How do you compare with others? Or Benchmarking in modern parlance

Competitors – you need to know all about them

  • Who are they?
  • What are they up to?
  • How well do they perform?
  • How do you compare?
  • Why they perform better than you in some ways?
  • What would you need to do to be the best?

The “trade”

  • What can you learn from them?
  • How do the key financial ratios compare?

If they are doing better than you and you can find a way of matching or surpassing them, the benefit outweighs any consideration of whether the comparison was relevant in the first place. Don’t allow yourself to fall into the “that doesn’t apply to us” trap!

Here are a few “control points” you will find useful when comparing yourselves with others. I am sure you will think of some more specific ones that apply particularly to your type of business. If you cannot find an external benchmark, then set your own and aim to improve each year by 5% or 10%

Here’s some simple ratios you’ll find useful:

Financial

  • Debtor days
  • Creditor days
  • Stock turn
  • Gross profit
  • Profit before interest and tax
  • Output per employee
  • Liquidity and borrowing
  • Current assets
  • Departmental efficiency measures

Employee measures (will tell you how good management is)

  • Absenteeism
  • Labour turnover
  • Sickness
  • Suggestions made each month.

Marketing and sales measures

  • % spent on advertising
  • % spent on marketing
  • Call to order rate
  • Targets to achieve the sales results forecast.

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