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)? 

Once you have carefully analyzed your cost to produce, be absolutely relentless in challenging yourself to do better.  Set goals to compress the time it takes on core tasks, write them down, make sure your team is aligned around the goal and measure your progress. Then do it again.

Some business owners are hesitant to reach outside their company for benchmarking purposes. Use membership in associations that are national in scope such as the Irrigation Association or PLANET to contact a reputable company that has a similar target customer in a different geographic area. Most people are eager to share with someone inside their industry that is not a competitor in their market. (Be mindful of regional differences in salary structures.)  Simply ask for a conversation, share best practices and compare metrics. I have done this, and have always come away with a better understanding of my own business.

Another approach is to benchmark with a different service industry in your own market area. After all, a heating and air conditioning company for example has many of the same challenges that a landscape installation and maintenance contractor has.  Additional benefits to reaching out in your own geographic area to a business owner in another industry are you may develop a relationship that evolves into lead sharing and a type of executive support network. This type of relationship can be invaluable to building your business – but the key to success is what you bring to the table. Specific metrics and unvarnished candor will go a long way to building credibility for you and your business!

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