Benchmarking can be a useful tool in setting goals for your business. Common types of benchmarking include the measurement of your products, services, and/or processes against those of a competitor, your own business’s previous performance, or industry leaders. Here, we will examine use cases of the different types of benchmarking, highlighting their benefits so you can apply them to your organization. Benchmarking can help you set meaningful expectations and measure your success.
Types of Benchmarking
There are three main types of benchmarking that can be useful to your business. Many companies use a combination of these to get a complete view of their business’s performance against multiple objectives.
Internal Benchmarking – Benchmarking against yourself can be useful for measuring performance changes in nearly any aspect of your business. Say you want to measure the success of a new sales initiative, for example: You can benchmark post-implementation sales against what you sold beforehand to see if this new initiative really made a difference. You can do this with any metric, whether you want to increase the length of time people spend on your website or reduce the number of customer complaints. You can even benchmark one similar department against another. Self-benchmarking year-over-year can help you measure the growth and stability of your business.
Competitive Benchmarking – You can benchmark your company against a competitor to see how you are performing by comparison. In this case, you may only be able to benchmark against metrics that are publicly available, such as sales, social reach, and SEO. Good social listening can provide clues about what information other companies may be reporting.
Functional Benchmarking – This is when you benchmark your company against one considered to be “best in class” or at the top of your industry, to spotlight areas for improvement. You can also benchmark your company against an industry average. Some industries are inherently riskier or have slower sales cycles than others, so benchmarking against a company or companies in your specific industry can give you a more accurate picture of how your business is really performing.
How to Start Benchmarking
The difficulty of benchmarking varies depending on the complexity of the key performance indicator (KPI) you are trying to measure. To get started, try the steps below:
- Select a product, service, or process to evaluate.
- Identify meaningful KPIs and a time frame in which you will measure them.
- Choose external companies or internal processes to benchmark against.
- Collect data on KPIs for the selected time frame.
- Analyze the data and identify opportunities for improvement.
- Adopt and implement new best practices, setting improvement goals that are “SMART” – specific, measurable, attainable, realistic, and timely.
Benchmarking With Business Credit
Benchmarking your business credit scores and ratings can help you focus your credit-building efforts in a specific area. For example, if your D&B PAYDEX® Score is noticeably lower than the industry average, getting that score up may help you become more competitive. And if your industry’s average PAYDEX Score is relatively low, having a higher score by comparison may give your business a significant advantage. You can also note the business credit scores of your direct competitors and see how you measure up.
What Information Is Available Through CreditBuilder™?
The Insights feature helps you set specific goals related to your business credit scores and ratings. For smaller businesses that don’t have a dedicated credit manager – or not-so-small businesses that have a very busy one – this feature makes it easier to manage your own business credit scores and ratings. Whether you want to obtain new or better financing, bid on contracts, get better insurance rates, obtain property, improve your relationships with your customers, separate your personal and business credit, or just maintain and impact your scores, you can receive specific in-product advice geared toward helping you get there.
This goal-setting feature can assist you with internal benchmarking, by allowing you to set meaningful goals in terms of specific scores and ratings and to monitor your progress over time.
With the Peers feature, you can add your competitors to see their scores and ratings. This can be especially helpful for competitive benchmarking if you frequently bid against them on contracts where bidders are required to disclose their scores and ratings. You can also be alerted to significant events affecting those competitors, such as looming or actual bankruptcy filings, reported legal action or criminal activity, or relevant natural disasters.
The Risk Assessment tab allows you to benchmark the Peers you’ve added against your industry, so you can see how your business looks in comparison. And for each score and rating on your Risk Assessment dashboard, you can get a detailed view of business and industry trends and other information useful for functional benchmarking, such as industry medians and averages and whether your industry carries more inherent risk.
To learn more about business credit scores and ratings in general, take a look at our Scores and Ratings page.