Benchmarking can sometimes get a bad rap as being too focused on the past, and not insightful for the future. In reality, the value in benchmarking comes from using it to inform future plans, and providing a sound base to launch from. Here are some thoughts on using benchmarking for strategy development.
Strategic planning requires a clear understanding of where you are now, as well as looking to the future and where you want to be. Benchmarking is useful for both purposes. By identifying trends and the strategic issues that might be holding back business performance, it helps to prioritise where to invest time, capital and effort to improve returns. Or it may highlight that things are tracking well and its time for the next opportunity!
Once opportunities have been identified, historic benchmarking provides a realistic baseline for scenario planning. This enables comparison of different options to be done with realistic underpinning assumptions around performance. The numbers don’t lie!
Using industry benchmarks can provide the ‘guard rails’ to test future growth plans or new opportunities against. Indicators such as debt to income ratio, finance coverage ratio, and return on assets managed are all useful ways to assess the viability of a new plan. It can help to put some objectivity around pursuing what seems like a great idea, and overcome any biases within the business.
Having benchmarking results on hand can also aid quick decision making when unexpected opportunities come up. For example those that have a good handle on their numbers are able to quickly assess whether a new lease or land deal might fit, and are able to act decisively on opportunities that suit.
Finally, ongoing benchmarking can help to measure progress against a strategic plan as its being implemented. It provides a set of standard protocols to measure against and track progress.
Pinion Advisory has our Snapshot® benchmarking system and experienced consultants that can assist with benchmarking and strategy development, so why not find out more about the opportunities in your business today? If you are interested to know some overall trends in performance from the 2019 year, our 2019/20 benchmarking summary report is available now. Contact Royce for details.