Merriam-Webster defines benchmarking as, “The study of a competitor’s product or business practices in order to improve the performance of one’s own company.”
Benchmarking is identifying a scope of comparison to discover who is best at something, whether it is in your company, your industry or the world. It surpasses guesswork and reputation by providing numerical data. Benchmarking provides a standard, a set of requirements against which you can compare your products and services. This standard helps you focus on your strengths and weaknesses to determine necessary improvements and stay competitive.
Yesterday, Promotional Consultant Today shared five steps to benchmarking your business. In part two, we share five more.
1. Weigh your costs against industry norms. These might include utility bills, wages or research and development costs. If you can highlight areas where your costs are higher than the average, you may be able to make savings.
2. Calculate sales per employee. This will provide a straightforward measure of productivity and efficiency. If your sales are comparatively low, investigate the reasons; you might find the problem is not with your sales staff but your product, or that you are pitching to the wrong market.
3. Work out your profit margins. Your gross profit margin (direct profit on the cost of goods and services sold) will tell you how efficient your production processes are. Comparing this with your net profit margin (profit after all your costs have been deducted, including marketing and administration) will tell you how effectively you earn profits from sales. But how do you compare with other businesses? Should you streamline your operation?
4. Measure your customer service standards. Customer service is a key battleground for businesses with similar products or services. Working out the proportion of sales accounted for by returning customers will give you a picture of your service levels, as will the number of complaints you receive and the time it takes to fulfil an order.
5. Obtain benchmark information without approaching an external benchmarking partner. You can benchmark your firm’s key statistics against widely available industry norms-salary surveys and published information on financial ratios for your industry, for example.
Use these benchmarking tips to provide a pathway and outline opportunities to gain market share and move beyond the competition.
Source: Atom Content Marketing, founded in 1991, was created to give clients a way to communicate effectively with the hard-to-reach small business market. Atom is run by CEO Rory MccGwire, MD Lisa Williams and a dedicated team of digital, project management, content and marketing specialists, based in the heart of Bristol, England. They’re supported by a UK-wide network of subject experts, business writers and advisers.
Compiled by Cassandra Johnson
