About LivePlan's Benchmarks

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What are the Benchmarks?

The Benchmarks section in LivePlan offers averaged financial data, collected from U.S. companies across a wide range of industries. 

When creating your company or adjusting your company type, LivePlan’s AI Assistant will automatically generate the industry code most closely aligned with your business’ industry. You can also manually search for your industry within the U.S. The benchmarks will then display metrics showing how companies similar to yours have performed in the past.

These metrics can help you compare your own forecast against the actual performance of similar companies. Industry benchmarks can tell you whether you are matching the profit margins of your peers, keeping too much inventory on hand, or getting paid faster or slower than others.

Note: LivePlan's Benchmark data is U.S. data. We continue to search for international sources of benchmark data, but as of yet have not found any with large enough data sets to be helpful for our customers. 

This feature is available to LivePlan Premium users. To learn more about LivePlan Premium, please click here

Benchmarks metrics and ratios available in LivePlan

After you've searched for your industry, you'll see benchmark data for key profit, cash metrics, as well as quick and current ratios. This article offers a detailed description of each metric available, and you can also find this information within the LivePlan Benchmarks tab. Just click on any metric for details:

Profit metrics

Profit metrics tell you how your margins compare to the rest of your industry. See how you stack up at three key points:

  • After you pay your direct costs (gross margin) 
  • After you pay the rest of your regular expenses (operating margin) 
  • Your true bottom line (net profit margin)

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Profit metric How it's calculated
Gross margin This metric subtracts your direct costs from your revenue to determine your gross margin (sometimes called “gross income”) and then divides the result by your revenue to produce a percentage.
Operating margin This metric subtracts all of your operating expenses (direct costs, payroll, rent, advertising, and so on) from your revenue to determine your operating income and then divides the result by your revenue to produce a percentage.

Note: If you manually enter your expenses in the Dashboard using the "Enter overall expenses" option, LivePlan will treat the value you enter there as your total operating expenses when it calculates operating margin. If you want to separate out taxes, interest, etc., from your operating expenses, be sure to use the "Enter individual expenses" option instead.
Net profit margin This metric subtracts your total expenses from your revenue to determine your net profit (also known as “net income”) and then divides the result by your revenue to produce a percentage. (More Details)

 

Cash metrics

Startups and small businesses must manage their cash carefully. Even a profitable company can run out of money if it pays its bills too quickly and collects from its customers too slowly. The cash metrics show you how well you are protecting your cash position:

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If the cash metrics aren't shown in your results, here are some tips for seeing them:

  • Enter values for the average days to get paid (Accounts Receivable or AR) and average days to pay (Accounts Payable or AP) in the Cash Flow Assumptions section of the forecast.

  • To see the Inventory on hand metric, enable inventory handling in the Cash Flow Assumptions section of the forecast.

Cash metric How it's calculated
Average days to get paid This metric divides your average accounts receivable balance (that is, the amount that your customers still owe you for past purchases) by your revenue in the selected period. The result is then multiplied by the length of the selected period to translate it into the equivalent number of days.
Average days to pay This metric divides your average accounts payable balance (that is, the amount that you owe to your suppliers for purchases on credit) by your direct costs in the selected period. The result is then multiplied by the length of the selected period to translate it into days.
Inventory on hand This metric divides the average value of your inventory by your direct costs for the selected period, then multiplies the result by the length of the selected period to translate that into days.

 

Spending metrics

Note: The spending metrics will be hidden if you have chosen "Enter overall expenses only" when you manually entered your actuals in the Dashboard.

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Spending metric How it's calculated
Revenue spent on rent This metric takes the expense(s) you designated as rent in the forecast, divides that total by your revenue, and expresses it as a percentage.
Revenue spent on marketing This metric takes the expense(s) you specified as marketing in the forecast, divides that total by revenue, and then expresses it as a percentage.
Revenue spent on payroll This metric takes the total of salaries & wages plus employee-related expenses, divides that total by revenue, and expresses it as a percentage.

Quick and current ratios

Note: The Quick ratio isn’t shown if inventory isn’t enabled in the Cash Flow Assumptions area of the forecast.

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Other metric How it's calculated
Quick ratio This metric takes current assets and subtracts inventory from it, and then divides that total by current liabilities.
Current ratio This metric takes current assets and divides them by current liabilities.

 

What to do if no data is shown for a metric

There are a couple of reasons you may not see data for a particular metric in the Benchmarks overview. If you haven't started your forecast or entered your actuals in the Dashboard, you'll see messages like these, which tell you where to enter the missing information:

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If you have started your forecast and/or entered your actuals into the Dashboard, and you see the phrase "No Data," it could be because you haven't entered data yet for the month you have selected in the Benchmarks display. Click the date menu in the upper right corner to change the display date:

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How is the Benchmark data different than market research?

The Benchmarks page of your LivePlan account gives you useful insights into how your forecast compares with the average performance of similar-size companies in your industry. These metrics help you make sure that your business plan is realistic. While the Benchmarks are extremely useful and can be used as industry research, they aren't meant to function as market research. Here are some reasons why:

Company data vs. customer data

Our Benchmarks data comes from our partner company VerticalIQ. They compile financial data for a wide spectrum of businesses, remove any identifying information, and then aggregates that data. You can learn more about this process below under About our Benchmarks data.

So Benchmarks data will give you a window into similar companies to yours. Market research, on the other hand, helps you learn about your customers. The more you can learn about who your business serves and what problems your product or service solves for those customers, the stronger your business plan can be.

Getting specific about your market

The Benchmarks data is categorized according to the North American Industry Classification System (NAICS), which is a standardized system used by U.S. federal statistical agencies. This standardization is helpful for organizing a massive amount of data, but the classifications can be quite general, and in the case of a business operating in a niche market, there may not be enough data available to register in the Benchmarks at all. 

This is where market research makes a big difference - it helps you understand crucial details like how many potential customers there are for your business and what their locations and needs are in a way that the Benchmarks data can't provide.

Market research helps you write your plan

If you've looked at the questions presented in both the Pitch and the Plan section of LivePlan, you may notice that many of them relate specifically to these same subjects: who your customers are, where they are, what they need, and how you'll provide it. This is why doing your own market research is so important - the data you discover is the foundation of your business plan.

If you're not sure where to begin with your market research, here are some very helpful articles:

About our Benchmarks data

LivePlan is the only app with available world-class industry benchmark data provided by VerticalIQ.  This gives you the power to compare your key business metrics to other similar companies across the United States.

VerticalIQ owns a proprietary database of privately held company financial statements aggregated by industry. VerticalIQ collects from accounting firms, banks, and credit unions through a cooperative agreement with its clients. It separates the financial data from any information identifying the participating firms. Then, it aggregates the data by industry according to the North American Industry Classification System (NAICS).

NAICS codes and descriptions

Benchmark search results are based on the industry codes and descriptions established by the North American Industry Classification System (NAICS)VerticalIQ data is categorized according to NAICS because it is the standard used by Federal statistical agencies (like the U.S. Census Bureau) to classify businesses to collect, analyze, and publish data about the U.S. business economy.

NAICS was developed jointly by the U.S., Canada, and Mexico to allow for a high level of comparability in business statistics among North American countries.

NAICS category titles aren't always intuitive

NAICS codes and descriptions are updated every five years.  Despite these updates, many NAICS industry titles still contain somewhat outdated terminology. For example, if you are writing a business plan for a coffee shop, and you search for "coffee shop," NAICS will return a category called "Snack and Nonalcoholic Beverage Bars." This is the correct category for a coffee shop business, but it might not seem intuitive based on the title.

Likewise, If you search for "web design," NAICS will return a category called "Custom Computer Programming Services." It's important to read the full description for a category so you can make an accurate selection.

We have added more current terminology as keywords for LivePlan's custom search algorithm to make it easier to locate the correct NAICS category for your business. But if you have any difficulty finding a category that seems right for your business, please , and we'll be happy to help you.

How to use the benchmarks if you are outside of the U.S.

The industry data from our partners at VerticalIQ comes from U.S. companies only. While we continue to search for sources of international benchmark data, we haven't yet found any sources that contain large enough data sets to be of use to our customers. 

If you are in another country, the data in the Benchmarks tab may still be useful, but you probably want to select the entire U.S., rather than a specific region, as your point of comparison to your forecast. For more information on LivePlan's global compatibility please see Can I use LivePlan outside the U.S.?

The articles below will show you how to search for and view benchmarks data for your industry: 

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