The best business decisions aren't made in a vacuum. In order to break from the pack, you have to know where you stand relative to your peers and competitors. Benchmarking, or comparing a company's operational and financial performance metrics against businesses considered industry leaders or best-in-class, is one of the best ways to identify factors and processes that can lead to superior performance.
Advances in information technology are making it much easier to facilitate the dissemination of best practices, pushing benchmarking forward with rapid momentum. This can be a tremendous boon to small- and medium-size companies looking to get to the next level. In fact, for many companies on the fast track, benchmarking has become an integral part of achieving exponential growth.
But how do you access and compile the reams of data necessary for effective decision making? While the information may be publicly available (although not always), it is likely to be widely dispersed and time-consuming to gather. To facilitate the efficient analysis of a broad universe of performance data, Bank of America Merrill Lynch has developed a tool called PeerProfilerTM.
Based on the unique breadth and depth of our clientele, a database was created that includes information aggregated across thousands of companies in every industry. By leveraging that information, along with other industry-specific data and publicly available information, it's possible to develop an individually tailored peer benchmarking analysis for every client. Armed with that data, clients, client managers and other bank experts work together to analyze a business relative to best-in-class peers and develop comprehensive strategies that lead to efficient growth.
According to Marie Braham, senior vice president with Bank of America Merrill Lynch, "Discussing PeerProfiler results with clients helps elevate the level of dialogue around important topics such as optimal capital structure, working capital management, operating efficiency, as well as debt capacity available to support organic growth or strategic acquisitions. As a result, PeerProfiler results can help us better understand a client's business and home in on their priorities and needs."
Marie Braham, SVP, Bank of America Merrill Lynch
For example, some clients may focus on modeling that compares the company's key income statement and working capital metrics with a peer composite. Potential strategic topics for discussion include margins, operating expense or net income versus the peer group, or working capital metrics such as days payable or days receivable. Based on PeerProfller data, it is possible to identify the key variables that have the most significant impact on these metrics, and explore financial solutions that could have a positive impact.
In addition to financing or capital-raising strategies, which are critical to supporting growth, treasury and other solutions can be developed to reduce costs and Improve key working capital metrics.
PeerProfiler also includes a sensitivity analysis model that illustrates financial impacts from changes in payables, receivables and inventory. It can also be used to review the Impact of foreign exchange rates or commodity price volatility on margins, which could lead to recommendations from bank experts on hedging strategies to manage risk and smooth earnings.
"The client manager can use PeerProfiler information to help us understand a client's strategic needs, and connect those needs to the right solutions from our broad range of capabilities,” explains Braham.
Technological change, expansion into global markets, and increasing demand for innovation, quality and speed will all have growing implications on businesses of every size, and companies need to be outward-looking and knowledge-driven to keep up. In this environment, benchmarking will become an even more essential process in pursuing growth, and PeerProfiler can provide a unique advantage in helping companies achieve their growth objectives.
PeerProfiler is available to clients of Bank of America Merrill Lynch. To learn more about how the tool can help you manage growth, talk with your client manager.
This article illustrates the features and capabilities of Bank of America Merrill Lynch Commercial Banking proprietary PeerProfilerTM.
*All data points are hypothetical and for illustrative purposes only.
- Benchmarking your business’s performance metrics against industry leaders can lead to superior performance
- An outward-looking perspective is required to keep up with technological change, global expansion and innovation demands
- Besides gauging EBITDA and NIBT competitiveness, PeerProfiler™ can pinpoint solutions for your strategic needs