Continually being profitable is the aim for many small business owners in New Zealand. After all, putting in the hard work for a healthy reward is certainly an impressive achievement. However, what about those enterprise owners who want to continually push onto the next level, and perhaps even become a leader in their sector?
Well, that's where small business benchmarking comes in. In essence, it's the process of gathering information around your closest competitors, and seeing how your endeavour stacks up. Naturally, benchmarking can be carried out in a number of different ways, but here are three top tips:
1. Assess the industry leaders
As touched on, a solid benchmarking plan starts with intelligence gathering. Fortunately, the Inland Revenue Department (IRD) has financial information for over 45 sectors, and you can see some of the facts and figures behind those Kiwi businesses that are most successful.
The IRD data is grouped by industrial classification, but even niche sectors such as agricultural machinery, bakery products and sports equipment trade are all covered in depth. Consequently, even if you may think that your businesses offerings are one of a kind, there should be some information available that can help you assess performance.
2. Calculate performance ratios
The IRD explained that the next step is a case of calculating your company's performance ratios. These are all centred around company finances and give you a snapshot of how the business is performing from a capital perspective.
Using small business software such as CashManager from Accomplish can be a big help here, ensuring that any research you carry out around the facts and figures give an accurate representation of performance.
3. Leverage the right tools
As touched on, accounting software is a must when attempting to benchmark your business. However, there are a raft of other tools that are just as applicable.
Specifically, many of the big banks - including ANZ - offer free services that can help you better establish everything from your debt ratio to your gross profit margin and working capital, amongst many other figures that are central to a successful benchmarking strategy.