Business Benchmarking: How Efficient Is It?
Just Like sport, in business , we like to develop how we are doing by looking at how well others are doing
If you are a runner and train on your own, how will you know how you equate to others who also run? The principle also applies to company and business owners.
For example, imagine you manage a Plumbing shop or big business selling bathroom gear. You might assume your business is performing OK by getting a gross profit measurement of 30 percent
But what if other comparable businesses in your industry are doing better and achieving a gross profit of 45 percent?
That could indicate that there is certainly room to get better and do better. In brief, benchmarking provides you the targets to do all you can towards because they equal operation with other alike businesses in your industry (your competitors).
Benchmarking is a necessary component for company development as it lets you know and gives you transparency to ascertain what it takes to be the greatest in your area, and what it means to be a leader in your industry.
Benchmarking means that you can:
- Look for new ideas and vastly successful operating practices and then relate these to your own undertaking.
- Explore your own organisation without the sentiment by looking at the numbers and make the necessary improvements to rival or beat your competitors.
- Comprehend and recognise the shortcomings in your own company and then to create and put into practice a business strategy to eliminate or improve those failings.
- Acknowledge others (your competitors) are performing in some areas then to find out how they are doing it. Then employ and adapt those practices to your small business.
PricewaterhouseCoopers “Trendsetter Barometer Survey” noted that “fast growth companies who used benchmarking information to appraise company operation against their peers achieved 69% faster growth and 45% greater productivity over those who did not.”
Preparation / Examination This feature of company management is generally not well understood. It’s largely neglected by most big business owners but it can generate huge rewards.
As chartered accountants, we’ve seen business accomplishment in our clients progress dramatically after using benchmarking as a tool to gain deeper business intelligence.
Analysis can mean you can see a particular strategy will generate the best return for investment, and then quantify and measure 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 accomplishment indicators and benchmarks prior to making strategic / key discussions.
Good scrutiny means you can:
- Identify key accomplishment measures (KPI’s) that drive and support your big business
- Use information to create and grow financial and corporation strategies that actually work that can be measured.
- Ascertain to talk and rate your business financial accomplishment clearly
- Be exceedingly clear what effects the bottom line is impacted by changes that you implement
- Speak successfully between your company adviser, accountant and financial institution
- Recognize how banks rate company performance
- Understand the most effective ways to boost your cash flow. While examination is vastly enjoyable and even rewarding it can be extremely intricate and is best left to specialists.
Your accountant can advise you how you can use this process in your company.
Paul Easton works in marketing for John Roe – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is an accounting firm specialising in property and business accounting in New Zealand. Search Engine Optimisation by Digitalawol.com
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