Your business is underway and things are progressing, but how do you know if you are going about things in the right way?
How are you doing in comparison to other businesses out there? Are other companies doing things that you could apply to your business 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.
As we discuss in Tip 9 of our eBook ‘10 tips for busy business owners’ it’s important to understand the success factors of your industry. Benchmarking allows you to gain real insight and learn lessons from competitors to drive real growth in your own operation.
In this post we’ll shine some light on the benchmarking process, and examine the most important reasons why you should be benchmarking for success.
Benchmarking in a nutshell
Most simply put, benchmarking refers to looking outside of your business at how other businesses are performing.
By looking at the processes that they’re using to achieve their success and avoiding mistakes that they might have made (and these could be in other industries, regions or countries) you can then spot areas in your organisation that could benefit from improvement and how to go about it.
In other words, benchmarking can pinpoint the common reasons behind a company’s (or more often, a group of companies examined as an industry) success and give insight into how to replicate or improve them in your business.
The process of benchmarking can be broken down into 4 generalised steps:
- Have a clear understanding of your own business processes first.
- Now analyse the business processes of other companies in as much detail as possible.
- Compare your existing business processes with the other companies that you’ve looked at.
- 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 regularly looking at what is happening in the market and constantly evolving and improving your best practice.
5 reasons you should be benchmarking
- 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.
- To benchmark effectively you need to look closely at your own business processes and identifying their strengths and weaknesses. By doing this you can avoid making business mistakes that you may have made without this knowledge.
- 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 criticized! But the objective nature of benchmarking means you can be realistic about your business’ performance and how it can be improved.
- 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.
- 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 stationary supplies compared to industry averages.
Benchmarking made easy
At RightWay, one of our favourite ways to benchmark is to use Ranqx – a Kiwi app solution that allows you to simply and easily compare and improve your business.
When you use Ranqx they will link your accounting data (securely, confidentially and anonymously) into their database and compare it against businesses like yours, in your industry.
When you use Ranqx you get:
- Fast, up-to-date financial benchmarking where you can see where you stand in comparison to your industry
- Easy to understand visual comparisons on key metrics like revenue and operating profit
- Solid ideas on what needs improving to measure up to your competition
- Profit forecasting.
And, we want you to know that we’re recommending Ranqx simply because we think (well, we know) it’s an incredible and powerful app that really helps New Zealand business owners – we have no financial investment in Ranqx.
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 smart help available like Ranqx there’s nothing stopping you from making the most of this exciting and game changing analysis.
You don’t need to reinvent the wheel – see how your business stacks up, find out what others are doing really well and use this knowledge to your advantage. With the power of benchmarking, your business has every chance of coming out on top.