Benchmarking Your Financial Ratios

How do you know if your small business is performing well? Increasing sales figures, loyal customers, and positive recognition are all good indicators but how do you compare to your peers in the industry? One method to determine your performance is by benchmarking your business ratios. Your financial and operating ratios such as Receivables Turnover Ratio or Gross Profit Margin when compared to your industry will aid you in seeing if your business is performing above or below the industry averages.

To begin your first need to get your NAICS Code. One source for industry financial benchmarks organized by NAICS Code is the Annual Statement Studies book published by the Risk Management Association. You can do-it-yourself by visiting your local public libraries for benchmark data or work with your accountant to help benchmark your financials.