Most firms I speak to are already sitting on a wealth of data. You have financial statements, BAS reports, profit and loss statements, and management accounts—all regularly updated and delivered on time. But I find myself asking a crucial question.
What happens after you send these reports to your clients?
In many cases, the client reads the report, files it away, and moves on. The conversation surrounding these documents often fizzles out, leading to missed opportunities for deeper engagement and understanding.
Identifying the Gap
Compliance work certainly has its place; it serves its purpose by explaining what has already happened in the business. However, by the time you sit down to review those numbers with a client, they have already moved on to addressing current challenges. The questions they bring into the conversation often sound more like this:
• Am I actually doing okay?
• Why does cash feel tight?
• Can I afford to hire another employee?
• How do I compare to my competitors?
Unfortunately, a standard report does not answer these pressing questions on its own. What is missing is context. This is precisely where benchmarking becomes invaluable.
My Perspective on Benchmarking
When I reference benchmarking, I am not merely talking about sending another report to your clients. The true value lies not in the output itself, but in the opportunities that it opens up for discussion.
If you send a benchmark report without any context, it can actually do more harm than good. Clients may struggle to interpret the information, leading to confusion or disengagement. Instead, I use benchmarking as a tool to guide meaningful conversations.
Benchmarking allows you to introduce:
• Context about how the business is performing over time
• Comparisons against peers or industry expectations
• Patterns that highlight areas of focus
• A natural starting point for a more profound discussion
Rather than dictating what is wrong, you can point to something intriguing and ask an open-ended question. This approach transforms the tone of the conversation from mere reporting to collaborative exploration.
Three Approaches to Benchmarking
There is no need to overcomplicate the process of benchmarking. I typically think of it in three layers, depending on where the client currently stands in their business journey.
The first layer is the simplest: comparing the client to themselves. By examining trends over time—such as revenue, margins, and profit—you can shed light on changes that the client may not have noticed. Even a couple of years' worth of data can reveal important shifts.
The second layer involves comparing the client to their peers. This is where industry benchmarks come into play. Whether using public data or more detailed insights, these comparisons help contextualise the client's numbers within a broader industry framework.
The third layer is about comparing the client to a targeted goal. This approach is more structured, as it involves building an aspirational model with clear numbers to aim for and specific KPIs to track. Each layer builds upon the last, gently guiding the client to a deeper understanding of their situation.
Real Conversations in Action
Where this process truly shines is in the actions it inspires. For example, I collaborated with a podiatry clinic that, while maintaining steady revenue, was experiencing a gradual decline in margins. The client attributed this to market conditions without realising the underlying issues.
Upon closer examination, two critical factors emerged: they had not adjusted their pricing in years, and their suppliers had significantly increased costs. This sparked a conversation about pricing strategies.
As a result, they made necessary adjustments, introduced a structured review process, and within a year, their profitability improved without losing any clients. This single conversation paved the way for ongoing strategy discussions and long-term planning.
Another instance involved a plumbing business where the owner was perpetually overworked, falling behind on invoicing, and grappling with cash flow issues. Initially, the thought was to hire another plumber to ease the burden.
However, through benchmarking, it became clear that the real issue was not a lack of manpower but rather a lack of structure. The business had significantly less administrative support than comparable firms, and their working capital cycle was notably longer.
Instead of hiring another tradesperson, the owner decided to bring in administrative support, streamline invoicing processes, and enhance collections. Consequently, cash flow improved, the owner regained valuable time, and the overall stability of the business increased.
There are also occasions when benchmarking does not lead to immediate changes. For instance, I worked with an architecture firm where one number stood out: their rent was considerably higher than that of similar firms. When we discussed it, the client was already aware of the situation. It was a deliberate decision based on their appreciation for the location and its alignment with their business objectives.
That conversation did not lead to a change but rather confirmed their intentional choice. Sometimes, that affirmation is just as valuable as taking action.
Starting with Benchmarking
If you have not yet incorporated benchmarking into your practice, I suggest starting with a simple approach. Do not attempt to roll out a complex system right away. Instead, choose a few clients who are open to having a conversation and focus on just one to three key metrics.
Highlight something you’ve noticed in their data and pose a question. Encourage the client to share their thoughts and insights. If the conversation goes well, you can build on that initial engagement. This organic approach is typically how benchmarking practices grow.
The Future of Client Relationships
Implementing benchmarking fundamentally alters your role as an accountant. It allows you to go beyond simply explaining what has already occurred. Instead, you begin helping clients understand their current standing and what steps they can take next. This shift is where the true value lies.
Clients do not require more reports cluttering their inboxes; they need clarity about their financial situations. When you provide that clarity, the conversation naturally evolves into something more meaningful.
This is where advisory services truly begin. By facilitating insightful discussions, you foster a stronger, more collaborative relationship with your clients, ultimately leading to better outcomes for both parties.
Watch the Full Session
If you are interested in seeing how I conduct these conversations and implement benchmarking in practice, I invite you to watch my QuickFest session. I walk through the process step by step, offering insights that can help you apply these principles effectively in your own practice. You can catch the full replay here: