In the most simple terms, benchmarking is a management technique used to identify "best practices" with the intent of implementing them into one's own organization.
Benchmarking can improve the efficiency and profitability of any organization. Common uses for benchmark data include:
- Improving efficiency, productivity, and profitability
- Preparing a loan request
- Creating a business plan
- Researching potential business acquisitions
Unfortunately, benchmarking is often time consuming and can be cost prohibitive. Therefore, most formal benchmarking is limited to large corporations with equally large budgets. It is typical for public accounting firms and professional consulting companies to manage benchmarking studies. However, if you have a small to medium size business, collecting simple metrics can often yield big returns. For example, when you consider the following, how do you stack up against the competition?
- Do your competitors own or lease their office space? Their equipment?
- If leasing, what is the average lease term?
- What is the revenue per employee in your industry? In your state? In your city?
- What does a typical employee benefit package include?
- Should you use permanent or temporary employees?
Would it surprise you to know more than 78% of U.S. medical practices use contract labor to supplement their regular work force? If you happen to be among the 22% that do not, you might have an opportunity to improve profitability and efficiency. How much is contract labor used in your own industry? Are you in the middle of the distribution or an outlier?
As important as understanding basic business metrics, is understanding and fully utilizing the power of internet communication. But how much knowledge does the average business have regarding the cost vs. benefit of internet advertising? Typical unanswered questions:
- What is the average amount invested in a website?
- How many hits a day should it receive?
- What should be the monthly internet advertising budget?
- How does one measure the effectiveness of an advertisement budget?
- What are others in my industry doing in this area?
Understanding what others are doing is where benchmarking becomes a business advantage. If you are in a competitive environment, recognizing trends early is critical. It's also important to understand what key areas your competitors may be using that you are not. Do you really know how many website hits is competitive? 10, 100, 1,000?
This type of information can help any business grow. If you are interested in learning how your business compares to others in your industry and in your geographic location, benchmarking is a technique you should explore. As a start, please try InstantBenchmark.com. Our information is simple, easy and always free.
Lance Allen
Managing Partner
Instant Benchmark, LLC
