Benchmarking provides a means to compare your firm against other businesses, and identify areas where you can improve your performance. Rather than being a pointless exercise in data analysis, it can help you to identify areas where you can make changes and make your firm more profitable. It gives you an insight into different ways of working, which can give you an edge over the competition
To benchmark your business, start by deciding which areas you want to compare. Select those that are central to achieving your key business objectives such as finance, sales or margins. For example, you might want to assess your business costs against industry norms.
Look at the mechanics of your business. How well are you using your technology, for example? Are other businesses benefiting from new ways of doing things? Think how other firms’ objectives can benefit your business.
Avoid over-complicating your approach — stick to one or two key indicators to benchmark. The more focused your research, the more useful it’s likely to be.
Benchmarking indicators include:
Now you need to decide against which businesses you will benchmark your firm. At a basic level, you can compare your figures against available industry norms. It is worth comparing your operations with firms outside your sector who excel in areas you want to measure. Analysing their approach and adapting it could help you overtake competitors.
You can access basic benchmarking data using the Benchmark Index. You could also contact your trade association or business support organisation to ask whether they can provide information about benchmarking organisations relevant to your business sector.
You can join forces with other businesses so that you can both carry out comparisons on an ongoing basis. It is vital that you come to an arrangement with a business (or businesses) of a similar size and structure — and one with similar objectives.
Your trade association or local business support organisation might be able to help you find such a partner. Alternatively you can pay to use the services of a benchmarking adviser.
It’s a good idea to draw up a benchmarking agreement with your partner. This should include the information you want to exchange and how it will be used. Never ask for information that you are not prepared to share in return.