Kent Bang of Compeer Financial, 3 Steps to Benchmarking to Improve Your Operation, September 13 2017

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When faced with tighter margins, benchmarking can help you find ways to improve efficiencies and increase profitability. Benchmarking compares the performance of your own operation, typically with financial or reproduction performance indicators, against the performance of your peers or against yourself over time. Benchmarking helps you see the big picture while also providing the opportunity to analyze the details contributing to those larger differences.

It’s critical to utilize quality, standardized information to ensure accurate comparisons.

For example, use accrual income and expenses for financial benchmarking. Accrual accounting aligns the timing of when expenses and income are realized. Comparisons based on accrual financials allow you to more accurately evaluate where your operation is positioned in the current market, without the influence of tax adjustments or variances in cash flow.

Evaluate the gaps between you and the top producers, and then develop a reasonable target for your operation. If you are in the bottom 25%, aim to move up to the average. If you are in the top 25%, strive to be number one or to excel in areas where you are closer to average.

It is an important business practice that you understand the limitations of your operation and develop your business plans to manage around them. These limitations should be incorporated into your long-term goals, not be used as excuses to justify performance. It’s also important to keep pushing for improvements in the areas where you are already successful in order to maintain your competitive advantage.

The final step is to develop a plan to work toward these targets. Even if you are in the bottom 25%, you should still be looking at what practices and systems helped the top producers get to and stay at the top. Implementing techniques already proven to be successful by the best farms in the benchmark can shorten the learning curve for your operation.

Start off with big picture analysis of how your business performance stacks up, and then evaluate what needs to change in your farm’s daily operation to achieve your new goals.


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