By finding and parsing industry benchmarking data, you can analyze your business’s performance and make more informed spending decisions.

Have you ever wondered how much you should be spending on marketing or how much you should be paying your operations manager? Researching your competitors’ spending habits and financial ratios, as well as industry averages, can help you assess your performance and make more educated decisions about how to spend your hard-earned dollars. Follow these four tips in order to find and leverage useful benchmarking data.   

Begin with a plan.

“There is no substitute for having the right data when trying to make high-stakes competitive decisions. The best benchmark data is multidimensional. It combines information about the customer (who bought?), sales event (what was sold?), and business performance (what were the operational/financial results?),” says Troy Ruemping, strategy and product management expert at Point B, a consulting group.

But before you begin to gather this data, you must articulate what you’re trying to find out and why. “Before the data-gathering process even begins, clarify both the key questions to be addressed and the hypothesis about the answer,” suggests Ruemping. “Translate findings into concrete operational actions for the near term, plus broader insights for executive consideration over the longer term.”

Use online tools.

The U.S. Census Bureau’s online resource offers general business statistics, as well as data — broken down by industry — on workforce indicators such as turnover, new jobs and earnings; and financial stats, such as sales, retained earnings and financial and operating ratios.

“Though they don’t cover marketing spending outright, they do go over profit margins, which can be used to gauge how you’re doing,” explains Marc Prosser, cofounder and managing partner of Fit Small Business, a site that provides product and service reviews for small business owners. “If your marketing spending keeps your gross profit margins from being where they should be, that’s a clear sign of an issue. You can also use this method to compare industries.”

Additionally, consider these online resources:

• BizStats, a free resource for industry financial ratios, as well as other useful business statistics, such as “cost of labor: cost of goods sold” and “small business rent as a percentage of sales”
• BizMiner, a subscription-based service for industry financial ratios and market statistics
• Yahoo Industry Research Center, a free tool with stats on the day’s best- and worst-performing industries, as well as granular data and relevant news broken down by sector

Many libraries maintain subscriptions to business databases, so you may want to start there. Library card holders can usually access them for free, and in some cases remotely from their own computers via the library’s website.  

Consider external resources.

In addition to the information you can find online, there are a variety of companies that offer tools for tracking and presenting benchmarking data in a way that’s easy to digest and act upon. “New platforms have developed to scrape, mash up or even crowdsource market data from a variety of sources. New analytical tools are also emerging to make sense of qualitative data (customer reviews, patent applications, call center conversations, etc.) and detect the ‘weak signals’ that could become important trends down the road. It can be helpful to enlist a partner who can act as the ‘data concierge’ who synthesizes insight from several sources,” advises Bill Cornell, strategy and product management consultant at Point B.

Start small to avoid data overload.

If you’ve heeded tip one and have a clear idea of what type of information you would like to gather, that will help you avoid this pitfall. If you “over-buy externally sourced data” you can become “mired in data overload and bloated research cost,” cautions Cornell. So start small. If you are partnering with an outside resource, this will allow you to get to know the firm before you deepen your relationship. If you’re handling data sourcing internally, this approach will keep your team members on track and help you assess their performance before determining their next project.