A benchmark is a standard or guideline used to compare some aspect of a business to some objective or external standard measure. For example, when a banker compares a business’ profitability to standard financial ratios for that type of business, the process is sometimes referred to as “benchmarking.” Liveplan creates a chart that it calls “Business Benchmarks,” which it uses to compare five standard business measures (sales, gross margin, net profits, collection days, and inventory turnover) as they change over time. In this case the benchmark is the business itself, so it compares past results to planned future results.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.