Nothing drives success quite like some competition. In order to gain some leverage against the competition, CEOs must first understand the competitors they’re stacked up against and compare it to their company financials to track how their own performance is measuring up. Like a sports team watching a film to learn more about the team they’re facing, CEOs can garner a lot of valuable insights by benchmarking their company against their competitors.
In this guide, we’ll look at how you can use the financial reports of your competitors to gauge the success of your own company and devise a strategy that allows you to rise above the competition.
Important benchmarks to consider
When comparing the current state of your company to the current state of other, similar companies that you are in competition with, there are many important data points for you to consider. These data points include:
- Operating costs
- Gross profits
- Net profits
- Sales trends and profitability trends
- Marketing expenses as a percentage of gross revenue
- Cost per employee
- Revenue per employee
- The ratio of revenue to fixed assets
Once you’ve identified your competitors, comparing these data points to that of your company allows you to determine how well you are performing against the competition. Since competing companies will likely be operating a business very similar to your own, it’s valuable to have the means to analyse and learn from how they’re running their operations while saving costs to generate higher profits. Doing it this way may also reveal constant bottlenecks in your operation and highlight key areas where there is room for improvement. Likewise, identifying these key areas enables you to use them as a leverage so you can set yourself further apart and always be one step ahead of the competition.
Where to find financial data on your competitors
One easy way to garner loads of information on your competitors is to hire a consulting firm that has access to a large databank of industry data as well as individual company data to produce a comprehensive report that compares and contrasts your company against its competitors. However, if you wish to produce this report in-house, there are plenty of resources available so you can find the data points outlined above both in your industry and the individual companies you are in competition with. These resources include:
- The Australia Bureau of Statistics. The Australian Bureau of statistics offers data on sales trends based on industry, product, and geography. Combined, this data can help you compare your own sales trends against the sales trends of the competition.
- The Australian Department of Jobs and Small Business. The Australian Department of Jobs and Small Business provides information on employee wages per industry, enabling you to conclude how your cost per employee compares to the average amount of money other companies in your industry are spending on their employees.
- Risk Management Association. The data provided by the Risk Management Association is the data that most banks use to evaluate a company, making it an invaluable resource for benchmarking your own company.
- Morningstar – Morningstar provides comprehensive financial data on publicly traded companies. While this resource is most often used by investors, the same data can be used for benchmarking purposes.
- Dun & Bradstreet – Dun & Bradstreet offers a wealth of data on individual companies, including sales data, important ratios, balance sheet data, data on employees and their earnings, and much more.
These, of course, are just a few of the resources available for unearthing enormous amounts of data both on individual competitors and industry averages. With a little time and a few expenses, you should have no problem finding enough data to thoroughly benchmark your business.
The value of benchmark-based goal setting
Goal setting is one of the most important things CEOs can do to achieve a benchmark that their whole team can strive for. However, it’s important not to set these goals at random. If the financial goals you set for your business are too high, you risk setting an impossible standard that hurts morale when it is not met. If your goals are too low, your company could end up meeting its goals and still underperforming.
This is why benchmark-based goal setting is so valuable. Once you determine how well your competitors are performing across a wide range of metrics, you can use that data to set goals for your own company. Since these goals will be based on the performance of other companies in your industry, benchmark-based goals largely eliminate the concern that the goals you set will be too high or too low.
Setting goals based on the performance of your competitors is just one of many ways you can use the data you’ve garnered from your competition’s financials to drive the strategy of your own company. By taking the time to benchmark your company, you’ll gain a better understanding of your company’s performance and be in a much better position to rise above the competition.
TEC gives you access to one-to-one executive coaching and mentoring sessions with experienced business leaders who can help you achieve this. Contact TEC today to find out more.
Related article: How to stay motivated and stick to your goals by TEC Chair, CEO mentor and coach, Richard Appleby