Do you know how your business performs against key industry benchmarks around margins, labour productivity, profitability, working capital performance and banking ratios?
Knowing a few key numbers can show you the key areas to focus on to improve your business performance. Here’s what we have done recently:
Case Study 1
Two hospitality food and beverage businesses, both running for two years, struggling to make profits and not sure where to start to take profits to another level and improve profitability
- We found out how well they performed compared to other similar businesses and found their margins were lower and labour costs were higher than industry benchmarks. These are key KPI’s for their industry
- A review of the cost and pricing of all menu items, portion sizes, purchase planning to match the menus and avoid overstocking of perishables, staff rostering during the day and the week to match demand.
- Online menu costing software is now being used and has made it easier to price and cost menus and record recipes.
Within a few weeks of our assessment, both businesses are on track to improve their profit from zero to 20%+ of sales. Changes have been made to pricing, portion sizing, purchasing and staff rostering with immediate results.
Now that margins and labour costs are under control both businesses are now focussed on gaining new customers and increasing business from repeat customers.
Case Study 2
A manufacturing business carrying excess stock of $400k. It had a year’s worth of stock when the industry average is 3 months. Purchasing was out of control despite having an inventory system in place. The business was unaware of the magnitude and consequences.
- Benchmarking against industry information so they know what good stock turn look like.
- A review of stock turn for all products and identification of all slow moving stock on a regular basis
- Review of minimum order quantities to reduce stock holding.
- Regular reviews of forward customer orders and demand to optimise purchases and stockholding.
- Rationalisation of product lines to reduce the range of products available, especially the slow moving ones.
- Special promotions to clear surplus stock as it is better to have the cash rather than stock sitting in the warehouse
So far they have cashed up surplus and slow moving stock to the value of $200,000, freeing up space in their warehouse. They have a better understanding of how to manage stock effectively, reducing the amount of money tied up in working capital and reducing the risk of holding obsolete stock.
Integrating benchmarking into your organisation will result in valuable data that will encourage discussion and spark new ideas and practices.
- Gain an independent perspective about how well you perform compared to others
- Clearly identify specific areas of opportunity
- Prioritise improvement opportunities – focus on where the biggest gains can be made
- Set performance expectations and targets for yourself and staff
- Monitor company performance and manage change
Download this article as PDF – How Benchmarking Can Improve Profits