Benchmarking is a method whereby organisations systematically compare their performance, processes or key performance indicators with those of other organisations or recognised benchmarks. The aim is to identify strengths and weaknesses, uncover areas for improvement and learn from successful practices.
This method is particularly useful for start-ups in realistically assessing their own development and making well-informed decisions. Companies from other sectors can also provide valuable points of comparison.
What types of benchmarking are there?
Depending on their objectives, companies can use different forms of benchmarking.
- Internal benchmarking: Comparison of different teams, departments or business units within a company
- Competitive benchmarking: Comparison with direct competitors in terms of products, services or key performance indicators
- Functional benchmarking: Comparison of similar processes with companies from other sectors
- Strategic benchmarking: Analysis of successful business models, strategies or long-term approaches
Which method is suitable depends on which area of the business the start-up wishes to improve.
How does benchmarking work in practice?
A meaningful comparison begins with a clear question. After all, meaningful insights can only be gained by using appropriate key figures and peer companies.
A typical process consists of five steps:
- Setting goals: Which process or service should be improved?
- Select key figures: Which figures allow for a meaningful comparison?
- Collecting comparative data: What information is available about other companies or industry standards?
- Analysing differences: Why does a company achieve better results?
- Implementing measures: What insights can be applied to our own business model?
The team then checks whether the changes have actually led to better results. This turns the performance review into a continuous improvement process.
Example: Benchmarking in a B2B start-up
A start-up is developing a software solution for industrial companies and would like to improve its sales process.
The team first analyses how long it takes, on average, from the first point of contact with a customer to the signing of the contract.
It then compares this duration with available industry figures and empirical data from similar B2B software companies.
In this context, the start-up has found that its sales processes take a relatively long time.
A closer look reveals that potential customers often have to wait for technical information and personalised quotes.
That is why the team is standardising its tender documents and improving internal coordination.
After a few months, it reviews the average duration of the sales process once again to assess the impact of the measures.
Which key figures are suitable for comparison?
The selection of appropriate key performance indicators depends on the business model and the specific business objective.
Typical examples include:
- Customer Acquisition Costs (CAC): Costs of acquiring new customers
- Conversion rate: Proportion of interested parties who carry out a desired action
- Customer Lifetime Value (CLV): Expected economic value of a customer relationship
- Customer satisfaction: Evaluation of experiences with products or services
- Duration of proceedings: Time required for individual work or business processes
- Cost per unit of service: The cost-effectiveness of certain products or services
It is important that companies use comparable data. For example, key figures from different business models or stages of a company’s development cannot simply be compared.
What are the advantages and limitations of this method?
A structured performance comparison helps start-ups to refine their processes in a targeted manner.
It is particularly useful for:
- To recognise strengths and weaknesses more clearly
- Setting realistic performance targets
- To learn about successful approaches
- Optimising costs and processes
- Making strategic decisions based on data
However, not all comparative data is publicly available or sufficiently reliable.
Furthermore, start-up founders should not simply copy the successful approaches of other companies. This is because different target audiences, resources and business models can lead to different outcomes.
It is therefore crucial to adapt these findings to one’s own requirements and to assess their impact.
How can innoWerft help with this?
innoWerft helps founders to critically review their business models, define relevant key performance indicators and analyse market and competitive information. Through coaching, start-ups can identify areas for improvement and devise appropriate measures for their future business development.
Frequently Asked Questions about Benchmarking
What does ‘benchmarking’ mean in German?
The term can be translated as ‘performance benchmarking’. This involves companies comparing specific processes, key performance indicators or performance levels in order to identify opportunities for improvement.
What is the difference between benchmarking and competitive analysis?
A competitive analysis focuses primarily on other market participants and their strategies. Benchmarking, on the other hand, specifically compares certain services or processes in order to identify concrete areas for improvement.
Can small start-ups also use benchmarking?
Yes. Even start-ups can compare their key figures with suitable benchmarks. Often, just a few meaningful key figures and publicly available information are sufficient for this.
How often should a company carry out benchmarking?
That depends on the area under review. Rapidly changing key figures can be monitored regularly, whilst comprehensive process comparisons are often best carried out at longer intervals.
innoWerft is an early-stage investor and accelerator based in Walldorf, supporting start-ups before or shortly after they are founded by providing capital, coaching and access to a network of investors and businesses to foster sustainable growth.
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