Added by on 2012-09-26

Before you start the benchmarking process you must have a very good idea of the essential function of your business. In other words, you must determine what you do, why you do it and who you do it for.

You need to work out exactly what your customers require from you, who your main customers are and why they come to you rather than to your competitors.

Furthermore, you will need to look at what your products and processes are, and how and why they are important to your business.

All this will help you determine the essential nature of your business. You need to know how your business operates before you can effectively undertake the rest of the benchmarking process of comparing, strategising and implementing.

Also, by doing this you will start to form a very clear impression of where your business is going and this will assist you in determining what aspects of your business are crucial to its success.

To begin with you need to answer the following important questions:

  • What does your business actually do?
  • Who are your most important customers?
  • What are your most important products?
  • What makes your business unique?

Write this out in a sentence or two. If you like, you can call this a “preliminary mission statement”.

Analyse your business processes

You must now move on to analysing your business processes in greater depth. Not so easy when you’ve been working in a business for a considerable period of time. After all, you probably go through some of your processes automatically, without even realising what is involved in performing them.

To help you we have listed some straightforward steps for you to work through. Your first task is to consider the following questions:

  • What aspects of your business are crucial to its success?
  • Where do you experience the most problems?
  • In what areas are you the most successful?
  • What aspects of your business cost you the most?
  • What areas are most profitable?
  • What aspects could you improve the most?

As well as helping you analyse your business, these questions will pinpoint specific problem areas, as well as those areas in which you are functioning well.

When working your way through all of these please don’t forget a very important and valuable source of information: your customers! After all, they are the people who keep you in business. They know what they want from you, what you do better than your competitors and what your competitors do better than you!

So take the time to chat to them. If nothing else, it will have a wonderful impact on your relationship with your customers, particularly if they later see you implementing some of the changes they suggested.

What is most crucial to your business success?

Identifying the aspects of your business that are most crucial to its success is your first task.

This could include having an accurate knowledge of stock turnover or an efficient delivery service for your goods. Crucial aspects could also include having sufficient cash in the bank to enable the company to trade effectively, providing the right products to your customers, or having competent sales staff.

If you are providing products to your customers, for example, it is important to identify exactly which products are most important to them and to you.

In a retail store, your main value to your customers is the particular types of product you sell, whether it is books, software or women’s lingerie. However, once they are in the store, they may also buy complementary products, such as a bookmark, a mouse or a handbag. It is crucial to your success that you provide a full range of products within your store and track the ones selected and/or requested by your customers.

Where do you experience the most problems?

It is usually depressingly easy to identify where your business is experiencing the most problems. These are the areas that don’t function properly, waste your time and don’t provide the returns you feel you should be making.

Problem areas are often those you have decided to put off sorting out until you have the time to do it right.

Well, now, as part of the benchmarking process, is the ideal time to do so. So, your first task is to make a list of all the problem areas in your business. Don’t forget that these problems can include factors such as staff relationships or agreements with your suppliers. Include any problems that occur to you.

Then have a good look at your list of problems and further sort them into:

  • Most crucial to your business
  • Causes the most stress
  • Costs you the most money
  • A supply/service problem.

This process of listing and classifying your problems should start to trigger strategies to correct them. Not all your problems will need to be dealt with immediately, but this process will help you to prioritise them.

For example, you might already know that a lot of your time and energy is wasted due to malfunctioning equipment. Perhaps your photocopier is old and should be replaced. However, it would be expensive to buy a new one and seems easier to persevere with the old.

In this case, you need to analyse exactly what it’s costing you for repairs and maintenance, as well as work out the time and money lost trying to get the machine to work properly. You might find that the costs involved in maintaining the old machine could be balanced out against the cost of leasing a new machine.

Whether or not you decide to replace the machine at this stage will depend on how it will fit into your overall strategic plan for improving your business. Don’t worry about it too much at this stage.

It is important now just to identify and list your problem areas, and later we will help you work out the most important things to change.

What is important is that all decisions for change are based on knowledge of all the relevant information, and not just on impulse.

In what areas are you the most successful?

It is always more enjoyable to identify where you are most successful. Hopefully, this should tie in with those areas you have identified as being most crucial to the success of your business. But this is not always the case.

Your financial statements, and your profit and loss details, will give you a very strong idea of where you are most successful. So will feedback from your staff and customers.

You might discover that you are the sole supplier of a particular type of merchandise in your locality and this, combined with the cheerfulness and efficiency of your sales staff, draws clients from other areas to patronise your business. In this case, it could be said that you are successful in fulfilling a need in the market and reinforcing this by the quality of product you are providing your customers.

Your second task is, therefore, to make a list of where you are most successful. Again include any factors you can think of and then further organise this list into:

  • Most profitable
  • Most central to your business’ orientation
  • Generates the most repeat business.

What aspects of your business cost you the most?

You will need to make a close analysis of your financial statement to determine what costs you the most. This analysis will be unique to each particular business.

Start with your overheads. In some cases, for example, the most expensive factor could be the rent or mortgage on the premises, while for others it could be the wages and salaries.

It is important to realise that sometimes it is cost-effective to spend what seems a large amount of money in a particular area as this could be important to the business. For example, a high rent could mean that your business is located in a prime position and so has a wealthy passing trade. This means that the high rental overhead is a crucial factor to the profits your business makes. If, however, you pay a high rent for a prime position, but this does not affect your income, your rent may be more than your business can afford.

Your third task, therefore, is to list what aspects cost the most.

Your costs could include factors that occur on a regular basis, such as rent and wages; costs that might occur once a year, such as subscriptions or rates.

Separate your list of costs into the following categories:

  • Regular
  • Periodic
  • Once-only.

What areas are most profitable?

You probably have a good idea of what is most profitable to you. Your end-of-year financial statement, together with your stock control records, should tell you this.

Your fourth task is to list your most profitable products. Break this list down into:

  • Type of products
  • A high profile factor in your business
  • Incidental to your business.

What aspects could be improved?

Working through the above steps will have helped you pinpoint what aspects of your business need improving. You will have identified what parts of your business work well and what don’t.

Make a list of the areas you see need attention. Break these down into the following categories:

  • Crucial to your businesses success
  • Important to improve as soon as possible
  • Can possibly wait until later
  • Expensive to implement
  • Inexpensive to implement.

Once you have analysed your own business it is time to compare it against others in your industry.

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