How do you measure up to other businesses in your industry? One of the things that banks do when considering loan applications is measure your financial status against those of similarly sized companies in the same industry. So, how do you find out how you measure up?
Initially, you must keep financial records. You will need to have a balance sheet and a profit-and-loss statement, as these comparisons are based on financial records.
First, identify your industry. One of the easiest ways to do this is to think of key words that describe what you do and look up your Standard Industrial Classification code and North American Industry Classification System code. One of my favorite sites is 1997 NAICS and 1987 SIC correspondence tables at the US Census Web site: www.census.gov/epcd/www/naicstab.htm. With this information, you can identify these two codes that represent your industry.
From there, there are two basic industry-standard books that banks use to make this comparison: Dun & Bradstreet (D&B) and Robert Morris Association (RMA). For example, you can find the industry average for gross margin, operating expenses (overall, not line items) and profit before taxes compared to sales for fast-food establishments. Or check directors' compensation rates. Ask the small-business loan officer at your bank or check with your Small Business Development Center for one of these resources.
Another place to check is your industry association. Your public library is the best place to start. Directories of Business Associations are not inexpensive to maintain, so most libraries are your community resource to turn to first. The reference librarian will know of many business tools for you.
You can try the Internet. Using the key words you identified above, you can find out what associations represent your market. There are several free Web sites that you can search. Searching http://www.yahoo.com/ for Associations + Oregon + your key word might be the easiest. There are subscription services available on the Web and directories available at your local library.
And, for fee-based services, you can find industry research online. Again, D&B is a good source. Use your search engine, type in "industry research" and choose your most appropriate options.
It is good to know how you measure up against your industry, but remember this: you need to be keeping good, accurate and timely financial data about your own business. Take the pulse of your own business and then compare it to that of other businesses in your industry.
Jimmie Wilkins is the director of the Chemeketa Small Business Development Center.
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