How do your profits compare to your competitors?
Author: Russell SmithFebruary 20, 2012
When I am going through the business numbers with a client and get to the profit figure, I am often asked whether the profit is good or bad.
When a company is appraising its profit performance, the first number to compare the profit figure with is the budget (if there was one). This will give an idea whether the business has performed to expectation. The second number would be to compare with the prior year. This will show whether the business’ profits are increasing or decreasing.
Both these numbers are easy to find and compare against.
The third number is potentially a more interesting number. This would be to compare your profits to those of your competitors i.e. other companies in your sector.
This number is a little more difficult to find.
Not many people know this (unless you are an accountant) but if you have a private limited company by shares, whilst your accounts are indeed published at Companies House and available for all and sundry to view, the accounts are the abbreviated set which basically tells the viewer very little. It is also impossible to truly tell what the profits of the company is.
However, there is a way to find this number…..
I have access to benchmarking software which effectively tells you how your profit compares to other businesses in your industry.
So for example, I can tell how I rank against other accountants in terms of sales growth, gross and net profitability, turnover, debtors, cash, return on investment.
The last time I looked at this myself, I ended up printing off a 60 page report and taking hours to dissect it (it was LOTS of fun!).
These reports (although not usually 60 pages) can be produced for pretty much any sector and really do answer the question ‘how do I compare to my competitors’.
If you are interested in finding out how you do compare email me at firstname.lastname@example.org