Do you ever wonder how your business compares with others in the industry? One way to find out is through benchmarking.
Benchmarking is the process of evaluating your business’s performance by comparing it to other similar businesses in your industry. The first step is to identify processes that you and other businesses follow. This would help give you a basis for comparing performances and determining the most appropriate benchmark for your business.
Apart from letting you know how competitive your business is, benchmarking also helps you discover areas of improvements. As a result, you get to improve your processes and boost your performance.
Types of Benchmarking
There are many types of benchmarking. If this is your first time to do it for your business, you may start with the most important. They are the following:
– Process Benchmarking — Process benchmarking evaluates your business’s operation and compares it with others. This includes assessing processes like investment decisions, stock turn rates, asset usage, and productivity.
– Performance Benchmarking — This type of benchmarking focuses on metrics like profitability, revenue, cost of goods sold, and business value.
– Strategic Benchmarking —With this type of benchmarking, you analyse your competition’s strategy to gain insight in their business performance. For instance, you may assess how they focus on investing in customer services or determine which aspect of their business they prioritise more. You could also look into how their location and number of employees affect their profit.
How to Get Started
Benchmarking may seem overwhelming but it doesn’t have to be. Here are some tips to get started on benchmarking.
Create a Yearly Operations Plan
This will help you zone in on what you want to achieve for your business annually. It also helps ensure that you and your employees are on the same page when it comes to implementing strategies for growth. An annual operations plan makes it easy to develop benchmarks and compare your yearly performance with other businesses.
Develop a Five-Year Plan
A long-term plan gives your employees and stakeholders an overview of where you want to take your business in the future. With a five-year plan, you’d be able to streamline your operations plan and make sure you are working towards your long-term goals. Additionally, you could include business forecasts and industry performance to ensure that your business’s performance is at par with the rest of the business in the industry.
With benchmarking, you can make your business more efficient and reduce costs. Furthermore, it could help you discover opportunities that could make your business more competitive.
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