Business Benchmarking

Business Benchmarking

Australian Bureau of Statistics data estimated in 2001 there were over 1.2 million small businesses operating within the Australian private sector. That's a lot of competition. So what can SMEs do to ensure they remain competitive within the marketplace? Benchmarking is a great way for SMEs to measure themselves against their competition in order to improve internal processes and ensure they stay one step ahead of the game.

The first step for any SME is to determine key performance indicators (KPIs), which is how a business defines and measures progress towards its goals.

For an SME this may be closing on 50 percent of walk-in sales or increasing business related phone enquiries by 30 percent. The indicator must be an amount that can be evaluated at the end of benchmarking to determine the success of the campaign.

It is important to remain realistic in setting KPIs as these should be levels your organisation can realistically achieve in a set amount of time. If in trouble, remember SMART - Specific Measureable Achieveable Realistic and Time constrained. These principles will ensure your organisation determines KPIs relevant for business success.

The next step is to benchmark your KPIs in relation to other businesses within your sector. This information is often compiled by external agencies which your business can have access to for a fee.

This benchmarking demonstrates who the key performers are within your industry and the areas where your business can make crucial changes to improve profitability, reduce costs and increase efficiency within the workplace.

Benchmarking can be an extremely useful tool in determining the strengths, weaknesses, opportunities and threats within your local business environment - this foresight could help you meet future challenges and capitalise on benefits.

After the benchmarking process is complete you must determine how your business will achieve the KPIs and become a leader of the pack. Cost, time and resources are all factors to consider before implementing any campaign activity so make sure you review what you have to actually spend to assist in planning your campaign.

 Benchmarking has become an organisational catchphrase in recent years, but there is still room for improvement when it comes to doing it properly. So what is benchmarking and how can it help you grow your business?

Benchmarking lets you compare your business performance against other similar-sized businesses in the same industry. This will show you whether your performance in certain areas is ahead of, or behind, competitors. As a result, it will give you a clear picture of where improvements are needed and how to increase your profit.

Benchmarking will help you understand:

  • Where cost savings and efficiency gains could most easily be made in your business
  • How the profit level of your business compares with others in the same industry
  • The scope for growth and how growth prospects change if business conditions are adjusted.

For example, you may be able to identify that:

  • You are spending too much on rent and need to consider negotiating lower rental rates
  • Your inventory costs are higher than competitors, indicating you may need to reduce waste or negotiate better rates from your suppliers
  • Your income per employee is lower than the industry average, meaning that you may need to examine productivity levels

How to benchmark your business

You can quickly and easily conduct a benchmarking exercise for your business through website like the FMRC Benchmarking website or even Larger Banks like the ANZ. Simply enter details about your business costs, turnover, profit and other financial data and the site provides an analysis of your performance relative to other similar businesses. Once you have entered and reviewed all of your data you can:

  • See how your business performs compared to the industry average
  •  Carry out interactive budgeting to see how changing your turnover or expenditure in certain areas would boost your bottom line
  • Request a member of the FMRC Benchmarking team to review your data and point out any significant discrepancies
  • Print the results of the benchmarking so you can refer back to them to help identify improvement actions.

 

 


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