Do you know how your business is performing compared to other similar businesses in your industry?
Do you want to identify opportunities to make it more successful than it already is?
Benchmarking is a great place to start – it’s the process of measuring your business’ performance in quantitative and qualitative terms to determine how it’s going.
Once you’ve done your benchmarking, you can compare it with your similar businesses in the sector… and that will help you identify opportunities to develop new products and services, or finesse your processes for greater efficiency, productivity and or quality.
Going forward, regular benchmarking will let you measure your business performance against previous quarters and years, so you can see the results of the action plans you implement and make further refinements.
Where do you start?
To benchmark your business, you’ll need to determine:
The processes in your business that are important for achieving your business goals.
Typically, these will be production, sales and customer service.
Get specific. When looking at production, include quality (the number of defects/ customer complaints per 1,000 units for instance) and productivity (the number of items produced per person). When considering sales, quantify the number of sales per person. And when measuring customer service quantify how long it takes one person to resolve an issue, and/or use customer feedback to acquire qualitative information about satisfaction levels.
- The businesses in your industry you want to benchmark yourself against.
Typically, these will be the best performers – after all that’s where you want your business to be. Search public records such as annual reports and websites, as well as government records to identify data that’s comparable to the data you’ve used to define your most important business processes. Collect data from several top performing companies to create a reliable data pool.
Once you’ve done this, you’ll need to:
- Establish business benchmarks for each key process by choosing the top results from each data pool – this is what you want your business to aspire to.
- Analyse your own performance against those benchmarks. If you discover your business data differs markedly from the benchmarks in your data pool, look at the factors that influenced the data – these could provide the clues you need to improve your business performance.
Some factors to check are:
- Your competitor’s strategic objectives; the processes they’re using, the way they allocate resources such as people, IT, production inputs and marketing, sales per employee, customer satisfaction, costs, salaries and profit margins.
Armed with this information:
- Create an action plan that will help your business match and exceed the benchmarks of your most successful competitors.
- Continue to collect competitor information to create data pools and compare your benchmarks, both against the best performers and against your previous performance.
Find out more
Benchmarking takes time but it can identify significant opportunities to grow your business.
The Australian Taxation Office has a benchmarking app that helps small businesses across 100 industries, with turnovers up to $15 million, check their performance against others.
Ayers expert services in financial, payroll and contractor management can reduce the stress of day to day management, leaving you free to concentrate on analysing and growing your business for the future.