50% of new businesses fail during the first five years, according to the Small Business Association (SBA). Every aspiring IT entrepreneur wants their business to grow and thrive permanently. Benchmarking is a critical process that allows your business to stay one step ahead of your competition.
Benchmarking enables a business to take a comprehensive look at its operations, gauge performance, identify gaps in its business processes, and maintain financial health. It is an opportunity to compare your approach with that of industry leaders. The information gathered is strategically used to steer the business in the right direction. Here are some critical benchmarking practices.
Determine Key Metrics
During benchmarking, there are countless ways that you can use to measure your business’s performance. Your IT business needs to use certain metrics or Key Performance Indicators to define their performance. Determining what metrics to use depends on what objective you have in mind.
If your goal is IT cost optimization, you can use metrics such as cash flow, sales revenue, costs of products sold, average revenue per customer, customer acquisition, customer retention, and customer satisfaction. Every business is unique; therefore, only meaningful metrics should be used to ensure you get the right results.
Decide Who to Benchmark Against
The benchmark you use plays a critical role in your study. When selecting a benchmark, pick an IT company of your size, which has similar objectives as yours. You can request local trade associations to give you several options. They are better positioned to identify the right benchmark company.
The benchmark you pick should be a top-performer, and their business model and organization should be relevant to yours. You don’t have to limit yourself to companies that are in your field, but sticking to a company that operates within your environment is more likely to give you relevant results.
Have a Timeline
Benchmarking is a process that takes time. From researching benchmarks, identifying where opportunities lie and implementing changes to create a competitive environment, you need to do this within a certain time frame. It is best you set a timeline for all these activities before embarking on the mission.
The benchmarking shouldn’t drag on for long. It should be done within a quarter of the year so that you will be able to compare yourself to competitors, perform changes, and start preparing for the next quarter based on the results of your analysis.
The data you collect is what will help you tune up your business approach. With this in mind, it’s critical that you only collect and analyze data which is relevant. Make a list of specific questions that you will investigate. These should include: What is that company doing to stand out and attract clients? What technologies are they using to streamline production and cut costs?
The answers to your questions can be acquired through surveys, website visits, and interviews. Most importantly, you should enlist the help of professional benchmarking specialists. These experts have access to loads of data and will help you gain useful insights and paint for you a clear picture which you can utilize to transform your business for the better.
After gathering all the data you can, you need to use it to boost your company’s performance. To use this data effectively, break it down, analyze it, and organize it into valuable information that you can work on. Scrutinizing the data enables one to identify patterns, trends, similarities, and gaps.
Analyzing the information will help you rectify the issues that were letting your business down and show you where your strengths lie. The analysis results will also enable you to predict future trends when you apply the new measures. You will know what to adapt, revamp, implement, and what approach you need to abandon.
After performing the benchmarking exercise, you now need to turn your attention to your operations. Use the gathered information to transform your business processes, strategies, and technologies. Remember to keep all stakeholders in the loop to ensure a smooth transition. As the IT field is always evolving, remember to constantly monitor and fine-tune your approach to stay ahead of the changing industry.