Benchmarking provides a means to compare your business against similar businesses, and identify areas where you can improve your performance. Rather than being a pointless exercise in data analysis, it can help you identify areas where you can implement changes and make your business more profitable. It gives you an insight into different ways of working, which can give you an edge over the competition.
To benchmark your business, start by deciding which areas you want to compare. Select those that are central to achieving your key business objectives, such as sales, margins or payroll costs. For example, you might want to assess your business costs against industry norms.
Our regional economy is driven by a number of industry sectors: tourism, healthcare, professional services, banking, and insurance, but leading the way are construction, manufacturing, wholesale and retail trade, support services and restaurants. Below are some high level performance benchmarks covering 95% of these businesses with sales under $25 million:
Average Sales Volume ($ millions)
Discretionary Earnings %
Construction $1.55 10.5%
Manufacturing $3.30 11.0%
Wholesale Trade $4.30 6.4%
Retail Trade $1.56 6.7%
Support Services $1.12 12.2%
Hospitality $0.91 13.4%
Discretionary earnings represents cash flow before owners’ salaries as a % of sales.
When looking at benchmark data, some simple but important questions should come to mind:
- How does this compare to your business?
- How can you grow your sales to reach, or even exceed, the industry averages?
- Where is the profitability level of your business relative to industry averages?
- What are the key drivers of profitability for your business?
More specific benchmarking can be done for your business in its specific industry sector, comparing to closely-related businesses in size, geography, and business activity.
Benchmarking can identify opportunities in your business, enabling you to develop strategic initiatives to improve performance. Suncoast CFO Solutions would welcome the opportunity to discuss benchmarking for your business and how it can help improve your performance.