In this difficult economy, small business owners have been challenged to reduce costs and still provide quality products and services to keep a competitive advantage.   Corporate executives, also faced with constant pressures to reduce costs, have saved billions of dollars for their organizations through benchmarking.  We as small business owners can also gain significant rewards from big business benchmarking practices. 

Benchmarking is the process by which you measure your company’s performance, products or services against companies recognized as the ‘best.”   You learn the practices that make for superior results and then adapt them to suit your particular business.  This works externally, comparing your company against another similar company or against your major competitors, or internally comparing the performance of your different departments.  Fact is if you do not know how your company compares to your competitors, you will have a hard time staying competitive.  If you want to ensure the future long-term success of your business take an example from big business and do some benchmarking.

Why Benchmark?

Benchmarking allows you to reduce costs and improve your bottom line, improve productivity, quality and customer service, and gain the competitive advantage. 

Reduce costs and improve your bottom line.    While learning from mistakes may be the best tools for growth in our personal lives, mistakes can be costly for small businesses.  Why reinvent the wheel when you can borrow the best new ideas, strategies and tactics from successful companies, adapt them into your company and experience similar success without spending much money.  

In a service business your major costs will be people and rent.  You can reduce costs by comparing your major expenses with other companies of similar size. How much do you pay for real estate relative to the market?  How much do you pay for healthcare?  How much do you pay for salaries?  You may find that your costs are high in comparison and learn from other companies how to improve

Improve productivity, quality and customer service.  When you learn about best practices that successful companies are using, you undoubtedly will want to increase performance in your company.  You can set new standards for performance.  You can present your employees with concrete data and solutions to gauge their performance.  Your workforce will be motivated to achieve better results if they have a standard to reach and a strategy to get there.

 Gain the Competitive Advantage.  Understanding why another company performs better than yours can start you thinking about your company’s future in new ways.  Staying in the forefront of your industry will set you apart from your competitors.  Benchmarking regularly will keep you abreast of what is happening in your industry and in your company,

Big businesses spend much money to save billions.  They hire a company to perform the research, identify the metrics, analyze the information, recommend and carry out change.  Small businesses can do benchmarking on a smaller scale and still reap the benefits.  It does not have to be a long-drawn-out program that takes months and hundreds of staff-hours to complete. For a small business it may take only a few weeks to do some research and get the information you need to improve. 

 How to Benchmark

1. Look within first.  You must have significant knowledge about your own, products and services before you can compare yourself against others.  Gain an understanding of strengths and weaknesses in your own practices. Then you can identify areas for improvement.
2.  Focus on improving one or two business areas at a time. Failure comes when you try to do too much at once.
3. Decide the data collection method.  The method may be online research and a telephone survey.  Or you may want to partner with larger companies with best practices to learn from their experiences through exchange of information and interviews.   If you are a certified minority or woman-owned business you may be able to partner with one of the member corporations of your certifying agency to explore best practices in a specific area.  You can also get the information you need from colleagues you know through networking who own businesses of similar size in revenues.
4. Look for one metric to measure.  Base the metric to measure on the targeted area for improvement.  For example, if you are selling a product, you may want to measure the cost of goods sold.  If you have a services business you may want to compare the average revenue per employee. 
5. Find competitors and companies within and outside of your industry with best practices in the areas relevant to you.  Find companies similar to yours - services or manufacturing.  Compare your company to those of similar size in revenues.
6. Collect and analyze the information.   
7. Adjust the best practice to fit your area of concern. 
8. Carry out the changes.
9. Measure the results.  
10. Perform benchmarking yearly.   Once the method for benchmarking is in place do it regularly.  This ensures that you continuously improve your business practices and services.

It is time to ensure that your businesses survives the downturn and is ready to thrive when the economy picks up again.