like any competitive pastime, we measure how well we are doing, by looking at others. This is a good way to improve yourself and your business

If you are a sprinter and run alone, how will you know how you compare to others who also run? The principle also applies to business and business owners.

For instance, suppose you operate a Plumbing shop or business selling bathroom fittings. You might think your operation is performing OK by reaching a gross profit percentage of 30 percent…

But what if other similar businesses in your industry are doing better and reaching a gross profit of 45 percent?

That could indicate that there is certainly room to improve and do better. In short, benchmarking gives you the targets to strive towards because they match performance with other similar businesses in your industry (your competitors).

Benchmarking is a vital constituent for business development as it lets you understand and gives you clarity to discover what it takes to be the best in your area, and what it means to be a leader in your industry.

Benchmarking means that you can: – Look for ground-breaking ideas and highly successful operating practices and then relate these to your own operation.

– Explore your own organisation without the emotion by looking at the numbers and make the required improvements to equal or better your competitors.

– Understand and Recognise the shortcomings in your own business and then to create and implement a business strategy to eliminate or improve those failings.

– Admit others in your market are performing better than you to learn how they are doing it and then apply that information to your business.

PricewaterhouseCoopers “Trendsetter Barometer Survey” noted that “fast growth companies who used benchmarking information to measure business performance against their peers achieved 69% faster growth and 45% greater productivity over those who did not.”

Planning / Analysis This factor of business management is generally not well understood. It’s largely neglected by most business owners but it can generate huge rewards.

As chartered accountants, we’ve noticed that business performance can improve quickly after using benchmarking as a tool to gain deeper business advancement.

Analysis can mean you can see a particular strategy will generate the best return for investment, and then quantify and measure the result of your decisions on profitability BEFORE investing time and money on implementation.

The best managers systematically do a review and analyse financial results, key performance indicators and benchmarks prior to making strategic / key discussions.

Good analysis means you can:

– Look at key performance Indicators (KPI’s) that help your business to prosper

– Use information to create and grow financial and business strategies that actually work that can be measured.

– Learn to communicate and measure your business financial performance clearly

– be very clear what effects the bottom line is impacted by changes that you implement.

– Communicate successfully between your business mentor, accountant and financial institution – Understand how banks measure business performance – Learn the most effective ways to increase your cash flow While analysis is very enjoyable and even rewarding it can be very intricate and is best left to specialists.

Your accountant can advise you how you can use this process in your business.

_______________________________________________________________________________________

– Paul Easton works with John Rowe – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is an accounting firm specialising in property and business accounting