If knowledge is power, then benchmarking is the ultimate business tool. Here’s how to use it to develop a better understanding of your business performance.

Benchmarking is the process of comparing your business results against those of your competitors. It’s a method many companies use to assess their performance and reveal insights into how each unit in the company is operating.

It’s a useful tool to help you develop a better understanding of how you operate, such as identifying where your strengths lie, the areas where you may be leading the market and where there’s room for improvement.

How can benchmarking help my business?

Simply put, you can’t fix what you don’t know is broken. Regular benchmarking will ensure you know exactly how things are going and where you stand in the market.

Insights you gain from benchmarking will inform many areas of your business strategy. For example, benchmarking will help you to set specific goals as you seek to improve areas where you may be falling behind your competitors. It will also help to direct your marketing strategy as you identify new growth areas.

Where can I find benchmarking information?

The Australian Taxation Office (ATO) is an excellent resource to find benchmarking data that is relevant to the construction, earthmoving and transport industries. ATO benchmarking data is industry-specific and calculated from tax returns and business activity statements (BAS) from more than 1.4 million Australian businesses.

Benchmarking data for the building and construction trade services industry reveals average annual turnover, expenses, labour costs and turnover, and cost of sales for building and construction companies that you can use as a basis of comparison with your own company’s performance. The ATO provides similar figures for the transport industry.

The Australia Bureau of Statistics (ABS) also offers a range of key benchmarking data that covers everything from international trade and price indexes to average earnings and work hours.

What benchmarking tools are available?

Manual benchmarking can be a complicated process that takes substantial time. But the good news is that the ATO has made benchmarking significantly easier with a business performance check tool you can access via the free ATO app.

The tool draws on benchmark data from more than 100 business types, and allows you to compare your cost of goods and expenses against similar businesses. It also provides financial performance ratios you can use to assess your debts versus your working capital.

Or, if you want to undertake a more thorough project, paid benchmarking platforms or accountants that specialise in benchmarking could be a better resource for you.

Benchmarking will help you understand how your business is performing compared to your competitors. It will reveal areas you can improve to boost your competitive advantage and ultimately, put more money in the bank.

Shane Conroy is a freelance journalist who contributes feature stories and business profiles to construction industry trade magazines, and has developed content for leading construction, earthmoving and transport equipment suppliers.