by Tash Hughes
of Word Constructions (www.wordconstructions.com)
one of those businesses terms most people have heard of,
but many of us donít know what it really means.
It actually is a
useful tool for anyone serious about developing a strong
business that will last. And you donít have to be a
marketing genius or business expert to use it, either.
In its simplest
form, benchmarking is comparing your business to others
to understand your current position and learn from it.
about learning and developing rather than winning or
losing so all comparisons are measurements. That is, if
you compare your profits to another business in your
industry and find yours are low, it could be that you
realise you can increase your prices.
The process can
be very time consuming, especially at the beginning.
Even if you contract an external benchmarking firm to
help you, you will still need to spend a lot of time
developing a plan and investigating your business.
You can choose
to benchmark your entire business or just some key
aspects of it. The main thing is to make benchmarking a
continuous process rather than a once off effort.
Why should I
your business to other businesses, you can learn a lot
about how to develop and grow your business.
- Where your
- Which areas
you can improve
- New or
different ways to do things
- What is
- Where your
strengths are and how to maintain them
- Where you can
information, you can plan ahead and improve your
business and potentially get an edge over any
competitors. It can also give you direction and
What do I
The first step
is to identify different aspects of your business and
choose which are the most important to your business
Some aspects of
business you may benchmark include:
- R & D
- Number of
- Sales methods
- Product range
benchmark one or many aspects at any given time.
Who do I
what aspect of your business you are comparing, you can
choose a wide range of businesses to benchmark against.
You donít have
to compare to other businesses in your industry,
although this is useful for things like customer types
and profit margins.
to other small businesses, related industries, a model
business or industry averages. You can even compare
yourself to your objectives and compare different
departments in your business.
How do I
benchmark my business?
One option is to
use an external company who is experienced in
benchmarking as they will gather information and provide
you with a detailed analysis of the results. However,
this may be too costly for small businesses.
It is possible
to benchmark your business by yourself, and there are a
number of benchmarking questionnaires available over the
internet to assist you.
is to form a group of 4 to 8 businesses and do a
combined benchmarking exercise. Choose businesses of
similar size and operations to make the result
meaningful, and make sure an appropriate agreement is in
place first to protect your data.
Once you have
established an aspect or two of your business to
benchmark, you will need to identify criteria to
compare. For instance, comparing administrative
processes could compare how often filing is done, how
emails are filtered and who answers general enquiries.
Put the relevant
criteria into a questionnaire form or checklist as this
is an easy format to work with. Then answer the
questions for your own business.
information to compare with will depend on the type of
information you are after. You may find it on their
websites, in their brochures, through industry bodies,
through statistics firms, asking directly, trade
journals, their annual report, or various other ways.
Be as thorough
as possible as accurate and complete data make the final
comparisons more effective.
Some aspects are
easier to compare than others Ė it is easy to compare
the number of staff but not so easy to measure customer
be converted into percentages, tables, charts and graphs
to make them more meaningful for you.
Looking at the
compared data, you may determine that some aspects of
your business need no extra work despite its importance
in your business.
arenít always black and white. Make allowances for
explanations, although donít explain away everything to
avoid acting on the results!
Sally and Jane
both run mobile hairdressing services. Sally carried out
some benchmarking comparisons and saw that Jane had more
than double the number of customers than she did.
However, as Sally was in a country town and Jane in the
city, the difference wasnít an indication that Jane was
doing a lot better than Sally. Trying get the same
number of clients as Jane wouldnít be a worthwhile use
of Sallyís time and money.
John and Bob own
businesses of similar size and structure, but Bobís
overheads are much smaller. John can see the higher
overheads are mostly due to his inner city location to
be close to his clients, but also noted that Bob cut
costs by changing power companies. John is now
researching power companies in his area.
Suzie and Fred
are both sole traders based from home, although in very
different industries. Fred noticed that Suzie was
outsourcing her bookkeeping whereas he did all of his
himself. Through benchmarking, Fred could see that Suzie
made more money by saving the bookkeeping time so he
hired a bookkeeper as well.
George and Tim
are both web designers, although Tim has only been in
business six months. Tim didnít compare how many clients
he and George have as he knew George already had a
successful client base. Instead, he compared how George
invoiced his clients and did follow up services. He
noticed a few things he could use and also realised
George tended to ignore complaints. By setting up a good
complaints system, Tim hoped to build a better
reputation and have an edge over George.
A group of five
sole traders worked together to benchmark themselves.
The five had a lot of business similarities but werenít
in direct competition with each other. By sharing
information, they all learned new practices, increased
their efficiency in general business practices and
discovered new marketing techniques.
Tash Hughes is
the owner of
Word Constructions and is available to solve all
your business writing problems! From letters to
policies, newsletters to web content, Word Constructions
writes all business documents to your style and