To measure their successes and identify their shortcomings, business entities use benchmarking. Business benchmarking is the process of setting standard or point of reference in measuring or judging the current value or achievements of your company. Organisations study the industry or competitive practices, functions and products so that they can implement new strategies to improve their business.
By simply examining your sales revenue as long as your sales figures are broken down as far as possible, you can measure your business' size and the level of your success. You can these records and probably won't need to look up any of your financial statements.
However, having a clear understanding towards your performance (whether your business is earning or not) is not enough if you want to know how exactly profitable you are. You should also look at your current profitability, which interpreted by the following ratios:
* gross margin (sales minus cost of goods) * return on equity (profit divided by net worth) * and return on investment or ROI(after-tax net profits divided by total assets)
Always remember that profits are not the only way to measure a business organisation's success. Your company's balance sheet can be an effective tool in understanding on how much your company values. Your net worth (assets minus liabilities) is a great indicator of whether you've built value in your business (and if you have, how much) or not.
Types of Benchmarking
* Strategic - is an analysis that involves considering high level viewpoints such as core competencies, new product developments and services and improving capabilities for dealing with changes in the external environment. It is most appropriate when realigning business strategies that encountered mistakes or problems.
* Performance or Competitive - to protect confidentiality, this method often started through trade associations or third parties. This is a type of benchmarking where companies consider their standing in relation to the performance of their products and services.
* Process benchmarking - when achieving improvements in key processes to obtain quick benefits, this is the best type of analysis.
* Functional - this type of benchmarking is where businesses compare with partners derived from different business sectors or fields to find ways of improving similar work processes. This method can lead to innovation and dramatic improvements.
* Internal - includes analysing businesses or operations inside or from within the same organisation.
* External - includes benchmarking outside organisations that are known to be finest in class. This type of benchmarking gives opportunities of new learning from those who are at the apex of the industry.
Accuracy in measurements and comparability at frequent intervals that help create a foundation for actionable information in benchmarking can generate a lot of organisational advantages. Benchmarking is one form of business intelligence that you can use to enhance your performance and meet the success you're aiming in the future.
By simply examining your sales revenue as long as your sales figures are broken down as far as possible, you can measure your business' size and the level of your success. You can these records and probably won't need to look up any of your financial statements.
However, having a clear understanding towards your performance (whether your business is earning or not) is not enough if you want to know how exactly profitable you are. You should also look at your current profitability, which interpreted by the following ratios:
* gross margin (sales minus cost of goods) * return on equity (profit divided by net worth) * and return on investment or ROI(after-tax net profits divided by total assets)
Always remember that profits are not the only way to measure a business organisation's success. Your company's balance sheet can be an effective tool in understanding on how much your company values. Your net worth (assets minus liabilities) is a great indicator of whether you've built value in your business (and if you have, how much) or not.
Types of Benchmarking
* Strategic - is an analysis that involves considering high level viewpoints such as core competencies, new product developments and services and improving capabilities for dealing with changes in the external environment. It is most appropriate when realigning business strategies that encountered mistakes or problems.
* Performance or Competitive - to protect confidentiality, this method often started through trade associations or third parties. This is a type of benchmarking where companies consider their standing in relation to the performance of their products and services.
* Process benchmarking - when achieving improvements in key processes to obtain quick benefits, this is the best type of analysis.
* Functional - this type of benchmarking is where businesses compare with partners derived from different business sectors or fields to find ways of improving similar work processes. This method can lead to innovation and dramatic improvements.
* Internal - includes analysing businesses or operations inside or from within the same organisation.
* External - includes benchmarking outside organisations that are known to be finest in class. This type of benchmarking gives opportunities of new learning from those who are at the apex of the industry.
Accuracy in measurements and comparability at frequent intervals that help create a foundation for actionable information in benchmarking can generate a lot of organisational advantages. Benchmarking is one form of business intelligence that you can use to enhance your performance and meet the success you're aiming in the future.
About the Author:
Organisations perform business benchmarking to examine their current condition. For more benchmarking tips, visit the links above.
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