Ten Ways To Benchmark Your Business

 By

Derek Williamson

FAIA, FFA, FIPA, CME

 

What is Benchmarking?

Benchmarking is the comparison that HMRC does on every business, comparing it with its competitors using the SICC codes.

This information is now available to you.

So by comparing you to businesses in your sector that do things differently, you can see whether your results could be better if you did things differently too. And by helping you to learn what is possible for others in your sector, it also makes it easier for you to work out what to do to improve your business and your results.

Goddards with the help of AVN have invested in software that helps to compare your performances to thousands of other businesses. As a result, we indentified 19 key financial rates that we can use when comparing your results to the rest of your industry. We can then use those comparisons to estimate how much extra profit you might be able to earn by doing what they are doing.


Ten ways to benchmark your business

Benchmarking provides a means to compare your firm against other businesses, and identify areas where you can improve your performance. Here are ten aspects of your business you should assess to see if you measure up.

  • 1.Focus on your key business drivers. These are the processes that underpin the success of your firm, and will vary from sector to sector and business to business. If you provide a service, customer care is likely to be a key business driver; if you are a high-volume manufacturer, production-line speed will be a key business driver.
  • 2.Decide who to benchmark against. Your trade association or local business support organisation should be able to suggest benchmarking partners. Pick firms of a similar size and with similar objectives to help work out industry yardsticks; but also compare with firms outside your sector who excel in areas you want to measure - importing their approach could help you leapfrog competitors.
  • 3.Compare strategic objectives. Can you learn strategic lessons from benchmarking partners? Does a focus on quality standards give them an edge, for instance? Are they developing online sales channels? Think what other firms' strategic objectives would bring to your business, if anything.
  • 4.Assess theefficiency of your processes. Look at the mechanics of your business - the production techniques, quality controls, stock management and so on. How effective are they? How well are you using your technology? Are other businesses benefiting from new ways of doing things?
  • 5.Analyse your allocation of resources. Are you putting resources into the same areas as your benchmarking partners? Do they have more employees, or fewer? In which parts of the business? Have they invested more in IT and other equipment? Are they spending more on marketing?
  • 6.Weigh your costs against industry norms. These might include utility bills, wages or research and development costs. If you can highlight areas where your costs are higher than the average, you may be able to make savings.
  • 7.Calculate sales per employee. This will provide a straightforward measure of productivity and efficiency. If your sales are comparatively low, investigate the reasons; you might find the problem is not with your sales staff but your product, or that you are pitching to the wrong market.
  • 8.Work out your profit margins. Your gross profit margin (direct profit on the cost of goods and services sold) will tell you how efficient your production processes are. Comparing this with your net profit margin (profit after all your costs have been taken off, including marketing and administration) will tell you how effectively you earn profits from sales. But how do you compare with other businesses? Should you streamline your operation?
  • 9.Measure your customer service standards. Customer service is a key battleground for businesses with similar products or services. Working out the proportion of sales accounted for by returning customers will give you a picture of your service levels, as will the number of complaints you receive and the time it takes to fulfil an order.

10.Obtain benchmark information without approaching an external benchmarking partner. You can benchmark your firm's key statistics against widely available industry norms - salary surveys and published information on financial ratios for your industry, for example.


  • We detail below key areas to benchmark
  • Year end
  • Region
  • Accounts Start Date and End Date
  • Turnover This Year
  • Turnover Last Year
  • Gross Profit
  • Interest receivable and similar income
  • Interest payable and similar charges
  • Profit on ordinary activities before taxation this year
  • Profit on ordinary activities before taxation last year
  • Owners’ market salary or drawings
  • Tax on ordinary activites
  • Total team costs
  • Outsourced cost of sales
  • Fixed Assets
  • Current Assets
  • Current Liabilities
  • Long term Liabilities
  • Trade debtors
  • Stock and work in progress
  • Number of employees


For further information about Goddards Accountants, please call us at our offices:

Brixton Office

c/o Technoestates

102 Acre Lane

Brixton

London

SW2 5QN

High Wycombe Office

c/o Franklin James

Axis 40, Oxford Road,

Stokenchurch,

High Wycombe

HP14 3SX

Croydon Office

c/o Technoestates

109 Church Street

Croydon

Surrey

CR0 1RN

Head Office

Spirit House

8 High Street

West Molesey

Surrey

KT8 2NA

Tel: 020 8941 2187

Email: info@goddards-accountants.co.uk

Website: www.cloudaccountingsurrey.co.uk

Skype: willconsult69 (Derek Williamson)

Ten Ways to Benchmark Your Business.pdf