Benchmarking & Valuation
As every business owner knows, it’s essential to measure your business’s performance to identify opportunities for improving your efficiency, profitability and business valuation.
You probably know how to measure your business’s performance “against itself” – for example, by conducting budgeting and variance analysis, using key performance indicators, or even comparing your revenue and expenditure this month to the previous month or this year to the last financial year.
But do you know how to measure your business’s performance against your competitors and other businesses in your industry?
The answer is business benchmarking
What is Benchmarking
Business benchmarking involves comparing your business’s performance against data about comparable businesses in your industry. This data includes figures for best practice and average performance.
Benchmarking isn’t just about your more obvious financial numbers. In addition to covering revenue, profit, expenses, and key performance indicators, benchmarking data can also compare your business’s performance in customer service, process management, staff productivity, and more.
It provides you with the information you need to discover how your business is really performing.
Your business benchmarking report is individually tailored to your business and its numbers. It doesn’t simply provide you with generalist information – it provides you with accurate, actionable data that applies to your business, so you have the information you need to transform it. Your report outlines how your business is performing, identifies areas for improvement, and provides suggestions on actions you can take to improve these problem areas.
The benefits of benchmarking fall into three main categories.
Business benchmarking highlights your business’s strengths and weaknesses. It compares your performance to industry benchmarks and indicates the level of improvement you should be aiming to achieve in underperforming areas if you wish to reach – or exceed – industry averages.
For example, your benchmarking report may suggest that your profit per client is below industry averages. However, it will also give you an idea of your profit per client, so you know how much improvement is required. This helps you to formulate realistic goals and targets for your business.
On an even more positive note, business benchmarking highlights those areas in your business that are performing as they should and those that perform above industry averages. This provides reassurance that the hard work you put into your business is paying off.
Your business benchmarking report won’t just show you what needs improvement – it will also help identify how you can make those improvements.
Your report provides suggested strategies for addressing certain problems. For example, if it suggests you need to pay less interest on your business loans, it may also put forward strategies such as negotiating a lower rate with your bank, or seeking alternative loan products with more competitive interest rates and conditions.
Benchmarking also has the power to make your business more attractive for investment or sale.
Suppose your benchmarking data shows that your business performs at or above average or has consistently improved its performance over time. In that case, your business will be attractive to potential investors or buyers, who will be more likely to pay a higher price than you might otherwise receive.
So if you’re planning on exiting your business now or even in the future, benchmarking is an excellent investment.
Information is power – and in the case of benchmarking, the information in your report will provide you with the ability to transform your business.
If you would like to enjoy the many benefits of business benchmarking, EzyGrowth can help. Contact us now to arrange a free consultation and proposal. We’re also happy to answer any specific questions you may have about benchmarking.
Your business benchmarking report compares your business to other businesses in your industry in Australia. It includes the following sections:
Do you know what your business is worth?
The optional Valuation Report is particularly useful whether you are looking to sell, raise funds or track the return on investment from business development projects.
Multiple valuation methods are available to calculate the current business value and how this value can be increased based on different strategic decisions.
Assess business development projects with respect to the likely impact on your business valuation. For example, will an increase in sales result in a higher or lower business valuation?