Finding Industry Averages for Small Businesses to help with Benchmarking, Ratio Analysis or Planning
You can add value for your clients by providing reports with key financial ratios compared to industry averages. This benchmarking can help clients see how their business is doing compared to others and identify areas for improvement. Plus, it is a great way for you to deepen your relationship with the client enhancing your position as their trusted business advisor. In this post, I’ll show a couple of ways to get industry averages for free or some lower cost options if you choose.
RMA Industry Averages from OneSource in ReferenceUSA
Login to the library website (look at for details about the ReferenceUSA database and how to access it) and go to the ReferenceUSA database and click on the OneSource database as shown below.
If your library does not have the OneSource database, you might want to check with some other libraries. In my area, only one out of three local public libraries subscribe to the OneSource database. After this section, I will show you other ways to get industry averages if this does not work for you.
Once you are in OneSource, you want to search for the appropriate industry. As shown below, I searched for restaurants.
The search results provide me with more details to select the specific type of restaurant – whether it is full service or limited service (see image below). Look through the search results to determine which most closely matches your client (or whatever).
When I click on the NAICS code in front of Limited Service Restaurants, I get the screen below where I can click on the Market Research Report to get the industry averages.
When you first see the pages with the averages, it is somewhat overwhelming so let’s break it down and first analyze the headings. RMA provides the two pages of averages—one based on assets and the other based on sales of the companies. This helps to compare companies of similar size. In the image below, on the right you will see this page is based on sales and the column headings indicates the range of sales. For example, in the image below for companies with sales < $1 million you would use the averages in the first column on the right (for the current period) and $1-3 million in sales would be the 2nd column. Note there is no breakdown based on sales (or assets) for the historical averages.
There are averages on both sides of the page – the left is historical and current data is on the right. You can see the period dates in the column headings.
In the image below, you can use the ratios in the section labeled Income Data (circled in blue in the below) to calculate the ratios for Gross Profit, Operating income and net income. Then, in the Ratios section, there are several other ratios provided for you such as the Current and Quick Ratios, Debt/Equity and more. You can use the ratios provided to calculate the Accounts Receivable and Inventory turnovers and days in receivables and/or inventory.
There are 3 averages for each ratio. For example, looking at the Current Ratio below for <$1 million in sales (i.e. the first column) the top number (1.9) represents the top 25% while the bottom (.2) is the lowest 25% of the companies that comprise the averages. I usually use the middle one (.7) – which is the median or average.
If you cannot access the OneSource database via a library for free you may want to go to the library (as discussed below). If you choose, you can get reports from RMA for $135 for non-members as shown below. Here’s the link
If you would like to read more about the ratios, how they are calculated, etc. here is the link to Financial Ratio Benchmarks – Definitions of Ratios which is a 15 page document which is helpful. Here’s the direct link: http://www.rmahq.org/NR/rdonlyres/15D21745-3F7C-478D-86EE-061F5E9AD888/0/Definition_of_Ratios_200910.pdf
RMA Industry Averages at the Library
If you cannot access the OneSource website to get the industry averages online, then you can go into your library. Most libraries have the book RMA (Risk Management Association) Annual Statement Studies in the reference section. It will save time if you know the NAICS Code before you get there. You can look up the NAICS code online (http://www.naics.com/search.htm). Otherwise there usually is a book of NAICS Codes in the Reference section of the library. Don’t forget to take change to copy the industry averages.
Note: Some people may remember using SIC codes. The Standard Industry Classification (SIC) codes have been replaced with the North American Industry Classification (NAICS) codes http://www.naics.com/search.htm
Free Industry Averages from BizStats
You can get industry averages for free from BizStats (www.bizstats.com) too but they are somewhat dated (i.e. old). You would want to click to see the financial benchmark reports as shown below. However, I’d suggest you check out the other stats they have available too. The stats on risk show what percentage of firms are profitable or not for an industry and more.
BizStats allows you to select whether the entity is a C or S Corporation or Sole Proprietor as shown below.
Next you need to indicate which industry. Also, notice you can purchase the BizMiner Micro Firm Profit & Loss Profiles with more information for $69 (for a 3 year report or $99 for a 5 year report).
Then you will see the average for the industry selected. The nice thing about the averages from BizStats is there is more detail by expense account. For example, you can see the % of sales spent on advertising, insurance, etc. The bad thing is the information is from 2007. However given the current economic conditions it may not be a bad idea to use ratios from a few years ago since that may be more ‘normal’. Below you will see all the financial benchmarking averages available for free. Remember there are other stats in the website which you may be interested in as well.
I usually use averages from both RMA and BizStats to get as much information as possible. Industry associations and organizations may provide industry specific averages (like sales per square foot for retail, etc.) which are useful as well. Keep in mind that you really only need to look up the industry averages for a client once a year. Clients like to see how they compare to their competitors. Plus, it provides a great consulting opportunity to discuss the numbers with clients, what the ratios mean and what they can do to improve the profitability of their business. I find this is a good way to differentiate myself and add value for the client. I hope it will help you too!
Time Sensitive – If you want to Grow Your Accounting or Bookkeeping Business, Do Not Miss This GREAT Opportunity!
We’re thrilled that many of you have already registered for our Second Annual Accounting vCon on May 16 & 17. You now have immediate access to some amazing case studies, a BONUS checklist, a BONUS “Dear John” sample letter for clients you need to fire (will be posted ASAP), hundreds of motivated and upbeat peers, and that’s all before the conference even starts!
It’s not too late! Read more
QQube™ 5.1 – the most complete data warehouse for QuickBooks – has been released.
According to founder Chuck Vigeant M.Ed., ‘this is the most efficient, most powerful release to date. We made over 60 improvements, additions, and fixes from version 5.0 including refresh algorithms that are up to 90% faster in certain cases. This was an ambitious agenda for the last two months, and we succeeded.’ ‘We were excited about the 5.0 release, but soon realized that we needed to make improvements to make it a better customer experience.’ Read more
Having your own business is hard work, but there is a smart way to serve clients well and make the income you want without putting in hundreds of hours per week. The skills and tools you need to move from one level of income in your practice are different from the ones it took to get where you are. Stop relying on peers who are at or behind your level of income and start relying on mentors like Michelle and Sandi who have already been where you want to go and are fully dedicated to serving the accounting profession. Read more
It’s super-easy to grow your business as big as you want and without struggle. All you need to know is the right set of skills. Unfortunately, they’re not accounting skills – they are practice management skills. And that’s one secret to growing a business that most entrepreneurs never learn.
There is a second secret: that it’s not that hard to learn these practice management skills. The problem is most people don’t know that that’s what will help them leapfrog their revenue and serve their clients better. Read more
Multiple monitors are GREAT! It can really help your productivity or allow you to keep up with social media posts on Twitter or Facebook. Regardless of how you use multiple monitors, when you travel or are away from the office, you really miss the additional monitor. I love being able to use my iPad as an additional monitor when I travel. Read more
Xero continues to impress and amaze me and many other accounting professionals. If you are not familiar with Xero yet, you can watch this webinar with Jamie Sutherland, Xero’s US President, for an introduction and demonstration of Xero. Read more
Are you looking for fresh ideas to grow your accounting business, practical sessions to update your skills, or fun ways to connect with peers, all on a shoestring budget (and that doesn’t take you too far from home)? If you answered yes, then we’d love to introduce you to the Second Annual Ultimate Accounting vCon.
If you answered yes, then we’d love to introduce you to the Second Annual Ultimate Accounting vCon, a 2-day virtual conference designed to help you: Read more
Join Michelle Long (Owner of Long for Success) and Ian Vacin (VP of Marketing & Product at Xero) for a 1 hour webinar on Value Pricing. Get an overview of what value pricing is, how to bundle your services, tips on how to set price, and how to take the first steps to increase your practice’s profitability. Plus we’ll give a wealth of tips and tricks from folks we interviewed while creating the content (like Ron Baker, Jody Padar, Sandi Smith Levya and others).
When: Thursday, March 21, 4:00 – 5:00 pm Eastern (US)
Can’t make it to the live session? Register anyway so you get the email with the link to the recording.
This is a basic level Group-Internet Based course worth 1 CPE credit based on a 50 minute hour.
Xero is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its web site: www.learningmarket.org
Just a quick note to let you know that Sandi Smith Leyva’s Accountant’s Accelerator program is closing to new members on Friday, February 22, 2013.
As an affiliate for Sandi, I personally know dozens of her clients and the great results they have had from the program. If you are looking for solid, proven ways to build your practice, serve clients better, and work smarter, then this program delivers. Here is just a little taste of what you get:
Have you been waiting for the QuickBooks 2013 give away? Well, I’m thrilled to say that the prizes are now on hand and ready to be given away! Stay subscribed to my blog so you won’t miss a chance to win!
This week, a blog subscriber will be chosen at random to win QuickBooks Pro 2013 (MSRP $249.95). Watch for an announcement at the end of the week! Read more
The Second Annual Ultimate Accounting vCon will be held on May 16-17, 2013 in the comfort of participants’ own offices. The all-virtual, cloud-based Ultimate Accounting vCon (which is short for virtual conference) is the brainchild of Michelle Long and Sandi Smith Leyva, two popular accounting industry speakers.
Michelle Long, CPA and owner of Long for Success, runs the 21,500-plus member LinkedIn group called Successful QuickBooks Consultants, is a popular QuickBooks speaker and trainer, and is author of two books, including “Successful QuickBooks Consulting.” Read more
What’s better than free? Box will give you 50 GB of free storage space and all you have to do is register! What a great way to have offsite backups of your data, share files with others, and more. Just remember to not put the QuickBooks working company file (QBW) in Box or other file sharing services. Read more
Join Michelle Long (Owner of Long for Success) and Ian Vacin (VP of Marketing & Product at Xero) for a 1 hour webinar on Value Pricing.
- What is value pricing?
- How to bundle your services
- Tips on how to set price
- How to take the first steps to increase your practice’s profitability.
- Plus we’ll give a wealth of tips and tricks from folks we interviewed while creating the content (like Ron Baker, Jody Padar, Sandi Smith Levya and others). Read more
8 Simple Steps to Accelerate Your Accounting Practice, Free CPE, and Final Call for Accountant’s Accelerator 2013
- Are actively growing your accounting practice, starting a practice, or repositioning your services
- Struggle with time management and how to get everything done even though you’d like new clients
- Want to develop your business management skills so you can move from being a technician to a business owner
- Feel uncomfortable or lack confidence when it comes to marketing or selling
Then I’d like to invite you to a complimentary webinar on Tuesday, February 19, 2013 full of simple and low-cost tips, answers, and ideas to help you in these areas.
“8 Simple Steps to Accelerate Your Accounting Practice” Read more
QQube™ Version 5 has a new look and feel, making it easier to use, less overwhelming to the casual user, and provides game changing capabilities when combined with the latest versions of Microsoft Excel. New users can now expect to get up and running in just a couple of steps, and existing users will find welcome changes to the interface, field names, and Excel integration.
CLEARIFY® founder Chuck Vigeant, M.Ed. says “There is a saying in the development community called ‘eating your own dog food’. This infers that the true test of a product is how often you use it in your own organization. I can’t put the tool down because I have so much fun solving customer problems that our user base was only able to produce in earlier versions with several degrees of difficulty. “ He continues: “there is nothing more comforting than to hear a customer go ‘wow’ when we show them that they can get any information about a customer, item, job, or account – with just a click or two of the mouse.”
In addition to the usability improvements, QQube now includes analysis tools for Audit Trail and Sales Tax, Balance Sheet by Class; several additions to Inventory, Job Costing and WIP, based upon customer requests; and new contact fields and bin location information available in 2013. This puts QQube in a class all by itself in terms of available data for QuickBooks users.
The Excel Add-In also has a few new tricks for Multi-Company users and Financial Statement generators.
Users who have tried QQube in the past but where a little overwhelmed, will find it much easier this time around. Report writers will have unparalleled access to almost any piece of QuickBooks® data. Existing users will be amazed at the changes that make their life easier.
QQube will be publicly available on February 5th, and the first webinar on the new features will be held on Feburary 12th. Register here for this free webinar: https://www3.gotomeeting.com/register/880941334
For specific details on the changes in QQube Version 5 please visit: http://community.clearify.com/articles/product/55/qqube-version-5-release-details
The difference between accounting practice owners that make a meager living and those that are far more comfortable financially can often come down to just one or two skills that are easily learned.
Most accounting professionals build their technical skills – far more than they need to – but they ignore the more important set of practice management and development skills that will help them take their practices to the next level. They keep reaching for technical credentials because that’s the more comfortable road.
But it’s also the less profitable road. Read more
Don asks a question about how to handle a high-maintenance client, and Jackie and Scott chime in with their opinions. Cindy asks about the special offer a vendor made yesterday, and Shannon clarifies.
Sandi’s teaching a session on pricing, Michelle is networking with participants, and other participants and exhibitors are intermingling in the Exhibit Hall. Sounds like a typical accounting conference, right? There’s just one difference: many participants are at home (some in pajamas!) in front of their favorite computer. They didn’t spend a dime on airfare, hotels, or taxis. They’re watching, often from multiple monitors and/or PCs, the current session, chat room conversations, Exhibit Hall displays, and much more in this fully virtual event. Read more
Accountants, CPAs, Bookeeepers and others who want to start or grow their accounting practice will find this free webinar contains valuable and beneficial information.
Join Ian Vacin (Vice President of Marketing & Product at Xero), Michelle Long (CPA, MBA – Owner of Long for Success) and Steve Chaney (CPA – Owner of Chaney & Associates) as they share proven strategies and experiences on how accounting professionals can leverage modern cloud solutions to transform their relationships with clients from transactional, hourly relationships to consultative ones that place the accounting professional back as the Trusted Advisor. Specifically, learn the process (with easy to follow steps) to move your once a year clients (like write-up / tax clients) to be monthly paying consultative relationships. Gain perspective on the process, the conversations,and the outcomes of these new relationships and revenue streams. Read more
One of my New Year's Resolutions is to focus on helping accounting professionals grow their business and improve profitability. Adding Concur to your 'toolbox' for your firm or clients and joining the Concur Advisor Program is one way to add profits to your accounting practice. Read more
If you are looking to start, grow, or accelerate your QuickBooks accounting practice in 2013, I’m excited to let you know about a program that’s generating quite a buzz. It’s especially for QuickBooks ProAdvisors, ISPs, EAs, CPAs, and bookkeepers who want to take their accounting, IT, or QuickBooks consulting practice to the next level.
Here are some excerpts from 2011 and 2012 members: Read more
Michelle and Sandi’s 7 Hottest Tips for Starting or Re-Starting Your Accounting or QuickBooks Consulting Practice
Whether you’re starting your first accounting or QuickBooks consulting business or re-starting your existing business, most of us want to attract a solid set of “A” clients that are rewarding professionally as well as financially. If you haven’t met that goal yet or you want to accelerate your business success, then we’d love to invite you to a complimentary webinar that can help you do just that: Read more
If you want to grow your accounting practice, then I want to share this information with you. You may have heard about Sandi Smith Leyva’s practice growth program, Accountant’s Accelerator. It’s just about to get started for 2013, and if you looking to work less, make more, and serve clients better, then I’d like to invite you to a complimentary webinar this Thursday, “A Sneak Preview into Accountant’s Accelerator 2013.” Read more
Want to finally start serving your small business clients without running all over town? Wondering what tools you need to get started? Wondering how best to talk your clients into changing, or maybe the “profit” part of all of this?
Then, Sandi Smith Leyva and I would like to invite you to our complimentary webinar, “5 Steps to Providing Profitable Virtual Accounting Services,” on September 27, 2012 at 2PM Central Time. Register here Read more
Sandi Smith Leyva and I are thrilled that many of you have already registered for our First Annual Accounting vCon. We also hope you enjoyed our complimentary sneak preview call, “11 Ways to Accelerate Your Success in the Cloud,” and we wanted to be sure to remind you that tomorrow, AUGUST 31, is the deadline for the Early Early Bird price that saves you over 50%.
If you haven’t registered yet, you can right here: http://accountingvcon.com/register/
There were so many great comments and questions from all of you on the webinar. We’re continuing the momentum by opening up our Community Forum this week: You’ll have two full months to connect with peers and exhibitors, download materials, and post your questions on the discussion boards, even before we start the vCon. Read more