should focus on actions rather than blaming external changes.

00:08:04 Using Inventory Trends to Spot Supply-Chain Problems
Explains how inventory growing faster than sales exposed a problem despite green supply-chain indicators.

00:09:15 Reviewing Financials and Strengthening Inventory Processes
Emphasizes inventory management, monthly P&L reviews, and correcting the underlying supply-chain issue.

00:10:24 Closing and Sharing the Episode
Summarizes the lesson and encourages listeners to share the episode with other operators.

Links and Mentions:

Podcasts and episodes
“Ecomm Breakthrough Podcast“: “00:00:00”
“A previous podcast episode about inventory“: “00:09:15”

Sales channels and platforms
“Amazon“: “00:00:00”
“TikTok Shop“: “00:00:00”
“Shopify“: “00:00:00”
“Meta“: “00:03:05”

Tools and technology
“AI”: “00:05:22”
“TikTok Shop algorithm”: “00:06:49”
“Meta’s Andromeda update“: “00:06:49”
“Weekly High Five Tracker”: “00:03:05”

Company
“Thras.io“: “00:09:15”

Transcript:

Josh Hadley 00:00:00  Are you tracking the leading indicators in your business that are going to predict the lagging metrics of revenue and net profit in your business? Today, I’m going to be sharing with you why it’s so vital to track the leading indicators and what leading indicators you should even be focused on. Welcome to the Ecomm Breakthrough Podcast, I’m Josh Hadley. I’ve scaled my own ecommerce brand from 0 to 8 figures, and I’m actively building towards nine figures in sales. This podcast is where I document that journey and share the systems, the strategies, and the lessons learned in real time so that you can learn what actually matters and scale your own business. My name is Josh Hadley. First and foremost, I am a man of faith. I’m a husband to a beautiful wife and a father of four children. I’ve been selling in the e-commerce space for over a decade, doing over $20 million in revenue on sales channels such as Amazon, TikTok, shop and Shopify. I’m also the host of the number one business strategy podcast for ecommerce entrepreneurs called Ecomm Breakthrough.

Josh Hadley 00:01:01  But first, I want to talk about like, what’s the difference between a leading metric or a leading action versus a lagging metric? Okay. So let’s say you’re trying to manage your weight. A lagging metric for your weight is your weight. You step on the scale that is your weight. What’s a leading indicator that would help you know whether you’re going to be heavier or lighter tomorrow? Well, obviously that would be the amount of calories that you consume in a day. In addition to that, it’s how much energy did you exhaust? How many steps did you get in? Okay, so if I’m trying to reduce my weight leading indicators leading actions would be, hey, if this guy is starting to do go from 5000 steps a day to 15,000 steps a day, that’s a pretty good leading indicator. He’s probably going to lose weight. But I also want to look at that in combination with, well, how many calories is he consuming per day? Okay. And what types of foods are those calories coming from? Okay, now I can see those leading actions.

Josh Hadley 00:02:08  I can make a more accurate prediction because he might be walking 15,000 steps a day. But if he’s consuming more cookies and brownies as part of his his calorie count, then I’m going to say, you know what? I don’t care if he’s walking more. The dude’s still probably going to be heavier because of what he’s eating, but if it’s, hey, he still has a high calorie count. But everything has been, you know, lean meat and vegetables and things like that. I ain’t no nutritionist. I’m just giving you a hypothetical example. I think you get the point, though, is like, you could match up those three data points together and have a pretty darn strong conviction that, hey, we’re probably he’s going to be losing weight here. It might take a couple of weeks, but if he keeps doing this day in and day out, I think we’re going to get the results that we want. Okay. How does that apply to business? A lagging metric in business is your profit and your revenue.

Josh Hadley 00:03:05  And to be honest with you, my perspective on that is your revenue and your profit are at least six month lagging indicators, like if you want to change net profit and revenue, typically that’s like there are things that you could do. You could cut your ad spend next month and like heavily reduce, you know, all of your marketing expenses and you could boost up your net profit. But it’s probably just like a temporary boost, as you know, your sales velocity would start collapsing, etc.. But let’s assume like you want to maintain things as they are, but just get better. It’s typically six months prior. Those are the things that make the biggest difference. And so for me, every Monday, one of the key reports that I review is called the Weekly High five tracker. Every team member has five leading actions or indicators that I am measuring to know, hey, are we going to be trending in the right direction or not. To give you just some like practical examples on the let’s talk about media buying on meta and things like that.

Josh Hadley 00:04:16  It’s how many new concepts did we come out with this week. And we obviously have a KPI. It’s like, hey, I want ten different kind of like customer avatars or variations of winning ads. Okay, are we getting more than ten per week? Cool. How many new AI videos were produced? Okay, KPIs 100. Did we get 100? Okay. How many new static images did we produce? Okay, we we wanted 50. We got oh man, we only got 30. Okay. And then last but not least, did we find any winners in the ad account that we’re doubling down on. And the goal is to find at least three winners. If not, that means, oh, hey, a lot of these videos that were churning out aren’t doing anything. That’s probably going to lead to a further bottleneck. So I can look at like those simple metrics. and if all of them are green, I can pretty confidently say, all right, next week and a and definitely a month from now, we should be seeing some positive results on our media buying and the profitability of those.

Josh Hadley 00:05:22  And if we’re not, then I’ve got the leading indicators wrong. And so it’s always like, here’s the best thing I would recommend is like start with the hypotheses that you have and use AI as your tool and friend to interview you, interrogate you, and ask like what the true leading indicators and actions might be and then see, like are those leading actions like if everything’s green, is that actually producing a green result that you want, whether it’s net profit or revenue a month from now? Because if it’s not, then you need to make some alignments and adjustments. Okay. That’s the purpose of that. The reason why I want to share that with you is because we had leading indicators that were showing up as all green during a period of time in the business where we were not achieving the lagging metrics. And guess what? As I went back months before, everything was green, and I flagged that very quickly to not only that department head, but also to my Director of Operations and said, we have a major problem if all of our leading indicators are green, and then five months or three months from now, my lagging metrics are showing negative numbers that they’re not reaching their forecast.

Josh Hadley 00:06:49  The goals that we had set out, we have a major disconnect. And so that therein is able to help you like troubleshoot some problems so that you can go in and say, okay, let’s stop the bleeding now and let’s change the leading actions and the leading measures so that we stop getting these poor results. And I think that’s the distinction I wanted to share with you today is like, if you’re not looking, if you’re just looking at lagging metrics, too often people are like, oh, well, it’s the TikTok algorithm. It changed or meta media buying, with with the new Andromeda update, it screwed us. It’s like yes and no. There’s still people winning. So what are you going to change in your leading indicators, your actions, your actions? Too many people keep blaming other circumstances. Oh, on Amazon, I had a bunch of competitors launch new products and they’re the they’re just cheap Chinese competitors or whatever it is. It doesn’t matter. But like that’s what I hear time and time and time again from entrepreneurs is like, somebody copied me and my my prices are being driven down.

Josh Hadley 00:08:04  While that is true, it is a true threat. There are still actions that you could take that can change that, That you can plan and prepare for that and say, okay, if that is the true environment that I live in. Andromeda has changed. Tick tock shop algorithm has changed. and then obviously Amazon gets more and more competitive. The fees keep increasing. Cool. That’s all well and true, but like, what are you going to do differently about it. What are those leading actions. And so the biggest way that we have kind of like identified a much bigger issue in our business is by measuring some of those leading action or leading indicators, in addition to the lagging metrics. And we saw a massive mismatch with what was happening in our financial results on our supply chain team. Everything was green. But yet guess what I kept seeing growing on our balance sheet inventory. Our inventory growth was outpacing the growth of our sales year over year. And that’s a problem because I don’t want inventory growing faster than our sales are.

Josh Hadley 00:09:15  Because if you go back to some of the previous podcast episodes I’ve shared. In fact, I have one episode that is centered around this topic in and of itself, which is inventory. Inventory is the Kryptonite for e-commerce brands. This is where the best brands go to die. This is why Thras.io went bankrupt. What did they screw themselves with? Not only did they not have good execution, but they way over purchased it on inventory and they ended up with 5 to 10 years worth of inventory and even 20 years worth of inventory on certain SKUs because they did not have good processes, not good checks and balances in place, and they did not have the right operating system in there, in there. So that is the importance of number one, establishing leading indicators and then measuring your lagging metrics, which, by the way, if you’re not having a monthly financial review with your whoever produces your profit and loss statement for you, You should be reviewing your PNL every single month. Okay. If you’re not doing that and measuring those two together, you’re going to start flying blind.

Josh Hadley 00:10:24  And guess what? Had I not caught that, our team would have kept operating under the same processes that we’ve been operating with for the longest amount of time, but instead we stop the bleeding, fundamentally changed, and found the root issue. Corrected that. And now I’m actually excited because our process for inventory management and supply chain is actually ten times stronger. Or it will be as we come out of all of this. And so that’s the story that I wanted to share with you as a practical example, something for you to consider in your own brand and how does that apply for you? So if you found value in this podcast, the biggest things that you could share is by sharing this with others and share it with the mastermind group. Share it with another operator that might be in the similar situation. And until next time. Good luck out there.