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How many farmers are benchmarking - and has it helped them?

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The benefits of benchmarking are often talked about, but how many farmers are actually doing it and has it helped them? Our exclusive Farmers Guardian survey, commissioned by HSBC, asked you to share your experiences.

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More than half of farmers we surveyed said they benchmark, and most reported improved profitability and wider business benefits from doing it. But that still leaves nearly half who are not benefiting from this practice.

 

Of the 207 farmers who took part in our online survey, 53 per cent said they benchmark and one third said they had been doing it for a decade or more.

 

Gordon Whitford, HSBC regional agriculture director for the North of England, Scotland and Northern Ireland said: “A large percentage of our most profitable businesses, across all agriculture sectors, undertake some form of benchmarking, whether it be measuring financial or technical efficiency.

 

“Benchmarking provides a full understanding of your total cost of production. Comparing your performance against peers means you can identify your strengths and areas for development.

 

“This is giving a clearer picture of where future investment might give the best possible return, so production costs can be reduced further.”

 

Benchmarking also has implications for borrowing, said Mr Whitford: “The bank and its credit team will take a much larger degree of comfort in the knowledge the customer has a full understanding of their costs of production and how they are performing against their peer group.

 

“Being able to discuss figures and efficiencies with your bank manager indicates the management has confidence in the decisions they have made and understands the implications of what they are doing.”

 

Nearly a quarter of farmers surveyed said it has made their business more profitable, while another quarter said it gave them greater confidence when making business decisions.

 

One-fifth said benefits extended to their wider business too, and 16 per cent said this increased the longer they had been benchmarking. This is perhaps why 17 per cent said they had increased the time they dedicated to it.

 

Overall profitability and input costs are the most important things to benchmark for, the farmers said.

 

Farmer groups vs. software

 

Benchmarking tends to fall into two camps: being part of a group of farmers which shares data and experiences; or using a software tool. Both are quite different in their approach.

 

While the first allows farmers to share their experiences with others and discuss their findings and solutions together, the second tends to lack this interaction, but means farmers can compare data with a larger number of farms. This might allow them to see how they compare nationally, or within their specific sector.

 

From the survey, 47 per cent of farmers who benchmarked said they did so as part of a group, while 44 per cent said they used software, suggesting a small number of farmers use a different method. Some may also use both.

 

Benchmarking software appeared to have substantial business benefits, with 86 per cent of those using it saying their profitabilityimproved, compared to 53 per cent who were part of a group.

 

Those who used software seemed to have achieved larger improvements in profitability, with 34 per cent saying it has had a ‘major positive impact’, compared to 29 per cent of farmers who were part of a group.

 

This might be because farmers who used software were making more changes in their businesses as a result of benchmarking; 93 per cent said they are doing things differently now they were benchmarking, compared to 75 per cent of farmers in groups.

 

While many farmers were actively benchmarking, 47 per cent were not. About half of this group considered it, but a range of concerns were holding them.

 

A lack of financial or computer skills were holding back almost one-quarter of farmers, who said they were concerned the software would be too complicated, they did not have enough financial detail about their business, or they lacked the financial competence to benchmark.

Mr Whitford said: “Clearly there has to be an element of trust if operating with a group. The farmer does have ultimate control over whom he or she wishes the data to be seen by, but when benchmarking information is available publicly, no individual farm can be identified.”

 

Not having enough time was also a problem for 15 per cent of people.

 

What stops benchmarking?

 

The most common reason for not benchmarking was concern about sharing their farm’s financial data, with 20 per cent of farmers citing this as an issue.

 

Nearly one-fifth did not think benchmarking would benefit their business. Only a minority had stopped, suggesting lack of support and understanding was an issue.

 

Some people started benchmarking, but stopped, mainly because it was too time-consuming (33 per cent) or too complicated (another 33 per cent).

 

Mr Whitford said getting started did not need to be that hard.

 

He said: “My advice would be to start with the basics. There is plenty of benchmarked data relevant to nearly all agriculture sectors. Work with your financial advisers to assess your current performance against this data.

 

“There are a significant number of business providers, such as accountants, consultants and buyers, who can help you establish your own benchmarking.”

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Competition winner

Winner of the prize for completing the HSBC benchmarking survey was Stuart Kirkwood from Hull.

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