How can benchmarking help your business grow and prosper?

 

“Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.”
– Steve Jobs

Benchmarking is not rocket science but it’s surprising how few businesses take the opportunity to gauge themselves against their competitors and industry peers.

Simply, benchmarking helps to establish baselines, define best practices, identify improvement opportunities, and create a competitive environment within an organisation.

The data generated from the exercise can provide you with information that encourages innovation, sparking communication, ideas and new practices. It can be used as a tool to help you evaluate and prioritise improvement opportunities.

Moore Stephens Markhams encourages the concept. We facilitate two industry benchmarking surveys (legal and pharmacy) and use the information to help inform our advice to clients. We also participate in accounting industry benchmarking opportunities, putting our money where our mouth is to assess our own business performance.

 

What can benchmarking allow you to do?

  1. Gain an independent perspective about how well you perform compared to other businesses
  2. Drill down into performance gaps to identify areas for improvement
  3. Develop a standardised set of processes and metrics
  4. Enable a mindset and culture of continuous improvement
  5. Set performance expectations
  6. Monitor company performance and manage change.

Financial benchmarking

In the case of our national pharmacy benchmarking survey, which collates anonymous data from 160 pharmacies throughout New Zealand, client and non-client alike, we examine numerous financial performance indicators.

The resulting report provides insight into trends, ratios, expenses and profits, occupancy and regional KPIs. Our advisors then draw on this information to help pharmacy business owners ‘drill down’ to identify areas for improvement.

This is the sixth year of annual results and consequently, we can observe trends and work with our clients to minimise being caught by any developing risks to their profitability. For instance, from our 2018 survey we are encouraging smaller businesses to consider merging to ensure their sustainability.

We also note that it’s becoming harder for younger pharmacists to borrow to buy a business. Consequently, we are suggesting to more mature owners they consider staged buy-ins over time as an option for their exit strategy.

You can learn more here – Pharmacy report 2018.

 

Lowering labour costs

Benchmarking involves identifying problem areas and by analysing top industry performers you can identify where you are falling short. Labour costs can be one such problem area.

For example, a small manufacturing company may study how a top competitor uses robots for several basic plant functions. These robots may help the competitor save a significant amount of money on labour costs.

You may obtain information on these robotics systems through your competitor’s website or online articles. They may also identify the company that sold them the robots. Subsequently, a call by you to the robot manufacturer may help you set up your own system.

 

Improving product quality

Companies may also use benchmarking to improve product quality. Engineers sometimes purchase leading competitors’ products. These then get taken apart and studied to determine how they outlast or outperform others in the industry.

Chemical engineers may study food or cleaning or other products in a similar manner. This allows comparison of the various elements against those in their own product line. Subsequently, improvements can be made to product quality.

 

Marketing and promotional opportunities

A business that uses benchmarking to improve its functions, operations, products and services is likely to be more in tune with its marketplace. Customers are likely to notice these improvements.

You may be able to leverage these improvements through brochures, your sales reps, advertising, blogs and social media platforms. These efforts are likely to increase sales, especially among core customers.

From our experience, businesses that operate more efficiently due to benchmarking can drastically lower their expenses. These savings can lead to greater profits. And this makes the effort involved in undertaking a benchmarking exercise well worth it.

If you’d like to discuss how benchmarking could benefit your business, please get in touch.

Jonathan Roberts is a Moore Stephens Markhams associate. He has facilitated the national pharmacy benchmarking survey since its inception six years ago. He also presents at pharmacy industry conferences and seminars and writes for Pharmacy Guild’s Contact magazine. Jonathan provides business advisory and taxation services to clients involved in a large range of industries including retail, investment, farming, and legal services.

Published summer 2018

Serious about your success?