Benchmarking
March/April 2003

Benchmarking - how do I really use it?
By Ross Turvey, Business Analyst

L

ink the financial results of a business back to the procedures that are driving the result. You can then fix the processes and the financials should improve too.

Benchmarking isn't just some fad - we instinctively look, compare and then adjust the way that we do things. We've done it for thousands of years, in many different ways. We set targets, then we measure the impact of the changes.

Sports people do it all the time: they record the current position; they change technique; they monitor diet; they visualise future performances. Then they measure progress towards their target. Manufacturers do it by buying a competitor's product then pulling it apart. You can and should do it as a way of continually improving your business - no matter how well you are already doing!

Where can you improve?
What process or activity should you benchmark in your business? Staff turnover? Low gross profit? High cost? Reduced hours from the owners? Pick an area that will respond to your actions. Look for the biggest costs, or the biggest problems, or the factors that will make the biggest impact on your customers' perceptions about your business. Little improvements here can make a big difference in dollar terms.

Is there an industry performer that has caught your attention as achieving in these areas? Could they be the benchmark for your business? How do you find out the target benchmark parameters for his business?

So you might use some of the financial indicators that we covered in earlier articles in this series: gross margins, costs, personnel productivity or stock levels for example. In each case, using the target numbers can show where and how much improvement is needed. Or you might use some subjective factors as your benchmark: Do your people smile as much as 'the opposition'?

An example: Well lit, bright premises
In a previous article, we mentioned the importance of well lit, bright premises with clearly laid out shelf areas and reasonable space for customers to walk around. The days of cluttered dark stores are numbered as corner stores change themselves to meet and beat this competition. What -or who - is the benchmark for this change? Take a look in your own market to identify how the better-presented stores are set up. Then, work out how many of those principles can be used in your c-store.

This is what we help you to do - we have been comparing and studying small businesses for the past 33 years. We've looked at what makes the good firms good. We'll calculate the 'Profit Gaps' that below-average performance is really costing youÖ and most importantly, we link the financial results of a business back to the procedures that are driving the result. Always, it's the financials which show up the success of the firm's policies and procedures: fix the processes and the financials should improve too.

The big payoff comes when you set the business up so that it consistently delivers these improved profits: your cashflow will probably improve, you'll see more profit, and it should make for a more valuable business when you're ready to sell. Sound like good enough reasons? We think so!

Looking "over the fence"
How many c-store operators seriously "look over the fence" at their competitors to see what they are doing? When did you last take time out to sit on the hill top, catch your breath and have a good look at what you are doing and wonder at how things might be improved? If you started your business from scratch today, how would it be set up - how would it differ from the business that you actually have today? Why not start changing the controllable parts of the way that your business runs?

It's a very important thing to do: you might either 'take a day out' to sit and ponder, or a more practical step might be just to go for a drive and walk by a few competitors within a few kms of your store. Call it 'Business Planning', or call it 'Benchmarking' if you like, or just call it 'good business' - but just do it!

SoÖ if Benchmarking helps other businesses, do you think it can help you too?

Feedback corner: Let us know what you would like addressed in future issues and we will be pleased to pull together some suitable material. Call us on 1300 555 334 and speak to Catherine Fenning or Ian Brown.