A small benchmarking group of positive, open-minded farmers can help find cost-cutting and business improvements, says one dairy farmer.
This article follows the publication of the results of a Farmers Guardian survey on benchmarking. Commissioned by HSBC, more than 200 farmers took part in the research.
Philip Halhead, Lancashire dairy farmer and bull semen business owner, says: “The lightbulb moment came with the dairy crisis. We could not make sense of the dairy business, which was operating on 20ppl prices.”
In response, Mr Halhead, who milks 300-head of Holsteins, and two other dairy farmers, formed their own benchmarking group to see what changes they could make.
He says: “We knew each other well from outside the farming business and we knew we had similar systems.”
The group met on their farms to introduce each other to their respective businesses and the challenges they faced.
For the first year, they collected data and tried to make sense of it, before bringing in specialist farm accountant, Dodd and Co, which put the numbers into an Excel spreadsheet in a way that was recognisable to all three farmers, says Mr Halhead.
Mr Halhead says: “We needed to be sure the numbers were accurate and comparable. This was critical.”
With this all set up, the three farmers were able to analyse their fixed and variable costs in detail, as well as their incomes. Now they concentrate mainly on variable costs.
They regularly get together to analyse their data and even go to events and suppliers together.
Mr Halhead says: “We have found each business has strengths and weaknesses. We have been able to share contacts, our best practices and make improvements.”
As a result, Mr Halhead has been able to cut the cost of milk production by 1ppl by changing the way he buys purchased feed. This is saving him £24,000-£25,000/year.
“I realised we were not sourcing feed as competitively as we could. One of the other businesses was doing that very well. So now we are more proactive; we look at the market, get quotes and use the futures market.”
The group has also compared insurance costs and Mr Halhead has saved £3,000 annually as a result.
The head of agriculture at HSBC visited members of the group to talk about the pig industry and what they could learn. HSBC has pointed the group to other farmers offering examples of best practice.
Buying and selling cattle is Mr Halhead’s area of expertise and he has been able to help his benchmarking colleagues with contacts and advice.
Comparing, sharing expertise and contacts goes right through the business, he says, and the group has compared contracting costs, staffing recruitment and management. Mr Halhead says: “We take five to six hours every two or three months to analyse benchmarking data.”
Although there are lots of benchmarking models, Mr Halhead recommends keeping a group to no more than five people. This helps build trust, ensures confidentiality within the group and boosts proactivity.
It is critical to pick the right people to benchmark with, says Mr Halhead.
“You have to have a lot of mutual respect for each other. It is fine to have different ideas and approaches; this can be healthy.”
You should be able to trust the other people to maintain confidentiality. They also need to be positive about making changes and be open-minded to new ideas.
Empathy and the ability to listen and make positive contributions is also important, says Mr Halhead.
To find other farmers to benchmark with, he suggests two main approaches: bring a group of friends together who you can be open with; or use your bank manager or accountant to identify possible farmers.
Both a bank manager and specialist farm accountant should have in depth knowledge of businesses and personalities who might match.
Mr Halhead says: “The biggest benefit for us has been getting a sense check on things. There is nothing off limits.”