- Without business growth comparisons any revenue performance measure is viewed in isolation and arbitrary.
- Revenue benchmarking compares key performance measures to peers and competitors. Without this perspective companies insulate themselves from the real world. This turns competitive knowledge into competitive advantage.
- Revenue benchmarking identifies underperforming areas that when improved will deliver the biggest upside impact.
- Business leaders use performance standards to establish a baseline, identify the highest impact opportunities and apply evidence-based best practices to achieve attainable targets.
Benchmarks can compare company performance measures with industry competitors. They flag under-performing areas that deliver the biggest financial uplift in the least time and cost. They apply predictive analytics to forecast the measurable impact for improvements. And they apply prescriptive methods or evidence-based best practices to capture those gains.
Here are several reasons to consider benchmarks for your revenue improvement programs (link to Growth Reversing a Revenue Downturn).
Create Your Roadmap
Benchmarks show the most direct route to business growth improvements.
Revenue benchmarking identifies gaps that can be prioritized based on their uplift.
When management has both visibility and measurability to the most significant underperforming areas, it can employ an effective case for change, a more confident business case for the transformation effort and a streamlined road map.
Rather than guesswork or estimated figures with questionable assumptions, benchmarks are actual figures from industry peers that provide confidence in calculating pro form business outcomes and setting realistic goals. The wisdom of what worked previously for similar companies lowers risk and accelerates time to value.
The above growth plan illustrates how improvements to customer service measures deliver a cumulative financial impact.
Business is a competition. If you are not outperforming your competitors, you are losing market share. Comparing total sales to competitors may show you if you are winning or losing but it won't tell you why. Revenue benchmarking provides the details to know exactly where you are winning or falling behind so you can apply timely and precise corrective actions.
To outperform competitors, you need to know how your performance measures compare. This comparison identifies potential weaknesses and areas where improvements will deliver the biggest financial impact.
I recently finished a project for a life sciences company. Initial calculations found that their sales win rate was five points below the Median level. By revamping the sale methodology and updating their sales process the client exceeded their goal of getting to the Median close rate. They now on their way to reach Best-in-Class performance for this metric. This single improvement has achieved sales growth of 4.5 percent.
"I never would have recognized an updated sales process would impact deal win rates and deliver such a big and recurring sales impact. After the fact, it seems so obvious."
Apply Predictive Analytics
Projection is not always prediction. Models and simulations must apply industry performance measures to advance from hypothetical scenarios to results based on what's worked for others. The best way to achieve predictable results is to replicate what others have already done.
Without industry performance data, goals are just guesswork followed by trial and error. Without the known performance measures, you don't really know what results should be or where the finish line is. This creates an aimless journey with no idea when you're done.
A better approach is to apply benchmarks for predictive analytics.
Many companies like to apply predictive models to show how a 1 percent improvement in any given performance measure impacts revenues or margins. Other clients with measures below the industry median often prefer to see the revenue and profit impact by improving their performance to the median level. Knowing the financial upside impact allows the company to know how much they should invest to achieve that upside.
The above example forecasts the revenue and profit impact of improving multiple sales measures to industry Median levels. This type of analysis allows management to compare, prioritize and sequence.
Begin a Journey of Continuous Improvements
Objective measures lay a foundation for continuous process improvement. They also bring clarity to the performance measures that most influence business growth. This clarity gets everybody focused on what matters and speaking a common language.
Repeated measurements build trends that reinforce and reward hard work. They serve to motivate staff long after the first improvement.
Accelerating revenue is never done. So, pursuing revenue improvements using industry data and targeting Median or Best-in-Class performance creates a clear journey with objective milestones and the motivation to outperform direct competitors. Continuous improvement can become your corporate DNA and a valuable competitive advantage.
Another benefit is that the most impactful revenue benchmarks seldom change. The measurement and progress toward key financial metrics generally withstands corporate reorganizations, management shifts or other organizational changes.
Performance benchmarks may be integrated and viewed holistically. They can then show how departmental or divisional metrics align and roll up and impact business and company outcomes.