Financial benchmarking is easier than you think

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How do you know if your small business matches up financially with the others in your industry? Most small business owners are curious to know how they compare with other small businesses in their industry, especially in regards to their financials. This is financial benchmarking and it is easier to do than you might think.

Financial benchmarking is important to a small business. It allows you to see how your business is doing in comparison to the average in your industry. It is comparing not to the best in your industry and not to the worst, but to the average. With this information, you can see which parts of your business are doing well and which parts need attention. The comparison is good actionable information and you can continue to compare yourself over time to see trends, especially if you have taken action to improve in an area.

Your financial statements such as the profit and loss and balance sheet must be in good order to properly benchmark. Financials with inaccurate and incomplete information do not allow you to effectively benchmark.

We have all heard the acronym GI-GO, garbage in-garbage out.



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