Benchmarking is a comparison, but it’s not a competition. Benchmarking can be a useful tool to understand where your farm management practices can improve on yield, profit margin, operation efficiency, or gross margin. Even human resources can be benchmarked, but it’s what you do with the numbers next that really counts.
Maggie Van Camp, national agricultural practice development leader for BDO Canada, joins occasional LIVE! host Kara Oosterhuis (with a pop-in by Shaun Haney).
RealAg hosts a LIVE! Q&A on a timely topic each weekday on social media at 1 pm M/3 pm E!
- Benchmarking is basically comparing. Everybody benchmarks all the time.
- Financial benchmarks are beneficial to farmers because they can act as “red” or “green” flags.
- You can compare historically, say to a five year trend to yourself, or to other farmers as a whole.
- How often should someone benchmark?
- Benchmarking started with Dr. Larry Martin (CME program)
- Scale matters. The best place to start is to benchmark against yourself. “Can make your numbers come alive.” Objectivity.
- Benchmarking can be done for anything really: finances, margins, your hair length, how short you are or aren’t
- Lots of ways to benchmark as a new farmer. What-if scenarios are a great way to track benchmarking.
- Privacy concerns? True. FCC did a survey a while ago, and privacy was a concern. Benchmarking by BDO, the numbers are anonymous.
- You can get a great report, and leave it on your desk. But let’s say you have a specific area you want to gain in, take those numbers and make them work for you.
- Specific ratios that farmers can focus on? Gross margin over revenue; Contribution margin over revenue; Operation efficiency; Earnings before interest.
- If you’re a BDO client, it’s easy to set up benchmarking. If you’re a DIYer, spreadsheet. The trick? A spreadsheet is great for comparing to yourself.
- Cost per acre for fertilizer might be easy. Debt capacity, maybe not so much.
- “You can’t manage what you don’t measure”
- Action steps after getting some data? Start with “what are the red flags?” and “why?”. Then “how can I solve this?”
- Five per cent increase theory.
- Technical difficulties, we can’t wait for rural internet improvements
- Benchmarking in addition to accounting work? More like at the same time as accounting work.
- Benchmarking in HR? How good is your benefits plan? How much do your people cost? Can be very variable and hard to benchmark.
- Have to be comparing apples to apples.
- Better to get better than get bigger.