Field Notes Blog > How does your farm business measure up?
How does your farm business measure up?
February 20, 2019
Featured Guest Writer: Raechel Sattazahn, AgChoice knowledge center director
During a year of low commodity prices for many Pennsylvania farmers, benchmarking has never been more important. While it might seem like one more item on your to-do list, benchmarking can help you understand your financial position and identify areas of improvement for the future success of your business.
How is your farm doing from year-to-year?
A critical part of benchmarking is tracking and reviewing your farm’s financial and production information from one year to the next. Where have you improved? What areas are bottlenecks on your farm? Benchmarking against yourself can provide valuable information and help you determine where to focus your efforts.
Are you among the best?
After you understand your business’s performance over the years, compare your farm business to your peers and the best-of-the-best. Business owners should always strive to become better. If your results are the same from year-to-year, chances are you are probably falling behind your peers. Growth of your business is important for long-term sustainability.
There are several benchmarking programs available across the agricultural industry to help farmers learn how they compare with others. While it is always good to compare your business to peers of similar size and production method, comparing your farm business with the best-of-the-best (the top 20 percent of your industry) will help you learn how to continue to improve.
Use the information and review results
Understanding how you measure up is just the first step. Using the information to make changes on your operation is the true value of benchmarking. After making improvements to your operation based on your benchmark results, review regularly to track the status. When used effectively, benchmarking can help operations turn weaknesses into strengths, improving the profitability of the farm business.
Consistency and accuracy is important in benchmarking. Be sure to benchmark on an annual basis, and calculate the benchmarks the same way each year. For financial benchmarking, it is best to compare your financials on an accrual basis. Year-end balance sheets should be prepared each year and used to generate accrual-based financial statements to ensure that inventories and other factors aren’t skewing your financial data.
Get started benchmarking today and consider how you can better track financial and production measures on your operation to improve your financial position.