Call it curiosity or just plain competiveness, most business owners want to know how their business compares to others in the industry, but don’t know how to go about it.
The best way to find out where you sit on the performance ladder is by benchmarking.
Successful benchmarking will enable you to compare the results of your business with other similar businesses and identify where you are ahead or falling behind.
This will help you focus on the issues that matter most and identify areas for improvement. Used this way, benchmarking is a great strategy tool.
Benchmarking is also a method of identifying what the standard of best practice is, who the best is, and how you can learn from them to implement better practices within your business.
It helps to identify problems and opportunities and provides a shortcut to improvements by learning how others have succeeded.
Just about every function of a business can be benchmarked, including:
You can also benchmark and study the processes that produce the results, as a means to identify how to adopt best practice.
Benchmarking can involve comparing your business against:
The process begins with identifying what is to be benchmarked.
If your business already monitors its own KPIs that are important to your vision and strategy, these might provide a sound starting point.
The next step is to identify the businesses you will compare yourself against. Ideally you should try and compare yourself against businesses with similar turnover and operating characteristics.
It’s also important here to make sure you’re comparing yourself against many other businesses, not just one or two.
A small number won’t provide sufficient information, depth or breadth of understanding about what’s happening in other businesses.
Make sure you compare yourself against the top performers across all sectors in the market, not just the average performers in your own industry.
After all, if you compete against the average, you’re likely to remain average yourself.
Once you know who you want to benchmark against, how will you gather the information?
Information can be obtained by sharing experiences between work colleagues; consulting experts with more experience in implementing processes or working in particular markets; participating in a benchmarking survey/report produced by an industry body or other third party; networking with people from other organisations at events and conferences; discussions with your own business networks or advisors like your accountant; accessing online databases and benchmarking providers; and reading to keeping on top of industry developments.
Whatever source you choose, make sure it’s reliable, and take the time to understand how they gather their data, how current it is, what their sample size is and who’s included in the sample.
When you have the information, assess your business’ data and performance against it. Where are the gaps and opportunities to improve?
Determine what your performance targets are and communicate these with the rest of your leadership and broader team to obtain their buy in.
Once you have agreement, develop action plans and monitoring systems to track your progress against those targets.
Benchmarking is an ongoing process for best practice businesses. But it’s a process that provides the benefits of exceeding your goals and reaching your fullest potential.
Marc Peskett is a director of MPR Group a Melbourne based firm that provides business advisory services as well as tax, outsourced accounting, grants support and financial services to fast growing small to medium enterprises. MPR Group is a member of the Proactive Accountants Network.
MPR Group conduct Maximising Business Value for SME workshops. To register visit their website www.mprgroup.com.au MPR Group is a member of the Proactive Accountants Network.
You can follow Marc on Twitter @mpeskett
