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Business Benchmarking: Welcome to benchmarking

April 19, 2022 -  By

In celebration of Kevin Kehoe’s final column for Landscape Management, we wanted to share Kehoe’s first column, then called “Business Benchmarking,” which appeared in the January 2008 issue. We will always be thankful to Kehoe for all his years of writing for our publication. We’re sad to see you go, but we are thankful for your years of service.

Welcome to benchmarking

This figure represents the best-in-class companies responding to LandscapeManagement's 2007 Benchmarking Survey. These are the 2006 numbers by category of each individual gold standard company. (Photo: LM Staff)

This figure represents the best-in-class companies responding to Landscape Management‘s 2007 Benchmarking Survey. These are the 2006 numbers by category of each individual gold standard company. (Photo: LM Staff)

A best-in-class 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 best-in-class companies — what they do and how they do it. We will 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 establishes a gold standard attainable for most landscape firms.

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

1. Assess operating strengths and weaknesses to identify sources of profit leakage: Conduct a line-by-line comparison of your numbers with the best-in-class numbers. Identify the variances to see shortcomings.

2. Budget and set objectives to close the leaks: You must project a pro forma budget based on the benchmark ratios and percentages and find ways to live within that revenue and cost budget. This process forces hard decision-making.

3. Establish a basis for business valuation to maximize your return on investment: The value of your business is based on profits and a multiple of these profits. Increasing profits and this multiple are critical. You will always have a greater impact on the value of your business by increasing the multiple. This means you need to execute a few critical strategies versus a long list of trivial tactics to drive up this multiple.

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

This article is tagged with , , and posted in 0422, From the Magazine

About the Author:

Kevin Kehoe was the founder of Aspire Software and a longtime landscape industry consultant.

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