Benchmarking is the act of measuring a specific metric against an established, or set, indicator. When it comes to business benchmarking, this is a process undertaken to determine how an organisation is performing compared to other similar businesses within the same industry. The process of business benchmarking involves obtaining high-quality data from real businesses and then undertaking a detailed analysis to determine a range of best practice indicators.
For businesses, it is important that benchmarking data not only compares business demographics such as size and income, but also performance metrics. There are many types of benchmarking which business owners can utilise to drive sustainable business growth, however, the most important are:
One of the most important uses of benchmarking is to assess a business’s performance against direct competitors. This enables business owners to keep a competitive edge in a growing economy.
Annually benchmarking a business against the industry enables business owners to gain a clear accurate picture of how their business is performing. This enables companies to see their real performance levels and identify opportunities for improvement.
Business benchmarking should also be used to assess spending habits to ensure management is investing wisely. For example, if a business is spending much less than the industry standard on information technology, it may be worth investing in systems to increase productivity.
It is also important for businesses to review the pricing of products and services regularly. This ensures companies know how much they should charge for products and services based on the industry benchmarks.
Benchmarking annually can further support businesses to address any issues with customer service by assessing how much to spend on servicing and value-adding for customers. This process can increase customer satisfaction and ultimately lead to increased repeat business.