I often get asked the question “How does my business compare against the industry?” Despite what you think about your business, most businesses in an industry are average at best. So what does that mean for benchmarking? Is it the average results from a sample of average firms? Or is it the average of an industry? I subscribe to the former. Let’s compare the best performers in an industry and the worst. The best performers are focussed on their own KPI’s and are educated on what their competitors are up to. Not all firms in an industry are competitors of the best performers, only those ones competing for the same target market with similar service or product offerings. Do you really think that the major players are concerned about the minnows? The top performers are where they are because they don’t follow the crowd, they forge new paths and set their own targets and benchmarks.
The worst performers in an industry will pull the average down that is if they even have time to subscribe to a benchmark, let alone interpret the results. The worst performers generally lack business acumen, creativity, fiscal discipline and strategic direction.
Don’t get me wrong, I’m not saying that benchmarks aren’t useful. I am saying that they only are drawn from a sample of the businesses in an industry and at best provide you with a sample of the average performers.
If an athlete wants to be the best in their sport, state, country or the world, do you think they benchmark their performance against the average and develop their training program based on the average? No way! They set their goals based on what they believe, what they want to achieve, and they are not satisfied with being better than the average. They want to be the best they can be.
Be the best business by benchmarking your business against yourself, not others.
For every professional services firm I offer a free Profit & Cash Flow Improvement Potential Review using your numbers. We will meet and discuss the financial position of your business, and discuss strategies that you can implement to drive improvement. I will also provide you with a report for you to refer to. Just click on firstname.lastname@example.org to doing something different to achieve improved profit and cash flow in your firm.
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