Benchmarks & Peer Groups in Balance Sheet Analysis: Why They Are so Important in the Evaluation of Companies

Benchmarks are reference values that enable the evaluation of the performance of a business partner in comparison with market norms or industry standards. They help to estimate the financial stability and the operative efficiency of companies and to obtain a realistic picture of their performance capability. Examples include:

• Financial key figures such as turnover growth, profitability and debt-equity ratio in comparison with the industry average.
• Efficiency metrics such as cost structures and key liquidity figures in a sector comparison.

Peer groups consist of companies with similar characteristics such as the same industry, company size or geographical location. They offer a relevant context for evaluating the performance of business partners in comparison with companies in a similar situation.

Objective Estimation of Creditworthiness 

Benchmarks and peer groups provide a solid basis for assessing the financial stability of a business partner. Through the comparison with relevant reference values, risks and opportunities can be recognized at an early stage, which is especially important when making decisions about business relationships.

Risk Recognition 

A comparison with benchmarks and peer groups uncovers potential weaknesses such as high levels of debt or insufficient liquidity. Such findings help in assessing risks and making well-informed decisions about whether working with a particular company makes sense.

Evaluation of the Growth Potential

Analysis using benchmarks and peer groups also enables a better estimation of growth potential. Companies can thus identify business partners that are likely to have long-term stability and profitability.

Better Negotiating Position 

A well-founded data basis gives you a stronger negotiating position. When you know exactly how your customer compares with his competitors, you can design your offers and conditions accordingly.

Build Long-Term Partnerships 

Through the targeted use of benchmarks and peer groups you can identify business partners that suit your company and with whom a long-term partnership has lots of potential. This contributes to developing stable and profitable business relationships.

The use of benchmarks and peer groups in the evaluation of customers and business partners provides companies with an objective, data-supported basis for making well-founded decisions. They help in reducing risks, discovering opportunities and developing a clear negotiating strategy. Companies that use these tools effectively not only secure competitive advantages but also lay the foundations for sustainable business relationships.

Use benchmarks and peer groups as a strategic instrument to understand your business partners better and put your decisions on a solid data basis. In this way, you can ensure that every new business relationship is not only successful in the short term but also in the long term.

Through the integration of "Benchmarks and Peer Groups" into our balance sheet analysis software FINOYO you can carry out comparisons across companies efficiently and effectively.

Do you want to find out more? Then download our product information on the FINOYO module Benchmarks & Peer Groups.