Benchmarking is the process of comparing your business forecast targets for revenue and expenses and comparing them to known industry standard targets for revenue and expenses. This is also know as "best-practice".
For example, the benchmark food cost for the restaurant industry is 28%-30% of revenue. If your food costs are significantly higher or lower than that, you then should know why and determine if they are higher by design or if you have missed some management or forecasting along the way.
As we continue with the program, we will talk about Key Assumptions a lot. Missing a benchmark by design is sometimes the most appropriate way to manage your business. In this case, you will explain your reasoning as a Key Assumption. For example, organic restaurant often have higher food costs and the menu prices can not sustain the 28% -30%, so the key assumption would be that "food costs are higher because the costs of goods sold are higher due to them being organic and not conventional".