Benchmarking is something that many business owners and professionals have been hearing a lot about these days. The key question that is often heard asked about it is, "Why should I benchmark?" The short answer to that is simple-because there is no such thing as "too many profits."
It could be said that the true and sole aim of benchmarking is to increase your company's profits. There really is no other reason to engage in such a process. Quite honestly, there is really no other reason for you to even be in business than to make a profit. Given that, it seems to make sense that you should remain focused on how to make as much profit as possible. Benchmarking is one of the best ways that you can achieve this.
What is Benchmarking?
Business Benchmarking is the process of finding then fixing internal issues by comparing your Revenue and Expenses against the most efficient and profitable companies. This helps you identify the differences that may be keeping you from having the same success as your peers or competitors.
With your year-end Profit and Loss report or tax return you transfer each line item from your Profit and Loss, both revenue and expense, on to a Benchmark Financial Statement. You then extensively research to find similar companies with revenue similar to yours BUT with much higher NET PROFIT. Next place your line items beside the benchmark company. At this point you easily find your deficiency called LOST PROFIT!
How does benchmarking increase profits?
When looking at how to increase profits, you could look at increasing your pricing but if that puts you out of the game from a competitive standpoint, it may not be a very helpful strategy in the end. You could try to find additional products or services to add to your repertoire but that also could bring in additional overhead needs.
Another option is to find ways to reduce the time or cost involved to perform your existing functions, thereby increasing overall efficiency and allowing you and your employees the time to produce even more than you do now.
Benchmarking utilizes your financial data and reviews your systems and procedures to locate the specific ways that you can refine your internal operations. The information gathered by benchmarking is the key to time reduction, cost reduction, production increase and, ultimately, profit increase for your company.
A good problem to have
Certainly if you are able to generate more business due to changes implemented after benchmarking, you could end up in a situation where you need to make other changes such as hiring more people because you are so busy. While such situations can be stressful for a business, most business owners would consider those to be "good problems" to have.
The Lost Profit system is an in-house non-web based accounting TOOL of finding profit eating issues and problems within your company. We CREATE and MAINTAIN your company's PROFIT, PRODUCTIVITY, SALES and CASH FLOW in that exact order! Lost Profits Associates, LLC. will teach you and get you started. We give you free lifetime coaching support. Your computer has two blank Financial Statements, one for year end and one for monthly results. Contact Lost Profit Associates, LLC. at ( http://www.lostprofitassociates.com/contact-us/ )
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