So, how is my business performing? Benchmarking

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We are frequently confronted by clients who, whilst good at their chosen trade or profession, have no idea how their business is performing.

They bumble along, keeping a fretful eye on their bank balance but when it comes time to male a large payment, such as a BAS payment, or a lease capital payment, they struggle. Invariably then they end up at the bank asking for more finance to “tide them over” – sound familiar?

Have you ever wondered how your peers are performing, how much they earn relative to total sales, and how much they spend on wages / advertising / rent etc.? Why, when talking to others in your industry do some businesses appear to be doing really well, better than yours?

Well, the answer is two fold; firstly, never pay too much attention to what others are saying, especially when they are spruiking about how well they are doing. My bet is that they don’t really know and in any case, you don’t have time to dwell on someone else’s business, you need to work on your own. Secondly, there is a way. Ask your accountant to benchmark your business against your peers. You will be provided with a comparative report, measuring your business against a group of businesses in the same industry, of the same size. Then you can see what everybody else is doing – right and wrong.

It is not the only answer but it is the beginning of an understanding of where your business is, and how it is travelling. Use it intelligently to make changes to your operations so that over time your business performance will improve.

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If you make a habit of it, for example, benchmarking every month, you will start to notice a trend which you can track for improved performance.

More importantly, you will have begun that all important thing, ‘working on your business’, not just ‘in your business’.

Out of curiosity, don’t just ask your accountant to prepare the standard profit and loss / balance sheet / tax return. Ask him or her to benchmark it as well so you can see how your business is performing.


Chan & Naylor


Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.

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