Business Benchmarking

What is Benchmarking?

Benchmarking is the act of measuring a specific metric against an established, or set, indicator. When it comes to business benchmarking, this is a process undertaken to determine how an organisation is performing compared to other similar businesses within the same industry. The process of business benchmarking involves obtaining high-quality data from real businesses and then undertaking a detailed analysis to determine a range of best practice indicators.

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Benchmarking for Businesses

For businesses, it is important that benchmarking data not only compares business demographics such as size and income, but also performance metrics. There are many types of benchmarking which business owners can utilise to drive sustainable business growth, however, the most important are:

  1. Performance benchmarking: undertaken to analyse overall business performance. This includes comparing overall revenue and expenses, profitability, business value and cost of goods sold.
  2. Process benchmarking: to assess how a business performs operationally against industry peers. This includes analysing productivity, asset usage, employee performance, stock turn rates and investment decisions.
  3. Strategic benchmarking: the process of analysing a competitor’s decisions. This includes comparing how much focus competitors have on products vs. services, how much do they invest in customer services, how many employees do they have to achieve high profits, how valuable is a good location and what areas of the business do they invest in.
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External and Internal Benchmarking

Business benchmarking can also be broken into two categories: external and internal. External benchmarking is the process of comparing statistical data of an individual business against a wide range of other similar businesses. Whereas internal benchmarking is setting internal goals and then assessing the businesses achievement against these targets. Internal benchmarking can also be the process of comparing internal departments against each other to establish company benchmark standards. Our software delivers a range of both internal and external benchmarking solutions:

Industry-Wide Benchmarking

Benchmarking an Individual Business

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Internal Benchmarking

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Why Should Businesses Benchmark?

One of the most important uses of benchmarking is to assess a business’s performance against direct competitors. This enables business owners to keep a competitive edge in a growing economy.

Annually benchmarking a business against the industry enables business owners to gain a clear accurate picture of how their business is performing. This enables companies to see their real performance levels and identify opportunities for improvement.

Business benchmarking should also be used to assess spending habits to ensure management is investing wisely. For example, if a business is spending much less than the industry standard on information technology, it may be worth investing in systems to increase productivity.

It is also important for businesses to review the pricing of products and services regularly. This ensures companies know how much they should charge for products and services based on the industry benchmarks.

Benchmarking annually can further support businesses to address any issues with customer service by assessing how much to spend on servicing and value-adding for customers. This process can increase customer satisfaction and ultimately lead to increased repeat business.