benchmarking analysis

We’ve all heard the terrifying statistics surrounding small business ownership. But putting aside the numbers surrounding how many businesses don’t make it, there’s still a lingering question: WHY do they fail?

    • Nearly half of the businesses that fail do so because of incompetence. Specifically, their prices are too high/low, owners live above their means, don’t pay taxes, lack proper planning/budgeting, etc.


    • Another common killer of business is a lack of managerial experience. About 30% of businesses fail as a result. Poor credit granting practices, rapid expansion and thoughtless borrowing all play a role.


  • Some owners may have managerial experience but lack knowledge and experience within the industry they’re breaking into. They may not carry enough inventory, waste their advertising budget, or ignore conventional methods when dealing with suppliers. This accounts for 11% of failed businesses.

There are exceptions to every rule but there are certain things that most failed businesses have in common:

Not Communicating with Customers: You may know the ins and outs of your business and industry, but your customers keep you afloat. Knowing how you can appease and please them can make a huge difference in customer satisfaction, which ultimately leads to more future customers. Don’t be afraid to open a dialogue with those who buy your products or services (and not just on social media). They are aware of things going on within your business that you may not even know about. They are spending their hard-earned money on your product so keeping them happy will not only keep money flowing but also boost morale.

Not Setting Yourself Apart: If you’re in the coffee shop industry in a major city, you’re going to have a lot of competition.
This is where average industry ratios, financial statement analysis software, financial risk analysis, budgeting and planning software, business profitability ratios, benchmarking analysis and business valuation software come in. They give you a foundation to build on. By failing to discover and maintain a unique approach to your business model, you are allowing your business to get lost in the crowd of other businesses. Whether it be offering a new signature coffee drink each week or holding a karaoke night, you must be noteworthy. A great way to begin this step is through benchmarking analysis. It helps you compare your business model with their competitors and then make adjustments accordingly.

Insufficient Business Model: This is another place where benchmarking analysis comes into play. Even if you have the most revolutionary product in the world, it means nothing until you’re able to successfully market it. People need to know about your product and why they may need/want it. Too many businesses are able to create a unique, intelligent and proactive product but lack the competence to create a profitable business model. This makes the difference between making a profit and being in the red.