Benchmarking: A useful reality check
If your business is doing well, you might feel there is no need to adjust your general operations. However, implementing benchmarking from time to time can prevent complacency from impeding your progress. Think of it as a reality check to keep your business from getting stale.
Benchmarking is the process of measuring aspects of your business in order to understand your position in the market. When you compare your business practices to those of others, you may discover ways to develop or grow.
Perhaps you are currently a leader in your field after having launched an innovative new product that has earned you more customers. But once your competitors follow your lead, what's new will become old. Customers will have different expectations. Benchmarking could present an opportunity to refresh some of your practices and strategies.
Compare your business to others like it, or, if you are already a leader in your industry, look to top businesses in other fields. To get the process started, you can:
- Use online tools and calculators, such as Industry Canada's SME Benchmarking Tool, to do the job yourself
- Join an industry association to obtain available data on a particular sector
- Hire a benchmarking firm for a more in-depth analysis
Benchmarking is not simply about collecting data; there must be a focus. Rather than covering too many areas, it is more useful to narrow the scope. It may be most prudent to stick to one or two key elements that drive your business, such as customer service or turnaround time.
What can you learn from the process?
- Your strengths might allow room for improvement.
- Some weaknesses may come as a surprise.
- Other businesses may have better practices you can emulate or tailor to your own needs.
- You may develop new goals or branch out in different directions.
Results may show that you do not measure up to your competitors, but you might see exactly where the flaws are or get a sense of how to improve them:
- Do you need to allocate resources differently?
- Is your technology underutilized?
- Are your costs higher than average?
- Are you targeting the right audience?
When you make changes based on the results of this process, you may decide to make benchmarking a regular part of your business mindset — a new approach to good business health.