“Are we going to hit our goal?”
“What happened last quarter?”
“Is this conversion rate good?”
Analysts early in their career struggle with where to start investigating business questions. It can be really difficult to know where to begin! Whenever you are faced with an ambiguous business question start with benchmarking and trending.
Benchmarking and trending are the simplest tools for analyzing performance. Trending looks at the change over time and benchmarking compares performance to targets or goals. These tools will get the ball rolling for any analysis request.
A measurement being good or bad depends on what you are comparing it to. Are you tall? Compared to a 1st grader, you likely are. Compared to Shaquille O’Neal, you likely aren’t. Benchmarking compares what happened to what we think good is. For example, if our business made $1 million compared to a $500,000 goal we would be elated. But if we compare our $1 million in revenue to a competitor who made $1 billion, we will be humbled rather quickly. Benchmarking adds context to the measurement so you can judge performance.
How things change over time tell us a story. A baseball player’s batting average increasing every season is a positive trend indicating improvement. The player is getting better and should keep doing what they’re doing. A restaurant’s revenue decreasing each month is a negative trend indicating deterioration. It’s time to make a change to get revenues back up. The trend tells us whether or not we are moving in the right direction.
Bringing them together
Together, trending & benchmarking show a summary of how something is performing.
Let’s go through an example:
“How is our win rate?” Happy to help Ms. Sales Manager.
Win Rate data:
- The team’s win rate increased each year
- Rep 1 & Rep 3’s win rate increased each year
- Rep 2’s win rate is the same each year
- Last year (2020), our team performed worse than the industry average (21% compared to 24%)
- Rep 3 is our only rep meeting the industry average
- The trend of our team’s win rate is increasing. We are getting better at closing deals.
- Our team’s win rate is still below the industry average. Our win rate has room for improvement.
- Rep 3 has improved the most over the last 3 years. What can we do to help Rep 1 & Rep 2 perform like Rep 3?
We used trending & benchmarking analysis to give context to Ms. Sales Manager on how her team is performing and give a recommendation on how to improve their performance.