For almost 25 years, ASA has contracted the services of Industry Insights, Inc. to conduct its annual “Operating Performance Report” survey. The OPR report offers industry wholesalers an opportunity to measure their own performance with that of their peers and others in critical benchmark areas.

The OPR surveys will be sent out to all ASA wholesalers in March. Those who complete the survey will not only receive a copy of the complete report, but will also receive a personalized profile that compares their company's performance to the whole.

Following is an article prepared by Industry Insights, suggesting that wholesalers might wish to adopt a habit of monitoring their performance on a more regular basis.

Industry Insights is an independent financial research firm headquartered in Columbus, Ohio. The firm possesses almost 30 years' experience specializing primarily in providing financial/operating, compensation/benefits and member needs survey services to trade and professional associations. For more information contact Thomas Noon, principal at Industry Insights, at 614-802-2310 ext. 107.

The Importance of Financial Ratio and Benchmark Analysis

How important is financial ratio and benchmark analysis to the success of your firm? The answer is, even simple analysis can provide significant insight into the operation of any firm. Understanding financial ratios and the positive impact of this type of analysis could mean the difference between simply “operating” your business or “excelling” in your industry.

Using Financial Ratios

Financial ratio analysis is a vital part of the successful operation of any business. The term “financial ratio” basically refers to the comparison of one performance indicator versus another such as relating bottom line profits to sales in the form of profits as a percent of sales. Ratios such as this represent an important gauge for monitoring the performance of your firm over time and as compared to your peers in the industry. Considering a financial ratio, as opposed to relatively meaningless absolute dollar figures, is useful for relating how profitable and productive your firm is.

Using Benchmark Analysis

Just as the absolute dollar amounts are inadequate in assessing a company's success, so too is a financial ratio inadequate unless there is a comparative against which to gauge performance. Such comparatives, or “benchmarks” as they are oftentimes called, can be in the form of:

  • A firm's own historical performance over time

  • A firm's budgeted or planned performance

  • The comparatives of your industry peers

    Comparing a firm's performance versus any of these benchmarks can provide important insights about a company's performance. Recognizing that performance ratios are an important gauge for assessing a company's strengths, weaknesses and improvement opportunities, the logical question arises, “where does a company obtain such benchmark information at an affordable price?”

    An accounting firm can provide this type of analysis but the cost can potentially exceed a thousand dollars. However, even at this price the analysis would still pay for itself. By enabling you to compare your expenses, gross profit margins, and turnover rates with those of other firms, you could quickly identify areas in need of improvement, and the resulting profit gains would more than cover the initial outlay.

    The good news is this type of custom financial analysis is readily available from the American Supply Association for only $95 per participating member firm. In return for this low participation fee, a responding firm will receive a copy of the overall industry report as well as an individual Company Performance Report containing a firm's own ratios calculated alongside the appropriate industry comparatives.

    The ASA Operating Performance Report (OPR) represents the most complete, accurate and up-to-date comparative financial performance information available anywhere for the P-H-C-P wholesaling industry. This study is designed to serve as an easy-to-understand, actionable tool for industry firms to evaluate their company's operating results in order to pinpoint strengths and weaknesses, and improvement opportunities.

    Results that appear in this report include comparative financial ratios and statistics for each of the primary business segments in the P-H-C-P wholesaling industry. Within each segment, data is shown for all participating firms as well as by sales volume size, and a special analysis that focuses on high profit firms. A variety of information is provided for each group, including: key measures of overall performance relating to profitability, productivity and financial management.