Methodology

The benchmarks look at some profit and loss items and some balance sheet items.

The model adopts the following principles:-

Average (profit and loss figures)

The average is calculated by taking all the figures in the sample and dividing by the number in the sample, including those where there are zero values. So if there are figures of :- £10,000, £20,000, £30,000, £40,000 and £50,000 the average is £150,000 / 5 = £30,000.

Average (balance sheet figures)

In some instances balance sheets may not be prepared or are not available. In that case calculating as above will produce misleading statistics. So the average for the current assets, current liabilities and net assets is calculated slightly differently in that any zero items are ignored. So the average of £10,000, £20,000, £30,000, £40,000 and zero = £100,000 / 4 = £25,000.

More than one year’s data?

It is recommended that you restrict the comparison data to any 12-month period for a particular client. If he has a 31 March year-end you could choose dates from 1/4/2003 – 31/3/2004 or 1/1/2004-31/12/2004. If you choose all clients on the system over say 3 or 4 years, it will treat these as separate clients. So if you have 6 clients of a type and 3 years data for each one, the system will assume you have 18 clients and will average the total over that number. Note that your client you are comparing will also be included and will distort the figures. Take this to extremes – if you have one client in a category and 2 years data, the system would report 2 clients and average the 2 years together to arrive at the statistics – this is incorrect as it is the same client!

Maximum and Minimum

The maximum figures refer to the largest figure in each “box”. It does not mean that the largest turnover necessarily has the largest gross or net profit. In fact the largest figure in each box could each come from a different client.

Similarly the minimum is the lowest figure in each box.