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Dec 2016 2 Minutes

Benchmarking

Benchmarking is the comparison of a business’ operating KPIs and other financial ratios with best practice in similar businesses. Benchmarking enables a business operator to conduct a peer-to-peer review.

It’s very difficult and lonely in small business. It’s very hard to find authentic data against which a business can compare its performance to others operating in the same business. This information is generally not known or released, which makes it very difficult for small/medium enterprise operators to know where they stand, relative to revenue generated per employee, gross profit percentages, labour to turnover percentages, net profit percentage to turnover and other performance data as compared to the overall industry performance figures.

Benchmarking is undertaken by all types of persons, not just business people. Sportspeople have been doing it for years. Cricketers, for example, are great record keepers and they compare bowling averages, batting averages, number of catches taken, etc. Some cricketers use baseballers to teach the players how to throw and how to speed up their ground fielding. Other sportspeople set and monitor actual performance against personal best for national or world records. They change parts of their technique. They understand the importance of diet. They use the most efficient equipment possible. They visualise future performance. Then they measure progress towards their target.

All these steps involve improving one aspect of their performance or technique, in an effort to improve their overall performance.

Manufacturers buy a competitor’s product and then pull it apart, looking for ways of improving their own product.

The information you could glean from undertaking a benchmark comparison report, at least on an annual basis, will significantly assist your business’ overall performance.

If you would like more information on benchmarking, please contact our office on (08) 9364 9988.