John Ossa on Benchmarking

Benchmarking is an act of measuring and comparing specific facets of your business with industry “standards.” Benchmarking against like/kind companies depends on the quality of data and its relevance to your specific market.  The “meaningfulness” of benchmarking depends on the quality of the question(s) you ask. What you do with this information represents the potential to improve your business.

What are the aspects of your business to benchmark? Benchmark the key things that your business success depends on.  They are: 

• Pricing
• Cost to produce your primary service 
• Your ability to capture the needs and wants of your customer
• The alignment within your company – is everyone in the company very clear on how what they do impacts the goals of the company? 
  

A topic we reflexively “benchmark” is price. Businesses benchmark pricing against “big box” rivals, and the local boutique or “specialist” vendor on a constant and ongoing basis.  This is an example of external benchmarking.  To really improve your business, drill down to core, labor intensive tasks and dissect your cost to produce that service.  An example of a core task for an irrigation contractor is installing 100 lineal feet of 2-inch mainline with 18 inches of cover.  How does your cost to produce benchmark against industry norms (external benchmarking)?  How does your cost to produce compare to your own historical numbers (internal benchmarking)? 

John Ossa owns Irrigation Essentials, a web-based irrigation consulting firm. See www.irrigationessentials.com; mail ossa@gie.net.