Benchmarking provides a way to compare your company against other companies and identify areas where you can improve your performance. To know how your business is performing it is vital to measure the differences between your business and the rest of the industry in which you operate in. Without benchmarking, how would you know where your business stands in the market and what to do to achieve future growth? The following points highlight the areas in which you should assess within your business.
- Concentrate on your key business drivers. These are the processes that are at the core of the achievements of your company and will differ from each sector and individual business. If you supply a service, client support is very likely to be an integral business driver; in case you’re a high-volume maker, the production-line rate is going to be an integral business driver.
- Decide who to benchmark. Pick companies of a similar size and with similar goals, but additionally compare companies outside your industry who excel in areas that you would like to improve in, importing their strategy might help you leapfrog competitors and get ahead. Choosing similar businesses to benchmark against creates realis goals and expectations, however aspiring to industry leaders will encourage best practice and efficiency.
- Evaluate the efficacy of your procedures. Look at the mechanics of your company – the manufacturing methods, quality controllers, inventory management and so forth. How successful are they? How well are you currently using your technologies? Are different companies benefiting from new methods of doing things? Your processes and equipment may be out of date and costing you, sometimes cutting costs is the best way to raise revenue.
- Analyse your allocation of funds. Are you placing resources in the very same regions as your benchmarking partners? Can they have more workers or fewer? What regions of the company? Have they spent more on IT and other gear? Are you currently spending more on advertising?
- Weigh your prices from industry norms. These may Include utility accounts, salary or research and development expenses. If you may highlight regions where your prices are greater than the typical, you might have the ability to create savings. You could be better off negotiating better prices on utilities such as rent and electricity.
- Calculate earnings per worker. This will offer a straightforward measure of efficiency and productivity. If your earnings are relatively low, research the motives; you might locate the challenge isn’t with your sales team but your merchandise, or that you’re throwing to the wrong industry.
- Workout your profit margins. Your gross profit margin (direct gain on the expense of products and services offered) will let you know how effective your manufacturing procedures are. Comparing this with your net profit margin (profit after all your prices are removed, for example, marketing and management) will explain to you how efficiently you make gains from sales. However, how can you compare with other companies?
- Conduct a benchmark audit. Are your benchmarks providing you with useful information? Otherwise, you are wasting time measuring statistics that will not have a profound impact. You should employ a range of both internal and external benchmarks to promote persisting improvement of your business. Publicly available company data is a great source of industry-specific information that could be helpful when benchmarking. Depending on the size of your business and the nature of the industry, benchmarking can be a tedious and time-consuming task, you could turn to a trusted business advisor to assist you in establishing useful benchmarks and relieve the pressures on your internal team.