Business Benchmarking: What is it?
As in sport or any other competitive pastime, we progress our accomplishment by competing with other people.
If you are a runner and run by yourself, how will you tell how you compare to others who also sprint? The theory also applies to big business and company owners.
For example, what if you manage a Plumbing shop or business selling bathroom furnishings. You might think your operation is performing Reasonable by achieving a gross profit ratio of 30 percent…
But what if other comparable businesses in your industry are doing outdo and achieving a gross profit of 45 percent?
That could indicate that there is certainly room to progress and do better. In brief, benchmarking provides you the targets to make every effort towards since they equal operation with other similar businesses in your industry (your competitors).
Benchmarking is a necessary component for corporation advancement as it lets you comprehend and gives you transparency to learn what it takes to be the best in your area, and what it means to be a leader in your industry.
Benchmarking means that you can:
- Look for new thoughts and vastly successful operating practices and then relate these to your own operation.
- Explore your own organisation without the sentiment by looking at the numbers and make the vital improvements to match or improve on your competitors.
- understand and Recognise the shortcomings in your own corporation and then to create and implement a company strategy to eliminate or get better those failings.
- Acknowledge others (your competitors) are performing improve on than you in some areas then to realize how they are doing it and then apply and adapt those practices to your corporation.
PricewaterhouseCoopers “Trendsetter Barometer Survey” noted that “fast growth companies who used benchmarking information to determine small business accomplishment against their peers achieved 69% faster growth and 45% greater productivity over those who did not.”
Forecast / Investigation This feature of small business management is generally not well understood. It’s largely neglected by most small business owners but it can generate huge rewards.
As chartered accountants, we’ve seen small business accomplishment in our clients improve dramatically after using benchmarking as a tool to gain deeper small business intelligence.
Analysis can mean you can see a particular strategy will generate the best return for investment, and then quantify and appraise the result of your decisions on profitability BEFORE investing time and money on implementation
The best managers methodically do a review and analyse financial results, key performance indicators and benchmarks prior to making strategic / key deliberations.
beneficial study means you can:
- Identify key performance measures (KPI’s) that drive and support your business
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- Understand to speak and appraise your big business financial performance openly
- Get clear on how your bottom line is impacted by changes that you make.
- Speak successfully between your big business adviser, accountant and financial body
- recognize how banks assess corporation operation
- Ascertain the most effective ways to increase your cash flow While analysis is extremely pleasurable and even worthwhile it can be vastly intricate and is best left to specialists.
Your accountant can help you with this.
Paul Easton works with Matthew Gilligan – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is an accounting firm specialising in property and business accounting
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