Once you have analysed your own business it is time to compare it against others in your industry.
Your aim is to identify how your competitors manage to do so well. You need to find out if they have any particularly successful functions or practices that you can adapt to your own business, especially in your own problem areas.
There are various ways of doing this, such as:
- Physical observation
- General research
- Collaborative information sharing
- Statistical analysis and comparisons.
You will probably find that you will need to use aspects of each of the above in order to gain a good understanding of your competition. You need to identify what will be of most value to your own circumstances.
Undertaking physical observation
This is often one of the easiest procedures to undertake and is simply a matter of carefully looking at a competitor’s business. A surprising amount of information can be gained from this practice.
Careful observation will reveal the type, and perhaps quantities, of the stock they handle, as well as who supplies them.
You will also be able to see whether their location influences the type of product they offer and the number of customers who enter the premises.
Importantly, physical observation will give you precise information about a competitor’s prices and the mark-up on items you stock in common.
Another good source of information is your competitor’s ex-employees. Bear in mind though, that if they have left under bad circumstances, this information could be biased or exaggerated.
List any differences you find important according to the following categories:
- Good business practices
- Influence of physical location
- Notable price differences
- Differences in type and quantity of stock
- Impressions gained about their turnover and customer satisfaction
- Areas in which you are better servicing the market.
Using general research
All sorts of external factors can impact on the success of your business and it is important that you bear these in mind when making your business decisions. These can range from the wider political and economic circumstances, to changes in your local business area.
Information about these factors is readily available in local publications and shouldn’t be overlooked. Look at the television news and current affairs programs, newspaper articles and press releases. Trade magazines and association publications are, of course, a valuable source of information on all the issues your industry is facing.
These publications can also provide you with specific information about your competitors. Feature articles, as well as their ads, will keep you up-to-date with their business focus and position, as well as their sales and specially priced items.
The Internet should not be overlooked, particularly if your competitors have their own Web site.
If you feel you really need to find more specific or in-depth information, you can organise for databases to be searched and released legal documents checked. However, it is highly unlikely that you would need to go to these lengths to get this type of information.
We must point out that it’s easy to get caught up in gathering more information than you need, or indeed bargain for! There is no point in gathering information just for the sake of having it. Pertinent information is the key.
When doing your research, ask the following questions:
- Why do you need this?
- What information do you need?
- What impact will the information have on your business?
- Is this the best, easiest or most accurate source?
- Does this research have any impact on your problem areas?
What you really need is enough information to effectively compare your business to your competitors. You need to know if there are any particular factors that affect their performance. Environmental factors, such as location in a wealthy area, are very likely to have a positive effect on a business’ profits.
Remember that sometimes “near enough is good enough”. You can waste time and money searching for specific details when more approximate information is enough.
Collaborative information sharing
In an ideal world you would be able to approach the owner of a similar business. You could pool your knowledge, or collaborate, and make sure both businesses were as successful as possible.
In the real world, this just isn’t likely to happen. After all, it goes against one of the main rules of business: gain more market share to make more money than your opposition!
That is not to say that your competitors won’t talk about business with you. They’re more likely to discuss ideas, influences and industry trends, than their detailed financial statistics. This is still useful and it’s worthwhile using all your “networks” for information.
Before you approach your friends and business associates, you must carefully consider exactly what information you need and who is the best person to go to for help.
The last thing you want is to make changes that won’t improve your business. Also, you don’t want to waste your own and your friends’ time.
You need to decide the following:
- What specific aspects do you need information about?
- Where can you best find this information?
- Who can you approach?
- What exactly do you need to ask them?
Statistical analysis of your competitors
This is where we have stepped in and done the hard work for you. We have found out the information you need to see how your business compares with the industry as a whole through our benchmarking guides.
In these guides we’ve included statistics gathered from a large number of similar businesses from throughout Australia. These have been grouped as to their size, location, and profitability and the figures presented accordingly.
We have then further analysed these figures to give you an idea of their Key Performance Indicators (KPI). These will help you determine your own key performance areas and help identify the strengths and weaknesses of your own business.
This information, together with the information you have gathered yourself, will provide you with a reasonably comprehensive impression of your own business performance in relation to that of your competitors.
This will also help you determine what aspects of your own business you should measure or benchmark.