Top 5 Reasons For Benchmarking A Business
Do you know how your business is performing when stacked up against competitors?
How about your clients? Do you know what they need to do to improve their business performance?
Do you know where the business is excelling? How it could improve? And what needs to be implemented to steer the ship in the right direction?
The good news is, there’s no need for guesswork. A detailed Benchmarking Report can answer these questions for you. Read on to see our key reasons for benchmarking a business.
Our key reasons for benchmarking a business
1. Get a true picture of business performance
By analysing a business against competitors in the same industry, business owners gain clear insights if their financial results (e.g. net profit, revenue) are ‘good’ or ‘need improving.’ Further, each industry has unique business performance metrics so it’s important to ensure the metrics measured are relevant. For example, an accommodation business may be focused on occupancy rates and costs of consumables. Whereas an accounting firm may be more concerned with employee output and fixed costs.
2. Identify strengths and weaknesses
A key reason for benchmarking is to identify the strengths and weaknesses of the business. Without this insight, managers can be caught out traveling blind and making business decisions without the right information. Knowing where there is the most opportunity for improvement can support business owners and advisors set clear objectives and develop a strong strategic plan.
3. View the business objectively
One of the most important reasons for benchmarking is to show an owner their true business performance. It is often difficult for business owners to take an objective view of their business. They may be too close and emotionally invested in the business, making it difficult to stand back and be unbiased. Benchmarking offers a reflection of where the business is against competitors, enabling the business owners to see their position in the market. This enables them to make realistic assessments about their performance and implement plans for the future.
4. Drive employee productivity
Benchmarking empowers you to understand personnel productivity in detail, and subsequently, set reasonable expectations for staff productivity. There’s no benefit in setting expectations that simply can’t be met by humans. Likewise, it can be detrimental to set expectations that are too low to drive real value or inspire staff. Comparing staff productivity to competitors will help identify productivity gaps and drive productivity improvements.
5. Understand the true value of the business
Knowing what a business is worth can support business owners make short and long-term decisions. By undertaking benchmarking, business owners can delve into what their business value is, as well as how to increase their value to meet their long-term objectives.
There are many more reasons for benchmarking a business. Contact us today to talk through how benchmarking can work for you and/or your clients.
How do I benchmark a business?
If our reasons for benchmarking resonate with you, it may be time to get benchmarking!
Like any management activity that’s worth doing, benchmarking can take effort and time. However, the key ingredient is knowing what you’re benchmarking against. High quality and relevant data are vital to ensure business owners gain a true picture of their business performance.
This is where we can help. Our Benchmarking Suite enables a business’s financial data to be imported straight into our online tool. It is then quality-checked and benchmarked against its industry competitors. Once completed, business owners receive a detailed report showing them how their business is performing.
You can view a sample report here to see how we benchmark businesses and you may find a few more reasons for benchmarking!
If done right, benchmarking can hold the key to future prosperity for the business.
Are you an Accountant or Business Advisor? If yes, you may be eligible for a free trial of our Benchmarking Suite. Click below to find out more.