Benchmarking analysis is a business improvement tool that helps company achieving business excellence. By using the benchmark analysis we strive to philosophy of continuous improvements.

In combination with other strategic and business performance improvement tools it provides a good basis for strategic and operational decisions.

Benchmarking analysis is suitable for companies at all stages of growth. With this tool we compare revenue/unit, cost/unit, productivity/unit, quality/unit and other key indicators in an easy and reliable way.

Speaking from the operational point of view, benchmark analysis points out the business fields and areas where significant further improvements are possible. However, when we speak from the strategical point of view, the tool allows us to determine the best practices of the leading companies in the industry and broader, namely from companies with similar processes from other industries that could be applied on the subject company.

There are several types of benchmarking, depending on what do we compare and with whom:

Type: Strategic benchmarking analysis
Purpose: Enhancing the strategy
Description: Comparing long-term strategy that have enabled the success of the companies being analyzed – stress on core competencies, abilities to respond to changes in the environment, and R&D.

Type: Competitive benchmarking analysis
Purpose: Reducing the operational gaps
Description: Comparing the key performance indicators and identifying operational gaps.

Type: Business process and business function benchmarking
Purpose: Improving key business processes and functions
Description: Comparing the key processes and functions with best practices.

The input data for the benchmark analysis are most of the time gathered based on publicly available information, financial statements, questionnaires and in-depth interviews. The sources of information are internal as well as external.

Interested in these services? Please contact us and we will present you the cooperation and our offer!

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In other words, EBITDA gives you an indication of how much earnings before interest, taxes, depreciation and amortization the company makes with all the invested capital. Negative number is a red alarm for a company, meaning that the company is facing fundamental problems with its operations.

Normally practitioners consider normalized EBITDA only (management adjustments, pro-forma adjustments and other adjustments), since one off events may sometimes represent a significant role.

Due to fast and easy use of EBITDA, the metric is dominating the financial world. Its applicability makes it a #No.1 indicator. Furthermore, it is often used in relation with debt, value and performance indicators:

– Leverage: Financial obligation/EBITDA

This metric measures how does the debt relate to the ability of generating the operational profit. It can be argued that a leverage > 4 is not acceptable for banks anymore.

– Interest coverage: EBITDA / Interest expenses

This metric measures the ability of a company to cover its interest out of its operations. It is obvious that a ratio <1 is not sustainable.

– Value multiplier: Enterprise value/EBITDA (EV/EBITDA)

This metric measures how the market values the firm according to its ability to generate operational profits.

– Performance indicator: EBITDA / Total revenues (EBITDA margin)

This metric is a relative indicator and offers a great way to compare the company performance with its competitors.

EBITDA is further developed into EBITDAR and EBITDARM in cases where costs such as rents, restructuring fees and management fees represent a significant amount. These is especially typical for retail industry, REITs, hospitals, etc.

Nowadays more and more financial practitioners are aware of the underlying interpretational problems of EBITDA. The metric that overcomes the disadvantages of EBITDA is the economic value added model (so called EVA model). Even though the model as such is more advance, it relays on subjective assumptions related to the cost of capital calculation.

Are you interested in boosting your EBITDA? Check our performance improvement services or contact us directly!

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