The Importance and Advantages of Financial Benchmarking in the Landscape Industry

In today’s fast-paced and competitive landscape, staying ahead requires more than just hard work; it requires smart, data-driven decisions. One of the most powerful tools for achieving this is financial benchmarking. For professionals in the landscape industry, benchmarking allows you to measure your company’s performance against industry standards and competitors, offering insights into where you’re excelling and where there’s room for improvement. In this blog, we’ll walk through the key advantages of financial benchmarking, what information is needed to get started, and how to dive in, even if it’s all new. 

What is Financial Benchmarking? 

Simply put, financial benchmarking is the process of comparing your company’s financial performance to others in the same industry. This comparison can show you how your business stacks up in areas like profitability, liquidity, and efficiency. The goal isn’t just to see how you compare—it’s about identifying strengths to capitalize on and weaknesses to address, helping you improve overall financial health and performance. 

What are the Key Advantages of Financial Benchmarking? 

• Finding Operational Efficiencies: One of the biggest advantages of financial benchmarking is how it helps uncover inefficiencies. Comparing key financial ratios like gross margin, net contribution margin, and return on assets against industry averages lets you see where you might be overspending or underperforming. For example, if your gross margin is significantly lower than the industry average, it might be time to take a closer look at your pricing strategy, direct costs, or how efficiently you’re delivering services. 

• Setting Realistic Financial Goals: Benchmarking takes the guesswork out of goal setting. Instead of picking numbers out of thin air, you can set financial goals based on data from top-performing businesses in your industry. Whether you’re aiming to improve profitability, grow revenue, or reduce costs, benchmarking helps you set realistic targets. This is more than just striving for improvement—it’s about setting goals that are grounded in the real performance of others in the field. 

• Improving Profitability: By analyzing metrics such as gross margin and cost and expense ratios, benchmarking helps you identify opportunities to boost your profitability. You’ll gain insight into how your competitors achieve higher margins and discover ways to adjust your pricing, streamline costs, or focus on more profitable services. This insight into best practices can be a game-changer when it comes to improving your own bottom line. 

• Making Smarter Strategic Decisions: Benchmarking isn’t just about numbers; it’s about making better decisions. Whether you’re expanding your business, entering new markets, or investing in new technologies, benchmarking data gives you the context to evaluate these decisions with confidence. When you know how others in your industry have navigated similar moves, you reduce the risk of costly mistakes and set yourself up for success. 

• Attracting Investors and Lenders: If you’re looking to attract investment or secure financing, demonstrating strong financial performance in comparison to industry benchmarks can be a huge asset. Investors and lenders want to know that your business is running efficiently and that you have a clear path toward profitability. Benchmarking helps you present a solid case by showcasing your financial health with data that investors understand and trust. 

What Key Information is Needed for Benchmarking? 

To get started benchmarking, you’ll need to gather some key financial data: 

• Revenue: Total sales or income generated by your business. Annual data is good to start, monthly data is even better to help see and monitor trends proactively. 

• Costs and Expenses: Breakdown of operating costs, including labor, materials, and overhead in a standard industry format for easy comparison. 

• Margins: Gross, net contribution, and net operating income margins. 

• Liquidity Ratios: Ratios such as the current ratio or quick ratio, which measure your company’s ability to cover short-term obligations. 

• Efficiency Ratios: Metrics like gross profit per hour, production efficiency and return on assets indicate how effectively you are producing work and using assets. 

• Growth Metrics: Information on year-over-year growth in revenue, net operating income, and other key metrics help show annual progress. 

These data points can be found through your own financial statements or sourced from industry reports, such as NALP. 

How Can I Get Started with Financial Benchmarking? 

If financial benchmarking is new to you, don’t worry. It may seem overwhelming at first, but breaking it down into manageable steps makes it easier to dive in. 

• Identify the Right Metrics: Start by determining which financial metrics are most relevant to your business. Focus on areas that align with your business goals and industry standards, such as efficiency, profitability, or liquidity. 

• Find Industry Benchmarks: Use industry reports, trade associations, and third-party financial data providers to gather benchmarking data for companies within your sector. Wilson 360, NALP, and Aspire, among others, offer annual benchmarking data. 

• Compare and Analyze: Once you have the data, compare your performance to the industry benchmarks. Look for areas where your business falls behind, and then analyze why that might be. 

• Create Actionable Plans: Based on your analysis, develop an action plan to address areas of weakness. Set realistic financial goals and implement strategies to improve your performance over time. 

• Monitor and Adjust: Benchmarking is an ongoing process. Regularly track your financial performance and adjust your strategies as necessary to stay competitive in the market. 

Financial benchmarking is an invaluable tool for any landscape business looking to thrive in a competitive industry. It provides a clear picture of where your business stands in relation to your peers and helps you identify areas for improvement. By setting realistic goals based on data, uncovering operational inefficiencies, and making smarter strategic decisions, you can drive your business toward long-term success. 

Interested in leveling up your landscape business with financial benchmarking? Wilson360 offers industry-leading benchmarking tools to help you achieve optimal performance and growth.

About the author: Steve Steele, Financial Services Practice Leader at Wilson360, specializes in corporate finance and operational strategy for green industry leaders. Connect with Steve at Steve.Steele@Wilson-360.com