Is there value in practice benchmarking?
Back in the 2000s, when I was doing what I did in corporate, we used to engage an external third-party benchmarking firm to send detailed business analysis questionnaires to all of our practices, pull together the information and collate it with information from all around the industry, all to try and give each practice a sense of how they were performing.
Even back then I knew deep down there was a flaw in this process that couldn’t be fixed.
Sure, there were some businesses who, by way of the fact they tracked this info as part of their day-to-day, could produce data at the drop of a hat to tell you things like:
- their conversion rates,
- number of clients per adviser
- average fee levels and ranges,
- which sources of new opportunities worked best.
They tracked it all, but ….. most of the businesses in our network did not.
The problem is when you’re pulling together data from a variety of sources with the intention of establishing benchmarks, and data is incomplete, inconsistent or just made up…what’s the old saying: put rubbish in, get rubbish out.
For that kind of benchmarking to really prove insightful and valuable, you need everyone collecting the same data in the same way and being 100% honest about what the numbers are.
I’ll give you another example.
One of the most common questions I get asked whenever I dive into the topic of pricing, is “What/ how/ how much do other firms charge?”
I mean, I’ll usually answer the question as best I can, but the reality is that unless you believe that other firms do what they do exactly the same way you do, that data also has limited usefulness.
Get Advisor Pricing Guide here
What/ how/ how much you should charge is always going to be dependent on your business. Just because another firm can charge a certain amount and be profitable doesn’t mean you can do the same.
I can almost guarantee you that copying someone else’s pricing model won’t get you the same result (unless you copy everything else the business does).
This gets to the heart of the point about benchmarking.
Practice benchmarking can be incredibly useful, but only it’s based on data that is:
- accurate,
- easy to get, and
- consistently tracked.
Which, to be frank, is usually not the case.
There is a solution though – instead of trying to benchmark yourself against others, benchmark yourself against yourself.
That’s the basis of the Practice Analysis tool I’ve used with the firms I coached; a tool I liked so much I decided to turn into a web app and, because I think it’s valuable to share, I decided to make available to anyone who wants to use it.
You can assess your practice here
It’s a tool which takes you quickly through a series of simple questions relating to each of the nine areas across the Journey to Leveraged (which is included as a bonus analysis in the PDF report the tool generates). For example:
- Are you clear on your target market?
- How effectively do you deliver your service packages?
- How did you create your pricing?
- How confident are you to charge what your business needs to?
- Have you designed your first 90 days experience?
….and lots more.
Then, it’s about simply asking yourself whether this is something you’ve mastered, a work in progress, or something that you haven’t begun working on.
Simple. Easy to produce. Consistent.
The point is to get a snapshot of where the opportunities lie and then, by committing to revisiting the process over time, a picture of where you’ve made progress.
After all, isn’t progress the real benchmark?
Benchmarking can be an incredibly powerful tool. When it’s simple, it’s even more powerful.
When it’s something you can track over time, it becomes a tool that can be the difference between thinking you’re making progress in the right direction and knowing you are.
If you’d like to start using a tool like that, you can check out practiceanalysis.com.au here.
Related: How to Drastically Improve Your New Client Meeting Outcomes