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Benchmarking: simpler than you think

A couple of our clients have come to us recently asking about benchmarking. Although they both said they understood what it meant, what it entailed and what the benefits were, they were concerned about the complexity of the job and the length of time it would take.

This struck us as slightly strange because when you get down to the nuts and bolts, benchmarking is a simple process.

Know your business

Benchmarking is essential for any business owner who truly wants to understand the performance of their business and how it compares with competitors. There are 2 key questions you need to ask when preparing to benchmark your business:

  • What do you want to measure?
  • What will you compare it to?

What will you measure?

Think about the processes that are critical to the success of your business. For example, if your company provides a service, sales and customer retention are likely to be key business drivers. If your company is in the production sector, the quality of your goods and the speed at which you produce them will be key to business success.

What will you benchmark against?

After you've decided which indicators are the most important measurements of your business's success, you must decide what to compare them against. There are a number of ways of doing this and much could depend on the age, size and strength of your business.

You could use:

  • data from businesses that operate in the same industry as you
  • statistics from similar sized businesses
  • information from companies that excel in an area you want to improve.

When you've chosen the type of businesses to measure your indicators against, it's time to collect some data. You can access basic performance data from other firms using services such as the benchmark index or you can contact the business owners themselves.

Make improvements

Once you have benchmarking information you can use it to improve how you run your business. If you are far off a particular benchmark you can adapt your processes to get you closer to where you want to be. Need help?

Our accountants and business advisers can help you achieve your strategic goals.

Contact us on 01628 631056 or email geoffk@knightandcompany.co.uk to review your business strategy.