Why Benchmarking is Key to Achieving Performance Targets
The term benchmarking is often discussed and thrown around in business conversation but very few small businesses are using benchmarks to determine their standard of performance. Therefore, this blog post will explain the importance of benchmarking; looking at why and how you can start to implement benchmarking into your performance metrics.
Your business is progressing well and you are making a profit but do you know if you are going about things in the right way? Do you know what a successful business looks like? How do you measure your progress?
How are you doing in comparison to other businesses out there? Are you a leader in your field or are others within your industry outperforming you? What are other companies doing well that you could apply to your business to help you reach your targets? Could you improve your standard of performance to reach and exceed your goals faster?
Welcome to the world of benchmarking – a valuable process that allows you to evaluate the position of your business in relation to best practices, and measure your performance on key indicators, against other companies in your industry.
Benchmarking allows you to gain real insight and learn lessons from competitors to drive real growth in your own operation. If you have aspirations of growing your business fast you must start benchmarking to ensure the fast success of your business.
By looking at the processes that other businesses are using to achieve their success and avoiding mistakes that they might have made you can then spot areas in your organisation that could benefit from improvement and how to go about it.
This could be in other industries, in other regions or even other countries.
In other words, benchmarking can pinpoint the common reasons behind a company’s success and give insight into how to replicate or improve them in your business.
For example, your competitor might outsource elements of their production, allowing them to benefit from economies of scale. Knowing this might lead you to consider outsourcing for your business as well that potentially provide good gain to your organization.
Why Benchmark? The Key Reasons.
Benchmarking has many benefits that should be explored, here are the top 5:
1. Benchmarking is your chance to really work out why the top players in your industry are such a success. By working out the key ingredients for their success, you can use these to do the same for your business.
2. To benchmark effectively you need to look closely at and document your own business processes and identify their strengths and weaknesses. This helps you avoid making business mistakes that you may have made without this knowledge. Plus you can improve current processes for the better.
3. Benchmarking allows you to be objective about your business. It’s hard to be critical of a business that you’re emotionally invested in – nobody wants the product of their hard work and dreams to be criticised! But the objective nature of benchmarking means you can be realistic about your business performance and how it can be improved.
4. Benchmarking enables a detailed understanding of personnel productivity and allows you to then set reasonable goals for staff productivity. Measuring your staff productivity against the top companies in your industry will help you identify your productivity gaps. Improving productivity should always be a priority.
5. Benchmarking is also important in assessing your financial performance; whether it be looking at salary levels or something as simple as how much you spend on rent compared to industry averages.
How to Benchmark
So now you know the why, how do you do it?
The process of benchmarking is simple and can be broken down into 4 easy steps:
1. Have a clear understanding of your own business processes first.
2. Analyse the business processes of other companies in as much detail as possible.
3. Compare your existing business processes with the other companies that you’ve looked at.
4. Apply the successful processes that you’ve seen work for other businesses to yours.
In order to be effective, benchmarking should be an ongoing process, that requires you to be regularly looking at what is happening in the market and constantly evolving and improving your best practice.
This is where we can help. At GrowFactor we can help you initiate this process by producing a benchmarking report for you as long as you have been tracking your financial data.
You know that running a successful business can’t be done in isolation, we live in a highly competitive and connected world. Benchmarking is a clever and valuable way to assess your own business performance against others out there, learning what others are doing and improving on it.
With the power of benchmarking, your business has every chance to coming out on top.
Do you need better financial clarity?
Get a free business benchmarking report worth £2000 for limited time.