One of the many benefits of working closely with an Accountant is having access to the insights and perspective that they have as a result of working with so may businesses, often in similar or adjacent industries.
As you well know, it’s very difficult for a small or medium sized business operator to find authentic data against which to compare their performance to that of their peers, as this information is generally not known or released. This makes it very difficult for business owners to know where they stand relative to other operators on some important metrics, including:
- Revenue generated per employee
- Gross profit percentage per department
- Labour to turnover percentage for each department
- Net profit percentage to turnover for each department
- Other performance data as compared to the overall industry performance figures
Benchmarking is a comparison of a business operation’s Key Performance Indicators (KPIs) and financial ratios with best practice and average performance data relating to similar businesses. It’s important to do it, some people do it without realising that the task is called “benchmarking”. Many businesses look, compare and then change the way they do things after reflecting. It’s not confined to business either, for example, sportspeople do it. Our cricketers are a great example. They use baseball players to teach cricketers how to throw and how to speed up their ground fielding.
Other sportspeople set and monitor their actual performance against “personal best” or national or world records and change part of their technique to improve. They understand the importance of diet. They use the most efficient equipment possible. They visualise future performances. They then measure progress towards their targets, as these steps involve improving one aspect of their performance or technique, in an effort to improve overall performance.
Benchmarking a business can assist business owners to identify the areas within their operations that have room for improvement so that strategies can be implemented to achieve the improved results for your business. Please contact your usual Hanrick Curran adviser or one of our Business Advisory specialists if you would like to discuss the opportunity and benefits in completing a benchmarking analysis on your business.