So, your business is doing well and things are tootling along just fine. But how does what you do compare to industry norms, and what could you be doing better?
Taking time to think about how your business compares to others is what industry calls benchmarking, but what is it, why should you do it, and what does it entail?
What is benchmarking?
In a nutshell, benchmarking is the process of looking at what your business does, and comparing it to one or more others using a set of pre-determined measures.
Why should you do it?
Ongoing evaluation is key to business growth. Tools such as the SWOT analysis (link to earlier post) are great for internal evaluation, but benchmarking is another useful tool that allows you to take a look at your competition and at industry leaders to see how your business compares to theirs.
Who should I benchmark against?
“I tell young entrepreneurs to use the leader in their industry as a benchmark as they create their own brand. Don’t look at what your competition is doing – if you emulate the leader in your industry, you will achieve a higher level of engagement with consumers and make their buying experience richer.” Steve Stoute, Founder of brand development and marketing firm Translation.
You can benchmark your organisation against one or more companies in your sector. Some people choose comparable companies, such as those of a similar size, age, or another common factor. Or, if you fancy a real challenge, you can follow the advice of marketing pro Steve Stoute and benchmark against your industry leader. Obviously if you are just starting out, this may not result in the most favourable outcome, but if you choose to use it as inspiration to set long term goals, it could be a bold move.
What does it entail?
After identifying who to benchmark against, the next step is to identify what to use as benchmarking measures. These will differ depending on your business, but remember they need to be SMART:
Measures might include:
- sales per employee
- production costs
- overhead costs
- profit margin
- production time
- customer service measurements
- resource allocation
- marketing spend.
The exact measures chosen will differ from company to company, but need to fit into your key success criteria. If you are a service-based company, this will likely focus on customer care, retention and recommendations. If you a production-based or sales-based organisation these will look different.
Remember to also consider looking at your competitor’s strategic focus. Are they investing heavily in marketing at trade shows with bigger and better displays, getting their brand out there and in front of new customers? Do they focus on customer care? What could your company learn from their strategic objectives?
Finally, don’t forget that benchmarking is not about comparison for comparison’s sake. Good benchmarking leads to identifying improvements that can be made. This is about improving productivity, increasing competitiveness, and ultimately, growing your business.