Hand in Glove: Benchmarking and Budgeting

The first step in establishing an operating budget is to forecast revenues. Until some measure of anticipated income is projected, the level of variable payroll and operating expenses is pure guesswork. For existing operations it is easy enough to look back at preceding years’ revenues and project accordingly. It is far more difficult in start up operations where even the guesstimates of the most experienced operator are suspect. Yet even with operating histories at hand, the person preparing the budget must have some understanding of the interplay of volume and average customer expenditure which underlie all revenue projections. This is important because the factors that bring a customer to an establishment are far different than those that influence how much he or she spends. These two factors – volume and average expenditure – are key items to benchmark in any operation and are easily determined from point of sale or cash register reports.

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