Three aspects of your firm that can be analysed in benchmarking

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An essential area of modern business, the benchmarking process allows companies to compare their operations against those of other firms working within the same industry, providing a means of improving performance and, ultimately, driving up profits.

Here, we’ve set out some of the components of your business that might be examined through benchmarking:

Processes

Without looking at a company’s fiscal performance, its processes alone will hint at whether or not it will succeed financially. Depending on a business’ sector, the benchmarking process may examine its production methods and stock management, while quality control may also be looked at, as all this will have an effect on overall performance.

Similarly, technology uptake, for example, the implementation of new software or equipment, is also important, and offers an easy method of business-to-business comparison. Have competitors taken new technology on board and, if so, have they benefited from it in any way?

Profit margins

Perhaps the most obvious method of analysing a company’s performance, and a more quantifiable indicator of the effectiveness of a company’s processes, it is important to look at profit margins. The gross profit is the money made directly from any products or services sold, while the net profit is the amount made after costs, such as administration and marketing, have been taken into consideration. A comparison of the two will show those carrying out the benchmarking just how effectively profits are earned from the sales generated.

As will other aspects of the company, the data generated can then be compared to similar stats from other firms. If their profit margins are greater, it shows that there are areas in the business that could be tweaked.

Strategic objectives

What a business intends to do is almost as important as how it actually performs. With this in mind, benchmarking may examine the company’s strategies. If competitors are outperforming you, where does their edge come from?

It could be the case that their emphasis on quality control is leading to improved customer satisfaction and increased sales, or their renewed focus on e-commerce has allowed them to tap into a larger pool of customers. Benchmarking may look at the strategies of other businesses, allowing you to see if your own company would benefit from the same approach.

To get the most out of the process, it’s advisable to outsource to accounting services. Qualified benchmarking professionals will be able to examine the shifting components of the modern business world, and offer advice on how they affect a company’s sales performance.