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How Do You Compare?

Evaluate how you compare to your competitors to make sure you're doing things right.
April 12, 2007
URL: http://www.entrepreneur.com/article/176948

Do you know how you compare to your competitors? Everyone knows it's important to track how your business is doing compared to past quarters and years. Yet it's equally important to have an idea of how your business is doing compared to the competition. For instance, if you have a 10 percent net profit, is that good or bad? My response would be that it depends. It depends on the history of your business, as well as how other businesses in your industry are doing.

The information you need to evaluate includes things like gross profit ratio, net profit ratio and current ratio. Of course many other ratios exist, but those are a few key ones you should begin with. Here's what they mean:

Now that you know what to look for, here are ways you can find out this type of industry information and use it for valuable comparisons in your management reviews.

These last two options are at the top of my list because you're getting the professional insights of an actual person. When you look at the ratios, do you know what they mean? Most likely not, which is where it pays to have a professional on your team helping you learn the key indicators of your business. So make sure you know how your business is doing, not only compared to your past data, but also compared to your competitors.