# How To Analyze A Waterfall (Bridge) Chart

## What Is A Waterfall Chart?

The main goal of a Waterfall chart is to walk the audience through how one data point grew or declined over a period of time. This "data walk" allows someone to quickly see which sub-categories within the data point improved and which ones declined (aka variances). Let's analyze a simple example to see how this works.

A Simple Example

The Corpus company has sales offices all throughout the United States.  These sales offices are grouped into three regions: East, West, & Central.  The CFO of Corpus wants to add a chart to his presentation to the Board of Directors that displays how the sales teams performed over the past two months and where efforts should be made to improve sales.

From the above data set, we can see the East sales group did \$200 worse month over month.  The other two groups increased their sales numbers. Let's see how this data can translate over to a waterfall chart

Once you understand where the numbers show up on the Waterfall chart, it is easy to tell which region(s) did worse from January to February and which regions did better (the green and red colors help out too!).

## Let's Tell The Full Story

I think it is important to go one step further in this example to show the percent change month over month in our Waterfall chart.  This is because showing a variance might not tell the whole picture if you don't know how big of a jump that change was.

Let's take the East region as an example.  With the data listed above, the East region went from \$400 in sales to \$200.  This could raise a red flag to the CFO as sales dropped by 50%!  But what if sales dropped from \$800 to \$600?  That might not warrant much concern as sales only dropped by 25%.  Now this is just a high-level example where in the real world drops of 50% or 25% might have your CFO fuming, but hopefully you understand the concept of telling a complete story with your data.

## Now You Know!

Hopefully by reading through this post you are now a little more comfortable in analyzing these types of charts.  I know when I was first saw one during my rookie year as an analyst, I had no idea what was going on with all those floating bars! But once you know how to analyze Waterfall charts, you can see how extremely useful they are for summarizing variances at a glance.  My current company uses these charts every month to show the variances between our Plan/Actuals and Prior Year/Actuals.  I'm curious if your company is using these charts and if so, what kinds of data is you company using them to display?  Leave a comment below and let me know!

## [New!] A Template You May Enjoy!

Creating Waterfall charts in Excel can be painstakingly tedious. You have to spend time creating a bunch of chart series and very complicated formulas -- it typically gets extremely confusing!

Wouldn't it be nice if there were a tool out there that could do all the work for you and at the same time generate a beautiful chart?

That's what I thought and I searched high and low for such a tool for years!! Unfortunately, I couldn't find anything that would meet my needs, so I took it upon myself to create THE BEST Waterfall Chart creator I could possibly make!

Have I made you curious yet? Go ahead, click the link below and see what I came up with :)