Why You Should be Benchmarking Your Business

When you’re at the gym, what or who do you compare yourself against?  Is it the fittest hottest person in the room who probably spends every waking moment there (and you wonder why you can’t achieve the same results with your perhaps 1 hour every…week?).  Is it your gym buddy?  The person on the treadmill next to you?  Yourself?

As a woman, I would be lying if I said I had never compared my body to somebody else (especially growing up in the era of Elle McPhearson, Claudia Schiffer, Helena Christianson and others)…if I was a foot taller I would be much skinnier I’m sure (the fact I love wine and food doesn’t impact on this whatsoever!).

Now you could be forgiven for thinking that I’ve gone off on some weird tangent this week and I want to talk in some way about the evils of body shaming and how we should never feel compelled to compare ourselves to others.  That is a discussion I’m not prepared to enter into and certainly isn’t the focus of my thoughts this week!

Instead I wonder, what other businesses do you compare yours against?  Do you even do any formal comparisons?  Do you know how well it is performing in relation to others in your industry?

How can you know whether you are succeeding on a broader level if you don’t look outside of your own bubble to see how you are tracking? 

Industry benchmarking is a fabulously informative piece of information to see how your business is tracking in relation to others in your field.  Many reports are published at a minimum each year detailing the performance of your industry, areas of growth or contraction.  What activities key players are focussed on and what challenges are seen as looming.  At a minimum this should be a part of your self-assessment, goal creation an planning.  For example, a report recently issued in the UK on the state of the accounting industry showed the firms took on an average of 29 new clients over the 12 months the report covered.  As a UK accounting practice, you could use this information assess your own performance regarding the onboarding of new clients.

But you can be a lot more detailed than an industry report.  You could identify your three key competitors and one company to emulate and use them to benchmark against.  A lot of information is publicly available but where its not – ask.  Businesses simply love to talk about themselves and their performance.  We don’t operate in silos and just because they are a competitor does not make them the enemy.

Your accountant is another wealth of information.  They most likely see a number of businesses in similar industries and so have a feel for how they are performing.

Whilst its all well and good gathering this information, how do we then use it to drive growth?  Comparing is one thing, growth is another.

Using benchmarked information to create key performance indicators (‘KPI’s) targeted at growing your business and improving performance is a fabulous way to stay focussed on the areas which really need it.

For example, your current debtor days may sit at around 35 days.  You may think, given your personal experience, this is the norm.  Upon reviewing some industry data and armed with some information from your competitors, you realise that actual debtor days now average 14.  You can then use this information to create a KPI around reducing debtor days to say 7 or 14 days and in doing so, improve the performance of your business and improve your cashflow.

By identifying key areas in your business which you view as important for the healthy growth of your business you can really focus on making the changes necessary to meet the challenge.

“Ah Alex ‘, I hear you say, “what if after we’ve looked at all this information, we’re the leader of the pack?”.  Don’t let that stop you!  There’s nothing like the satisfaction of beating a personal best.  Celebrate and rejoice in the fact you are clearly an industry leader, then go to work challenging yourselves to stay one.  Any kind of athlete will tell you that just because you’re out in front doesn’t mean you get to rest on your laurels, you need to go to work beating yourself and punching through even more barriers.

As they always say, there’s always room for improvement.

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