Over 100 years ago, the maxim “comparison is the thief of joy” was used by our 26th President, Theodore Roosevelt. While I agree with the premise of this quote, we do need to compare wisely our business to others to understand how we can do better. The opportunity to improve based on what we see and hear from others must be done cautiously.
Like most people, companies are most apt to share what they are most proud of, and many tend to embellish the information. This makes using their information as a target for your performance challenging. Social media almost makes a sport out of this concept on many levels.
The most reliable information about business performance is our own — if we are consistent with how we track it. We can all track however we choose, as long as we are consistent. This enables us to assess whether we are getting better.
A favorite expression of mine is “better is better.” The simpler we make the measurement, the easier it will be to be consistent. Some personal examples are tracking our weight or our weekly golf score. Both are typically done using the same scale or playing at the same golf course. The same information from others is rarely as dependable due to the “embellishment” factor.
An easy example for your business is to measure gross margin by plugging in your sales and cost of goods sold (COGS) numbers. This is simply defined as SALES – COGS/SALES (the difference between sales and COGS divided by sales). Here are some easy examples:
- Sales: Use trailing twelve-month (TTM) sales before any merchant fees.
- COGS: Use materials applied or used, plus direct technician labor minus all benefits, vehicles etc.
This example may appear to be basic, but the goal is to measure improvement compared to previous years that are tracked the exact same way. There will always be reasons, excuses and variables that may contribute to the change. However, when tracked consistently, you will be better able to make business decisions — including price increases, staff compensation and efficiency gains.
It’s unlikely that you will get as clean a comparison from others. Stay disciplined on how you get the information. Don’t expect to keep getting better results. Don’t react when you hear competitors claim better numbers. Your best way to improve is to compare to yourself.
When I was running marathons, my running partner, Steve, and I would track our results closely. Steve was a far more talented runner than myself, but whenever a runner told him their own time, he would always ask them, “Was that a good time for you?” He understood that we all have our own goals, and comparing results was not a great way to assess our performance. Comparing our own results is much more productive — and looking for ways to better those results is far better perspective and easier to manage.
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