Benchmarking has become common practice with industry and is being applied successfully on many farms to measure and lift performance.
Benchmarking provides a useful way of assessing the performance of a business. Benchmarks provide a point of reference against which performance can be compared.
Three Levels Of Benchmarks
1. Spot benchmarks
These provide and measure the performance of a business at any one point in time. Without an objective measure such as a benchmark, it is very difficult to gauge how a business is performing. Trends in the benchmark
This compares the performance of a business over time. In other words, “is the business improving its performance, remaining stable or falling behind”?
2. Industry benchmarks
This compares your business with others in the industry and lets you know where your performance rests, when compared to the rest of the industry.
Within agriculture, there are many possible benchmarks that could be used. One of the first exercises in benchmarking is to identify the key profit drivers for a business and to adopt benchmarks that measure these drivers. Consequently, benchmarks may vary from property to property depending on what the key profit drivers are for that property.
3. Common Benchmarks
- Water use efficiency under rainfall and irrigation Crop productivity
- Livestock productivity
- Income per labour unit
- Cost to income ratio
- Debt to income ratio
- Profit per dollar invested or return on capital
- Benchmarking can become your slave or your servant. It is important that the benchmarks adopted for your farm become your servants and not your masters.