what is a baseline 
a baseline is a fixed point of reference that is used for comparison purposes in business the success of a project or product is often measured against a baseline number for costs sales or any number of other variables a project may exceed a baseline number or fail to meet it for example a company that wants to measure the success of a product line can use the number of units sold during the first year as a baseline against which subsequent annual sales are measured the baseline serves as the starting point against which all future sales are measured understanding a baselinea baseline can be any number that serves as a reasonable and defined starting point for comparison purposes it may be used to evaluate the effects of a change track the progress of an improvement project or measure the difference between two periods of time for example a public company will track the performance of each product line by choosing one year as a baseline and measuring all subsequent years against it a baseline is typically used when a financial statement or budget analysis is prepared the statement or analysis uses existing revenues and spending as a baseline for assessing whether a new project is implemented successfully a financial statement analysis that uses a baseline is called horizontal analysis it compares a company s historical financial information over a number of reporting periods that may be monthly quarterly or annually the first period in a horizontal analysis is denoted as the baseline period all subsequent periods are then measured as a percentage of the baseline so a period that has the same revenue as the baseline would have 100 revenue in information technology there are three commonly used baseline points cost scope and schedule this exercise is useful in spotting trends looking at areas of growth or decline and assessing financial performance overall ratios like profit margin are also compared horizontally against the baseline year to draw conclusions about a company s ongoing performance project budgeting works from what is known as a cost baseline the cost baseline is the budget approved for the project usually broken down in some detail by cost category and cost period of time if a company opens a new warehouse for example and the cost baseline has been set at 100 000 per month every month for 10 months any monthly cost exceeding 100 000 is a red flag for the budget analyst however project costs inevitably fluctuate from baseline numbers as unknown and unexpected expenses or even in some cases savings are realized the cost baseline can be updated to reflect actual project costs in information technology management a baseline may be set for anticipated or maximal levels of performance there are three commonly used baseline points cost scope and schedule software applications used by project management professionals typically are designed to maintain and track these three critical baseline measurements 