Episode 47: The Importance of Benchmarking for Businesses
In this episode, I’m diving into a topic I haven’t touched in nearly 30 years: benchmarking. Yep, it might sound boring, but trust me, this one's important. I recently stumbled across some updated stats from the ATO and realised how powerful benchmarking can be for small fencing businesses like ours.
This episode is about understanding how your business stacks up against others in the trade—and why that matters. I’ll walk you through how the ATO uses benchmarks to sniff out dodgy numbers, but more importantly, how you can use them as a powerful internal tool. Whether it’s uncovering where you’re bleeding cash, spotting underperformance, or making better decisions around pricing and staffing, this is about getting your head out of the hole and really knowing your numbers.
No fluff. Just practical advice, real numbers, and a warning or two.
How to use benchmarking in your fencing business:
Compare yourself to industry standards: Use ATO or similar benchmarks (like carpentry/concreting if fencing isn’t broken out) to see how your cost ratios stack up.
Watch your labour ratio: Labour costs that spike above the benchmark can signal serious cash flow issues.
Use simple ratios: Cost of sales ÷ turnover. Labour ÷ turnover. Motor vehicle expenses ÷ turnover. These will flag where you’re overspending.
Look at expenses-to-turnover ratio: This varies by business size, but anything wildly outside the norm should be a red flag.
Don’t fear the benchmarks: If your numbers are clean, you’re good. If not—it’s your early warning sign to fix things before they get ugly.
Timeline summary:
[01:15] – Why I’ve got earphones in all the time (and what I learned while listening to a podcast from the ATO)
[03:42] – How the ATO uses benchmarks to flag businesses with suspicious finances
[04:53] – Forget the tax man—benchmarking helps YOU spot pricing issues, cash leaks, and mismanagement
[06:30] – When to use alternative industry benchmarks if fencing-specific ones aren’t available
[08:58] – Expense-to-turnover ratios for small, medium and large fencing businesses
[10:15] – Why my labour costs exploded this year—and what that told me about my business
[12:40] – A 10-minute exercise that uncovered where I was bleeding cash
[15:53] – A word of caution: high or low expenses could attract ATO scrutiny
If you found this episode helpful, do me a favour—rate, follow and review the show. And don’t forget to share it with someone who’s deep in the trenches with you. Join the conversation on the Fence Posts Facebook group or The Profitable Fencer.
Thanks for tuning in, talk soon.
