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Dare To Compare? Maximize Your Profits By Comparison! June 24, 2009

Posted by Julie Duriga, CPA in Uncategorized.
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Do you dare to compare?  Yes!  It is a big and daring step to compare your  business to other businesses in your industry but a project that will be well worth your while. 

There are many resources that help you compare your business to other businesses in your industry.  You can check with your SBA or SCORE offices for assistance in locating the resources.  They mayhave the comparison resources you need or they may be able to point you in the direction you need to find your industry standards.   I really like Sageworks’ presentation of the ratios and percentages because they are clear and easy to understand.

For example, if you own a spa business, there are industry standards as to what your gross profit should be, how many days you should be carrying your inventory, gross profit margin and many other very useful measurement tools.   These standards are critical to understanding your business, improving your business and making the changes that may be necessary to ensure the sustainability of your business.   

How can I use this information in my business?  If your product sales are 30% of revenues, and the industry standards are close to 50%, perhaps you need some assistance with your product placement, marketing your products or educating your sales staff on the benefits of the products that you offer.  These shifts can be made as long as we identify where we need to focus our efforts.    

Anytime you are daring to compare, the information is  in percentages or by ratio.    This means that you can compare yourself to a million dollar company and the percentages should be relatively close to yours.  Regardless of the number of zeros, percentages and ratios tell the real story of your numbers.    This will require some calculations on your part but they are easy calculations, simple division and multiplication.  Again, a SCORE counselor or SBA official can help you with the calculations or your accountant can also be of assistance to you.

Take the time to compare your business to the industry standards.  It will be incredibly revealing.  All of us who own businesses could always improve in one area or another.  The industry standards will point us in the direction of where we can improve and refine our business practices.

Need to feel empowered in your business?   Visit us on the web at www.UniversityForBusiness.com for more information on running a successful business.

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