Wondering how your business is holding up compared to everyone else in your industry? You’re not alone. My client, we’ll call Terri, was frustrated with her profits. She was stressed and anxious that she didn’t have enough cash to hire another service provider that would allow her to scale. She was pretty sure that her pricing was competitive though. She felt stuck. She wondered if other similar businesses were having the same issue. 

When Terri came to us, the first thing we did was compare her numbers to industry benchmarks. 

Benchmarks are simply metrics that serve as a standard for comparing performance. 

What we immediately found was that her gross margins were too low in comparison to the industry. Even though she felt like her pricing was competitive, we found that it was too low for the services she was providing. With that information, Terri was able to raise her prices and very quickly start seeing higher profits and accumulating more cash to support her plans to scale.

Benchmarking is helpful for so many reasons, but I’ll focus on four of them today.

Number one - setting realistic goals. Benchmarking against key performance indicators (KPI’s) allows a business to set realistic and achievable goals. You’ll be able to see what the industry standard is and then set your goals from there. Taking profit margin for example, if the industry standard is 12%, setting a goal of 25% may be unrealistic and you could see that you are setting yourself up for failure.

Number two - finding areas for improvement. Just like Terri did, you might find areas for improvement. Having this information is very powerful, because then you can use it to significantly improve the financial performance of your business.

Number three - evaluating efficiency. Direct labor, as well as front office compensation, are typically large areas of expense for wellness businesses. Comparing those numbers to industry standards can help you ensure that your practice is operating efficiently and that you’re not overstaffed. 

Number four - staying competitive. Comparing KPI’s like gross margin to industry standards will help you stay competitive. You’ll be able to ensure that your pricing and direct labor costs are in line and that you’re not falling behind.

Just a word of caution - I never want a business owner to compare and despair. Benchmarking is not meant to show you how bad you’re doing, it’s meant to show you what’s possible for your business. Especially if you’re a newer business owner, remember, you might be comparing your year one to someone else’s year twenty. So take the information as just that, information, and use it to help you grow.

If you’d like help with benchmarking, we’re here for it. Book a discovery call here.

Find this video and more on our YouTube channel!