When small business owners are looking for ways to improve their business, they may hire a consultant – but that can be costly and might not always yield the desired results. As an alternative to costly consultants, many business leaders find the support and guidance they need by joining a peer benchmarking group.
Peer benchmarking is a process that allows companies to compare themselves against one another. The groups can be organized by industry, or they may be divided by region. It’s a chance for businesses to get together to compare such things as best practices, performance metrics and business processes.
In sharing these metrics, participants not only learn what others are doing to be successful, but also may gain insight into some areas where they can improve.
Peer benchmarking allows you to do the equivalent of “grading on a curve.” By learning how others in your industry are doing, you can better set your expectations and create realistic goals. It can help you see areas where you could become more competitive. As you track your progress internally in addition to comparing it with your peers you will, over time, have a much clearer idea of what is possible within your organization.
Business owners are often extremely hands-on in their operations. While that has many benefits, it may mean you are too close to the situation to see the bigger picture. Although you may know what kind of results your own organization is getting, basing decisions solely on that can cause you to lose sight of other opportunities.
By knowing how your results compare with your peers, you will be better able to determine whether your results are poor, average or excellent. Comparing your business to those of peers provides you with specifics that you simply might not be able to find any other way.
To create or join a peer benchmarking group, contact your local trade or industry group. You may already be a member of such a group and can ask the organization’s director if it has a peer benchmarking group in place. If not, it may publish peer data you can use, or you could see if the group is interested in creating a peer benchmarking group. You also could ask other members of the organization if they are interested in creating such a group.
When you get access to peer data, either through published reports or through a group meeting, you can compare your data to those of others. (Make sure you understand the way the data are compiled so that you are comparing apples to apples.)
By organizing your financials in the same way they are compiled in the report or on a spreadsheet your group creates, you can begin comparing your results with others. It may take a lot of time to calculate how the other information is organized and to make sure your statements are done the same way, but it’s a valuable use of time. It will set up a way of measuring for the future and let you see where you are underperforming relative to the rest of your industry.
As you look at what you need to improve, you can develop a strategy based on what your peers have done to find success. Every business has some individual features that must be factored in, but overall you can see what might work for you. Remember to track results so that you can see what’s working – and what’s not.