The Importance of Benchmarking in Construction

 

Benchmarking is an approach employed to measure or verify performance by comparing it with an industry standard or any other information.

It is possible that you think your bid-win percentage is "really good," but what is the definition of "really good? Do you need to compare it against your peers or previous experiences? In order to determine if the winning rate is actually the way you want to see it You might want to consider doing both!

There are many reasons that every construction Company must conduct at least an initial benchmarking. It's an easy method to establish business goals which are quantifiable. You can track the progress and make sure your team is accountable. Additionally, it can inspire your employees as they have a clearly defined objective that's likely to be achievable while also challenging their capabilities. It's a chance to step back from the everyday grind and explore innovative ways to work and new methods to improve performance in the financial department and also encourage your team to think strategically. This can assist you in making crucial choices for the future, boost productivity among employees and departments and possibly help you identify and cut expenses. It could also provide an insight into your organization's processes and areas that you could enhance.

What benchmarks are you able to use?

The first step is to identify benchmarks that are similar to the construction business you work for. It's often much more difficult than it sounds However, there are resources available where you can select and select relevant statistics. Be sure to take advantage of the historical results of your business in addition, to measure against.

A few benchmarks that we have found useful and worth considering could include:

Backlog of working capital

Backlog to G&A What number of months worth of operating costs will be paid for with your backlog?

·         Gross profit per FTE

·         Net over/underbillings in relation to revenue

·         Net over-/underbillings to equity

·         The equity of stockholders in relation to revenue

·         Gross profit from completed and still-in-progress job

·         Gain/fade analysis of jobs

Don't forget to include the most commonly-used ratios (e.g. return on equity, return on assets, current ratio, etc.)

Always contact your reliable RubinBrown advisors should you have questions regarding benchmarking!

Location: India

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