Naturally all entrepreneurs want to see their business improve year-after-year. But how does that happen? Benchmarking is a great way to continually improve your business. It gives you insights into how your business is really doing, as well as how it compares to the competition.
What are the key metrics for your Industry?
Each industry is different and therefore the measures for benchmarking will also widely vary. Below I will explore some of the more common benchmarks.
Typical Measures:
Financial / Profitability
• Revenue growth
• NPAT growth
• ROE growth
• Profit Margin
• Cost Growth
• Return on Assets
• Return on Investment
• Inventory Turnover
Performance – time, cost, quality
• Delivery Time
• Time to answer calls
• Waiting time on hold
• Cost of Acquisition of new customers
Operational
• Risk Management (e.g. injuries)
• Website downtime
• Employee efficiency
Customer Service
• Number of customer complaints
• Time to deal with complaints
• Referrals
• Customer Retention (months/years as a client)
• Repeat Business / Returning Customers
Marketing
• Market Share
• Ad Campaign Success (e.g. items sold per ad)
• Brand Recognition
• Customer Surveys
• Cost/Benefit
Digital Media
• Traffic to your site
• Page views
• Site engagement (downloads, sign ups)
• Site monetization
• Time spent on the site
Social Media
• Likes / Follows
• Shares
• Traffic directed to site
• Ad campaigns
Choosing Suitable Metrics
How do you choose which metrics to use in your business? Here are some tips:
➢ Easy to Understand – if management don’t understand it – they wont use it!
➢ Easy to Measure / Capture – ensure the information is relatively easy to capture and also easy to measure accurately. There is no point collecting data that takes too long to obtain or is not accurate.
➢ Relevant – track data that is relevant to the business’s overall objectives
➢ Objective – the data needs to usually be in a quantitative form rather than based on the opinion of a staff member. Subjective data is likely to be manipulated, whereas quantitative data tends to speak for itself!
➢ Implementable – there is little point tracking information that wont be used by the business in a meaningful way or couldn’t be used even if you wanted to.
Benchmark against customer expectations and business objectives; don’t just compare yourself to your competitors.