Charles Alexander

Charles Alexander

One of the worst habits we have in my household (well, I have) is comparing what we have to someone else has.

And there’s always someone with something nicer.

*We got a 55-inch 4k TV, but…my sister-in-law got a 75-inch TV that has such a clear picture I thought that Derrick Henry was in their living room.

*We went to the beach in the fall, but…another family we know owns their own beach house.  And a lake house.  And a cabin in the mountains.  And blah, blah, blah.

We are constantly comparing ourselves with others to measure how well we are doing.  

This is not a very healthy thing to do on an individual basis.

But…

This could be a good thing in your business!

No, you shouldn’t stress out if a competitor has a new product or just moved to a bigger location.

However, you should be comparing your Income Statement to the industry average.

Why?

“What gets measured gets done!”

For example:

*If you are a restaurant owner what is your cost of goods sold (COGS), compared to other restaurants? The average is 37 percent.

*If you are a landscaper, do you know what your payroll costs are compared to other landscapers? The average is 22.50 percent and revenue per employee is $72,347.

*If you are a department store, do you know what your rent is compared to other department stores? The average is 5.36 percent.

*If you are a real estate broker what should you be spending on marketing compared to other brokers? The average is 3.52 percent.

Small business owners do a good job of comparing their current business to what they did last year, however, they need to know how their Income Statement compares to the industry as a whole.

Common measurements are your costs-of-goods-sold (COGS), net profit margin, current ratio, percentage of expenses versus income, etc.  

Comparing against other businesses in your industry is a more accurate way to determine how well you are doing and what you could improve upon.

Below are some great places to find these types of benchmarks for your industry:

*www.bizstats.com

*Your trade association for your industry

*You could always contact your friendly TSBDC for this type of comparison!

And if you just got a new smoker, I don’t want to hear about it.  Mine is just fine.

Charles Alexander is the director of the Tennessee Small Business Development Center at Vol State.

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