Financial Benchmarking: a practical guide for its application

Damian Baptista27 February

Many companies face financial challenges when competing in saturated or constantly changing markets, and maintaining a balance can sometimes seem almost impossible. This is where financial benchmarking becomes a key tool to transform a challenge into an opportunity.

In this article we will explain each step to understand and apply it. You will learn what it is, why it is important, the types that exist, how to implement it step by step, the most common mistakes to avoid and the tools you can use.

What is financial benchmarking?

Benchmarking, translated as “benchmarking”, is an in-depth analysis that allows a company’s strategies and practices to be compared with those of other organizations in order to identify areas for improvement. In its financial variant, the objective is to specifically analyze key economic and financial indicators to optimize resource management and improve competitiveness.

Imagine you have a company that offers online loans and you notice that the number of applications has decreased, while another similar fintech is growing rapidly. Benchmarking allows you to understand what that fintech is doing differently, whether in terms of user experience, marketing strategies, interest rates or ease of the approval process. In the financial context, this type of analysis helps identify successful strategies that can be adapted to improve profitability.

Importance of financial benchmarking

Financial benchmarking not only helps to understand the market, but also provides a clear view of the opportunities available. Among its main benefits are:

• Identify industry trends: Allows to anticipate emerging practices.

• Improve efficiency: Helps optimize internal processes and allocate resources strategically.

• Strengthen decision making: Provides hard data to implement informed strategies.

• Increase competitiveness: Facilitates the adoption of best market practices.

What types of benchmarking are there?

There are several types of benchmarking, each focusing on different aspects of the analysis. Here are the main ones:

Competitive Benchmarking

Analyze the strategies of direct competitors competing for the same target audience. For example, study the growth of a rival fintech to understand how it is positioning itself in the market.

Functional Benchmarking

Focus on companies in other industries for actionable ideas. A fintech might be inspired by the customer service practices of a retail company.

International Benchmarking

It studies global companies to anticipate trends and adopt advanced practices, especially useful in financial markets with great international dynamism.

Generic Benchmarking

It analyzes specific processes in any sector, such as the logistics optimization of a supply chain.

Internal Benchmarking

Compares departments or processes within the same company, allowing to identify and replicate internal best practices.

How to do financial benchmarking? Step by step guide

1. Choose competitors carefully

Select companies from the sector or even from other relevant markets. Be sure to identify market leaders.

2. Define your objectives

Establish what you want to analyze: Operating costs? Investment strategies? Profit margins?

3. Collects data

Uses reliable sources such as financial reports, market research and digital analysis tools.

4. Compare information

With data in hand, identify gaps and opportunities. For example, if a competing fintech has lower operating costs, evaluate how they achieve this.

5. Implements improvements

Apply lessons learned and continually evaluate results to adjust strategies as needed.

Common mistakes and how to avoid them

1. Failure to define clear objectives: Without a specific purpose, the analysis lacks focus.
2. Choosing irrelevant competitors: This can lead to inapplicable conclusions.
3. Rely solely on public data: Supplement with more detailed research.
4. Do not involve the team: It is crucial that all relevant departments are involved.
5. Lack of follow-up: Implementing changes without measuring results makes it difficult to identify their effectiveness.

The best benchmarking tools

Some useful tools for financial benchmarking include:

• Google Analytics: To measure the digital effectiveness of the competition.

• SEMrush: Ideal for analyzing digital marketing strategies.

• Tableau: Facilitates the analysis and visualization of financial data.

• QuickBooks: Useful for managing and comparing accounting data.

• Sector-specific tools: Such as consulting firm reports or global financial benchmarks.

Suppose a fintech notices a high customer churn rate. They perform a competitive benchmarking and discover that a rival company offers a more intuitive interface and lower transaction costs. After implementing similar improvements, they manage to reduce attrition by 25% and increase their user base.

Conclusion

Financial benchmarking is an essential tool for companies seeking to improve their market position. By analyzing and adapting the best practices of others, it is possible to optimize processes and increase competitiveness.

Ready to implement benchmarking in your strategy? Contact us and find out how we can help you take your business to the next level.

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