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Benchmarking Matters – What, Why, How?

2 June 2025

Amid the daily challenges of owning and managing a farm business, you could be sitting on untapped profit that can be found by looking at your farm accounts information. The method for uncovering these opportunities is benchmarking. 

Benchmarking is the process of comparing your farm’s financial performance against:  

  • Industry standards.  
  • Businesses similar in size and type to your own. 

Or most usefully:  

  • Comparing against yourself year-on-year to track progress.  

Understanding the numbers in your business helps you gain insights that lead to better decisions, improved efficiency, and greater profit. The Whole Farm Benchmarks (WFBM) Tool is a free, practical resource designed to help you do exactly that. 

Why Benchmarking Matters

Benchmarking is more than a financial exercise - it’s a piece of strategic work that can help you: 

  • Spot trends: Are your costs creeping up year-on-year? Is your output stagnating or lower than last year? Benchmarking helps you track changes over time and ask the right questions to make improvements. 
  • Make informed decisions: Whether it’s investing in new equipment or adjusting your enterprise mix, benchmarking provides the evidence needed to help you make business decisions. 
  • Compare with peers: Understanding how your farm business stacks up against others similar to yours can highlight areas for improvement or confirm that you’re on the right track. 

What is the Whole Farm Benchmarking Tool?

The WFBM tool allows farm businesses to compare their financial performance with anonymised data from similar farms across Scotland. By selecting your farm type and size, you can benchmark your headline financial measures such as gross output, variable costs, fixed costs, and farm gross margin against national averages and the top-performing 25% of farms. 

The tool is built on core financial principles and uses information from your farm accounts to calculate Farm Business Income as a percentage of output. This standardised approach makes it easy to assess profitability, regardless of your enterprise type or business structure. 

What Can You Use?

The WFBM tool breaks down farm finances into several key components: 

  • Gross Output: This includes the total value of your agricultural production and can be calculated for each enterprise on farm.  

 

For example: 

Gross output cattle = (Sales of cattle – Purchases of cattle) + (Valuation Change: Closing stock valuation – Opening stock valuation).  

  • Variable Costs: These are costs that fluctuate with production, such as feed, seed, and veterinary expenses.  
  • Fixed Costs: These include relatively stable expenses like labour, depreciation, and rent. 
  • Farm Business Income (FBI): This is a comprehensive measure of profitability, including income from farming, support payments, and diversification. 

Each of these things is expressed as a percentage of total output, allowing for meaningful comparisons across farms of different sizes and types. 

How You Use It

Here’s how to get started: 

  • Go to the FBI- £/ farm page and input your financial data.  

Enter:  

  1. Gross output for each enterprise. 
  2. Other income from support payments, and other sources. 
  3. Variable costs. 
  4. Fixed costs. 

These can all be gathered from the most recent set of your farm accounts from your accountant.  

  • Go to the FBI as % of Output page: FBI is expressed as a percentage of output, and you can calculate each fixed and variable cost as a percentage of total output (100%). 
  • Check the Glossary tab for explanations. 
  • Compare with benchmarks: See how your farm compares to national averages for your percentages of farm gross margin, variable costs and fixed costs. From here you can explore the various categories within these to gain further insights. 
  • Review your results - what did you find?  

From Accounts to Action 

Using the tool is one step, translating what you find into action is another. For example, if your variable costs are higher than average, the tool can help you identify whether feed, seed, or another input is the culprit.  

Examples:   

  • As a mixed farm, if total output = £250,000 and the total spend on concentrates is £40,000, that equals (£40,000 / £250,000) *100 = 16% of total output. This is higher than the group average of between 11-13% of total output. Why is that, can you make better use of your grassland and lower this cost?  
  • A mixed livestock farm finds that its machinery costs are 20% higher than average. By reviewing equipment use and maintenance schedules, the farm business owner can reduce costs and boost net profit. 

Impact

The WFBM tool is built with data from 400 farms in the Scottish Farm Business Survey, making it a reliable benchmark for decision-making. It’s especially valuable when applying for loans, planning investments, or preparing for succession. 

Building a Culture of Continuous Improvement

The aim for benchmarking is that it becomes a habit. By using the WFBM tool annually, you can track trends, set realistic targets, and measure progress. This proactive approach can act like an annual check-in and can build confidence that all is going as well as it can in the business. 

Moreover, the process can foster curiosity: Why are my costs higher than average? What can I learn from top-performing farms? How can I adapt to improve? 

 

Sascha Grierson, SAC Consulting

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