30 April 2024


By benchmarking your business, you can pinpoint the areas to focus your limited time on that will drive the greatest economic returns to you as a business owner. Benchmarking is an essential component of financial analysis that provides great insights into a company’s performance relative to industry peers and standards.

Financial Ratio Benchmarking:

a. Liquidity Ratios: These ratios assess a company's ability to meet short-term obligations. Common liquidity ratios include the current ratio and the quick ratio. Comparing these ratios with industry averages helps evaluate the company's short-term financial health and its ability to cover immediate liabilities. b. Profitability Ratios: Profitability ratios measure a company's ability to generate profits relative to its revenue, assets, or equity. Examples include the return on assets (ROA), return on equity (ROE), and gross profit margin. Benchmarking profitability ratios against industry peers helps assess the company's efficiency in generating profits and managing resources.
c. Efficiency Ratios: Efficiency ratios evaluate how effectively a company utilises its assets to generate revenue or profits. Examples include asset turnover ratio, inventory turnover ratio, and accounts receivable turnover ratio. Comparing these ratios with industry benchmarks helps identify areas where the company can improve operational efficiency and asset utilisation.
d. Debt Management Ratios: These ratios assess a company's ability to manage its debt and financial leverage. Examples include the debt-to-equity ratio, interest coverage ratio, and debt-to-assets ratio. Benchmarking these ratios against industry averages helps evaluate the company's financial risk and leverage position compared to its peers.

Cost Structure Benchmarking:

a. Cost of Goods Sold (COGS): Comparing the COGS as a percentage of revenue with industry averages helps assess the efficiency of the company's production or manufacturing processes. It also provides insights into the company's cost competitiveness and pricing strategy.
b. Operating Expenses: Analysing operating expenses (e.g., sales and marketing expenses, administrative expenses) as a percentage of revenue relative to industry benchmarks helps evaluate the company's cost management practices and operating efficiency.
c. Overhead Costs: Benchmarking overhead costs (e.g., rent, utilities, insurance) against industry peers helps identify opportunities for cost reduction and efficiency improvements. It also helps assess the company's overhead cost structure in relation to its revenue and profitability.
d. Cost Allocation: Comparing cost allocation practices with industry standards ensures that the company allocates costs appropriately across different business functions or product lines. This helps improve cost transparency and accuracy in financial reporting.
By conducting financial ratio and cost structure benchmarking, companies can identify areas of strength and weakness, set performance targets, and implement strategies to improve competitiveness and profitability relative to industry peers.

If you want to know how your property management business is performing against the industry benchmarks, please contact Owen who will give you a quick insight into your personal business against industry metrics.


Please contact your Bentleys advisor if you require any additional information.

Talk to us

Nick Den Heijer
Email: nick.denheijer@bentleysnz.com
Phone: +64 9 600 3901

Stay in touch. Please do not hesitate to contact your client advisor.