The profit gap
Each business is part of an industry. A business typically has competitors or comparable companies that operate in the same industry. Businesses in that industry have benchmarks. Benchmarks are key business metrics and practices that allow interested parties (i.e. the market) to compare a particular business against its competitors, peers or other companies around the world. Where a given business lands among these benchmarks helps an organization understand how and where it needs to change in order to improve performance. In short, benchmarks can tell a business owner whether they are a best-in-class business within their industry or something else.
One important benchmark is profitability, more specifically the earnings before interest, taxes and depreciation and amortization (EBITDA). Business owners need to understand the company’s EBITDA and how it compares to their industry benchmarks.
The difference between the EBITDA of a best in class business within the industry compared to the actual EBITDA of a business owner’s company is the profit gap.