Benchmarking takes the guesswork out of business performance by evaluating aspects of your business in relation to best practice. With this information it is easier to tell what’s going well and what needs to change to ensure your business goals/targets will be met.
The PrincipleFocus benchmarking process examines the strategic structure of the business and the impact on profitability and economic sustainability. We use key ratios (Turnover, Gross Margin and Overheads) to examine the overhead and finance costs used to support the business, and other ratios to examine the income and direct cost structure of the enterprises. Over time the PrincipleFocus benchmarking system enables you to develop your own ‘history’, resulting in a three-year rolling average for each individual business – essential data for developing a robust strategic plan for positive change.There are four main types of benchmarking conducted by businesses:
- Internal Benchmarking – this involves monitoring and measuring internal performance and comparing this to own historic records. (Collaborative benchmarking is usually completed between separate divisions of the one company, which is another form of internal benchmarking).
- Competitive Benchmarking – this involves benchmarking against external competitors producing the same product. This process usually involves facilitation by a third party.
- Industry Benchmarking – is benchmarking against best practice operators or industry leaders, who operate in a similar environment, but may not be a direct product competitor.
- Generic Benchmarking – involves benchmarking a specific process from an unlike organisation. This type of benchmarking focuses entirely on “process” rather than “practice”.
Advantages of Benchmarking
Benchmarking is powerful as it has the ability to overcome the ‘paradigms’ business owners have about their business. This is achieved by challenging the ‘this is the way we have always done it’ way of thinking.
Seeing the results and achievements of others in the same industry and even other industries helps break resistance to change to new methods, tools and ideas, by demonstrating they work. This also shifts thinking to an ‘it can be done’ mentality.
Stop, Check, Correct
Benchmarking is the “check” process, which in turn allows the “correct” process of the stop, check, correct procedure!!
The habit of business analysis that benchmarking creates allows business owners to know exactly how the business is performing, rather than going by estimates or gut feel. With this information it is easier to tell what needs to change to ensure business goals/targets will be met.
Benchmarking also identifies whether or not the design of the business will meet the personal goals of the business owners.
With this greater understanding of the business performance, strategies can be developed by owners, boards and/or consultants.