While business owners in all industries have different objectives and visions for their companies, nearly all of them share one common goal: to grow their businesses and see them become more profitable.
But as the saying goes, a goal without a plan is just a wish.
In fact, a business owner who isn’t sure how to plan and measure growth is building his or her business on shaky ground. In order to see steady growth, business owners need to create a plan and monitor their progress toward their goals. That's where benchmarking comes in.
As a business owner, there are many close working relationships you have to maintain. Some of these people you likely talk to on a daily or weekly basis. These are the people who help you get your job done, such as your employees, suppliers, manufacturers, etc.
But there are also some important business relationships you have with people who you only talk to monthly, quarterly, or annually. These are the specialists and experts you rely on to advise you about making your business run smoothly, such as your accountant, legal counsel, and other consultants. You may not interact with these people often, but it’s important to know that they’re available with trustworthy guidance when you need it.
The purpose of benchmarking your financial performance is to find opportunities to improve your profitability and cash flow. The process of benchmarking is to compare your results on certain key performance measures against your past results and/or the results of other companies like yours so you can identify opportunities for improvement.
As a small business owner, you may be too busy with an endless list of daily tasks to spend much time staring at numbers. Or maybe it’s just that while you enjoy the actual work you do, you dread the accounting activities necessary to keep your business running. Whatever the reason, many business owners dread and put off the important work of examining their business’s financial health.
While it’s understandable that frequent deep dives into the nitty gritty of your business’s finances might not be your favorite task, it’s incredibly important to regularly take stock of how well your business is doing. Sustainable growth requires the ability to understand and articulate your financial history, current standing, goals, and strategies.
Learn how others do it. Download our guide to growth.