Using Business Benchmarks – Three Points for Advisors

May 27th, 2019

Three points for advisors

One point that can be made about ‘Business Benchmarks’ is that they are a tool.

They are not the ‘complete answer’ to every possible question a client might ask you.   It’s not the one tool that will fix absolutely every problem that you are going to run across.  But they will enable you as an advisor to spot major weaknesses in a company’s performance – so you can play a vital part in fixing the underlying problems.

The second point to keep in mind is that ‘Benchmarks’ are indicators or guides.  An average gross margin might be 32.37% so if a client has a 32% or 33% result compared to a margin of 32.37%, then that’s not a problem because they are reasonably close to the average.   The idea behind ‘Benchmarks’ is to show someone who is on 25%, 26% or 27% that they should be aiming for something like 32% or 33%. So, don’t get too hung up on the second decimal place.

Thirdly, you can use Benchmarks as part of a staged approach to improving a business.  Athletes and sports people always set progressive targets. If somebody is a good quality ‘local’ athlete, then before they can begin to do something at a higher level they must start regularly beating Club records; then they set their sights on regularly beating the State records until they get to the stage where they become an elite athlete and they start thinking about the national or international record.  In the same way, staging your clients through a process of improvement is an important concept to remember. So, Benchmarks or targets can be set in stages; they also can move, in line with changes in general commercial practice.

A key benefit from using ‘Business Benchmarks’ is to give better advice with greater confidence.   When clients start asking: “Do I have a problem? I think I have a problem. Do I really?” you have access to some hard numbers from research across Australia, to say “yes, you do” or “no, you don’t”.

Ready to start using Business Benchmarks to help you clients? Try the Benchmark Suite! (for Accountants) (for Business Advisors)

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