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For example, measuring one business and its production costs per unit or its profitability per employee against a group of other similar businesses. There are many measures you can use for benchmarking and it’s important to find those which cover all aspects of your business – both physical and financial. Those involved in UK agriculture regularly compare yield per cow or tonnes per hectare, but it’s often done without the financial context. While having the highest yielding dairy herd or hitting an average of 10 tonnes of wheat per hectare across a farm is a fantastic achievement, it needs to be achieved in a way that generates a cash surplus at the end of the trading period. There are farming groups which use financial benchmarking successful, but those who fight shy of benchmarking may have the perception it is all about being the best and at the top of the list, which is not the case. Benchmarking is about identifying areas where businesses achieve better results than you and analysing how they do it. Equally it’s about sharing best practice and business skills for the
good of the whole group to increase efficiencies in order to give all a competitive edge. Only by comparing yourself to similar farms can you begin to understand where improvements can be made within your own. The key to operating successfully in a price taking industry is not the end product price, but margin, which benchmarking can help manage and improve. As well as margin, the need to forward plan and keep reviewing is also important. This enables you to keep track of market forces and how they could impact your business in the future. Of course, having a business plan and detailed financial projections do not guarantee profitability or generate cash. But, having the skill to manage your business and control costs delivers profitability in a price taking industry. A financial plan, reviewed regularly gives you the ability to adapt quickly to changes in the market or perhaps when the elements conspire against you. As we all know, the only constant is change, so to give your farming business the best chance of profitability, benchmark, plan, record, review and readjust
when something changes Apart from obvious business
efficiencies, there are other advantages to benchmarking and regularly reviewing your business. When the result of your analysis indicates that other producers have different systems or infrastructure which improves their efficiency, it can be a trigger for looking more closely at investment in your business.
The information generated by benchmarking can be a useful advantage when looking for funding for expansion or new infrastructure. It will be able to demonstrate how efficiently your business is operated, where you sit within your peer group and areas which you have identified as ones you can improve on - the actual reason for the proposed investment. Benchmarking, combined with a strong business plan, can be an exceptionally powerful message for any prospective funder, particularly in challenging times.
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