12 Why Are Benchmarks So Valuable for Growing a Business?

If you’re interested in starting or growing a business, it’s a good idea to have benchmarks to compare your performance against. But what exactly are benchmarks in a business context? And how do you properly utilize them to get the best results for your business?

Benchmarking and Growth

Benchmarks are metrics that are specifically used to compare one situation to another. Benchmarking is the process of using benchmarks to analyze potential problems, brainstorm ideas for how to move forward, and measure progress.

These benchmarks can be internal or external. For example, through maintenance benchmarking, you can determine the effectiveness and efficiency of your maintenance processes. If you’re using external benchmarks, you’ll be examining data from other fleet managers and maintenance departments, comparing their performance to yours to see how you stack up. If you’re using internal benchmarks, you’ll be examining data from within your own organization.

The Value of Benchmarking

Why is benchmarking so valuable?

• Objective measurements. First, benchmarking gives you objective measurements. If you’re flying blind, you won’t have any real data on which to base your conclusions; it might feel like you’re doing a good job, but are you really? Benchmarks remove the ambiguities and answer your questions resolutely. If it’s common for people to see a conversion rate of 2 percent in your industry, and you’re seeing 10 percent, you’re absolutely doing a good job. If your conversion rate is 0.1 percent, you’re not doing a good job. There’s little to no room for bias or subjective interpretation.
• Experimentation facilitation. Benchmarks are also useful because they facilitate ongoing experiments. Once you realize there’s a discrepancy, you can dig deeper and figure out why those discrepancies exist. Once you do, you can devise new plans for how to move forward and try to inch closer to your benchmark targets.
• Performance evaluation. These metrics are invaluable for evaluating ongoing performance as well. If you compare present efforts to past efforts, you can quickly determine whether your new experiments and new strategies are worth keeping. You can also prove the validity of your performance by using external benchmarks as a basis of comparison.

How to Use Benchmarks Appropriately

So how can you use benchmarks appropriately?

• Identify key areas for improvement. First, it’s important to identify the key areas for improvement in your business. What types of processes or opportunities do you want to examine in closer detail? Which aspects of your business need to be improved if your business is going to grow?
• Search for high-performing organizations in your industry. Next, look for high-performing organizations in your industry – the major players and fiercest competitors who are probably setting the highest standards. See if they publish any benchmarks for their performance, and if they don’t, consider contacting them directly to obtain them.
• Failing that, look at broad industry data. If you aren’t able to reach individual companies, you can also use broader industry data. Even a rudimentary online search can return a surprising amount of data on how companies in various industries perform in various ways. Always take these with a grain of salt, however, as random sets of online data aren’t always collected or analyzed responsibly. Also, averages and medians don’t always set a high bar for you to reach.
• Collect and analyze the data. Take all the data you’ve collected and analyze it, comparing it to yours as closely as possible. In this pursuit, it’s important to compare apples to apples as much as you can; even tiny differences in circumstances can result in a massive discrepancy. As a simple example, conversion rates in different industries tend to be radically different. By the end of your analysis, you should be able to determine whether you’re at the top of your game or whether you need to invest in more growth and progress.
• Analyze root causes. At this point, you can perform a root cause analysis. If you’re not meeting or exceeding your chosen benchmarks, why? What’s holding you back? What are your comparative businesses doing differently than yours? This may be the hardest part of the process, since it requires much more creativity and has no concretely defined answers. Brainstorm with your entire team to maximize results.
• Develop an improvement plan. With root causes appropriately analyzed, you can start addressing them. Develop and implement a plan for improvement in this area.
• Remeasure. When you’re finished, you can use your previous progress as a new type of benchmark; was your improvement plan successful in helping you grow?

Gathering and examining benchmarks by itself isn’t going to make your business grow. But if you properly collect and analyze benchmarks consistently, you’ll have all the data you need to make meaningful improvements to your organization.