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 sprinter and run alone, how will you know how you relate to others who also sprint? The theory also applies to corporation and small business owners.
For example, consider you operate a Plumbing shop or corporation selling bathroom fittings. You might assume your operation is performing OK by achieving a gross profit ratio of 30 percent
But what if other similar 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 critical element for business improvement as it lets you know and gives you clarity to notice what it takes to be the best in your area, and what it means to be a leader in your industry.
Benchmarking means that you can:
- Watch for revolutionary ideas and highly profitable operating practices and then relay these to your own undertaking.
- Delve into your own organisation without the emotion by watching the numbers and make the necessary improvements to match 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.
- Admit others in your market are performing better than you, to gather how they are doing it and then apply that information to your 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 noticed that corporation operation can develop quickly after using benchmarking as a tool to gain deeper corporation advancement
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 operation measures (KPI’s) that drive and support your business
- Look at key performance Indicators (KPI’s) that help your business to prosper.
- Learn to share and assess your corporation financial performance openly
- Get clear on how your bottom line is impacted by changes that you make.
- Talk effectively between your small business adviser, accountant and financial institution
- Understand how banks evaluate company operation
- Understand the most operational habits to increase your cash flow. While study is exceedingly enjoyable and even pleasing it can be very complex 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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