What is Benchmarking?
Businesses should always be looking for ways to grow and improve performance – but in an increasingly competitive world, there are a lot of companies looking to do the same. So how do you stay at, or get to, the top of your industry? How do you ensure your business is operating in the best possible way?
Benchmarking is the process of comparing your organisation to other, similar organisations within the market, in order to assess your business. It is also used to compare best practice strategies within your industry to your own methods. These comparisons allow you to measure your organisation’s performance and processes in a practical and meaningful way, and make changes and adjustments where appropriate, improving profitability and performance.
Benchmarking can be applied to products, services, processes or functions within the organisation and will be unique to different organisations.
Why Should you Benchmark?
Organisations generally have strong knowledge about their own successful operations, and a clear idea of what they are doing right. Although this is vital, it is also important to step back and evaluate how your organisation is performing in the broader marketplace. Without benchmarking, you may be doing some things very right, but missing a glaring opportunity for improvement. Doing so will help identify where in your business there is room for improvement, and highlight areas that require attention in order for the business to progress.
Businesses should always be looking for ways to grow; to improve their product offerings, provide better customer service, and of course, increase profits. But to do so requires constant work. The most successful businesses are the ones that constantly strive to be better. The moment you become complacent in your business is the time that you will plateau, or in some worse-case scenarios, notice business regression.
By studying the strengths of your competitors, you not only gain valuable insight into how to manage your business better, but also keep yourself and your business accountable for their own success.
“Unless you try to do something beyond what you have already mastered, you will never grow” – Ralph Waldo Emerson
Benefits of benchmarking
Benchmarking isn’t about copying or taking advantage of other companies. It’s focus is on being aware of how the industry is operating in order to identify sales and growth opportunities. Comparing your businesses’ strengths and weaknesses to a competitor won’t solve all your problems, but it will assist you in identifying industry trends, and identifying where you can make improvements. In some cases, it may seem obvious once it’s been pointed out. These changes may be to internal processes, as well as the financial processes as listed above. Benchmarking can also help you tailor your marketing and growth strategies, and alter how you present yourself to consumers and clientele. That isn’t to say you try to be just like other businesses. Remember, sometimes being unlike anything else in the market is what sells. Benchmarking can also be a useful motivator for individuals within the organisation as a whole, providing tangible goals and performance targets to stay ahead of the game
How do I start benchmarking?
Benchmarking is not a quick fix solution for growth. Rather it is a continuous, long-term approach in which you constantly check in on whether your business is the best it can be. You can benchmark nearly all areas of your company, but first, you need to collect financial and other related data of your own company, and your competitors. This quantitative data provides you with a point of reference for accurate comparisons. Such information can allow you to benchmark billing and payments, recruitment and other employee costs, stock control, debtors, ordering and purchasing, and Earnings Before Interest and Tax (EBIT). You can also gather data to benchmark and monitor performance, such as customer satisfaction and feedback, and overall efficiency within your business. You can then make changes to internal processes as necessary in order to reach performance targets.
How we can help you benchmark
Yes, benchmarking requires detailed data collection. In fact, the most tedious and time-consuming aspect of performing a benchmarking analysis is gathering the right financial data to compare your business with others. For someone not versed in this process, that is a daunting, confusing and at times an impossible task.
For more information regarding Benchmarking, and how we can help your business, contact one of our Audit Specialists today on 03 9835 8200.