Business Benchmarking: Welcome to Benchmarking

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To celebrate Kevin Kehoe’s latest column for landscape management, we wanted to share Kehoe’s first column, then titled “Business Benchmarking”, which appeared in the January 2008 issue. We will always be grateful to Kehoe for all his years of writing for our publication. We are sad to see you go, but we are grateful for your years of service.

Welcome to Benchmarking

This figure represents the best performing companies meeting landscape managementfrom the 2007 benchmarking survey. These are the 2006 numbers by category of each gold standard company. (Photo: ML Staff)

A top company is defined as the benchmark – the top five percent of all companies in an industry. This new column will discuss the performance and practices of the most successful companies – what they do and how they do it. We’ll define best-in-class performance in terms of financial results for labor, overhead, equipment, and profit and loss percentages.

We segment best-in-class companies into design/build, landscape construction, and maintenance. The table below highlights the P&L benchmarks for these segments. It sets a gold standard accessible to most landscape companies.

Benchmarks are points of comparison. They: (1) assess operational strengths and weaknesses, (2) budget and set goals, (3) establish the basis for a business valuation.

1. Assess operational strengths and weaknesses to identify sources of profit loss: Perform a line-by-line comparison of your numbers against best-in-class numbers. Identify the gaps to see the gaps.

2. Budget and set targets to plug the leaks: You need to project a pro forma budget based on benchmark ratios and percentages and find ways to stay within that revenue and cost budget. This process requires tough decisions to be made.

3. Establish a business valuation baseline to maximize your return on investment: The value of your business is based on earnings and a multiple of those earnings. The increase in profits and this multiple are essential. You will always have a greater impact on the value of your business by increasing the multiple. This means that you need to execute a few critical strategies rather than a long list of trivial tactics to increase that multiple.

Use benchmarks as a starting point to focus your team on the things that matter. Everything else is noise and distraction.

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