Benchmarking has become common practice within industry and is being applied successfully on many farms to measure and lift performance. 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.
2. 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?"
3. 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. One of the first exercises is to identify the key profit drivers for a business and to adopt benchmarks that measure these drivers.
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 (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.