The value of benchmarking your livestock business
09 November 2017
By John Francis, MLA Business EDGE deliverer
What is benchmarking? Benchmarking quantifies data surrounding production, the resource base and its value, pricing and costs associated with the business.
Why benchmark? Benchmarking, or comparative analysis, is a way of comparing your farm business performance with a range of other farm businesses. Benchmarking uses a common frameworkto compare the farm management records of many different farm businesses and enterprises. This comparative data is used to identify best practice at enterprise and whole farm levels.
But how can I compare my business with a different business? While most of the benchmarking inputs are specific to the farm entering the information, the process also uses consistent values to allow ‘like for like’ comparisons between businesses. The enterprises within mixed farm businesses can be compared by analysing the production and financial performance using per unit of production (such as per head of livestock) or per unit of area (such as per hectare).
What do I do with the results? Benchmarking offers the ability to compare the performance of your own farm against a group of farm managers identified as generating high levels of profit. These comparisons allow for the detection of areas of farm business performance where changes to systems, production levels or costs structures have the potential to lead to additional profitability.
Benchmarking brings out the best in farm business management. A comparison of the average return on assets over the last nine years from participants of Holmes Sackett benchmarking groups versus the average of the remainder of the database shows that the participants in the benchmarking groups have achieved 2.5% higher return on assets. The participants benefit from both the skewed sample (more profitable peers), but also from continual improvement.
Want to learn how to create a valuable set of farm business figures to allow you to benchmark your business? Sign up to a Business EDGE workshop.
Business EDGE was developed by MLA in 2010 for northern beef enterprises and in 2016 was extended to cover southern livestock businesses. Topics covered in Business EDGE include how to use business data to analyse enterprises rather than just meet tax compliance, the importance of understanding your earnings before interest and tax and assessing and managing business risk.
Upcoming workshops include:
Rockhampton: 20–21 November 2017
Charleville: 5–6 March 2018
Goondiwindi: 8–9 March 2018
Register at babusiness.com.au/thebusinessedge
Hamilton: 28–29 November 2017
Presenter: Dr Phil Holmes and Adrian Kennelly, RMCG
Register with Adrian Kennelly
T: 0427 679 041
Southern Highlands: 29–30 November 2017
Gloucester: 6–7 December 2017
Register with Prue Francis
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