The Pellucid Library is filled with charts, pages, and books designed specifically for investment banking pitchbooks and analysis. Chief Content Officer, Eric Rattner, shares his thoughts on the newly expanded benchmarking chart series and how these charts should be used.
Why use a benchmarking chart?
Bankers love to benchmark; pretty much every pitchbook will have at least a few benchmarking analyses. This is because benchmarking offers a very clean and elegant way to compare and rank entities across metrics. Using different treatments, you can pull out a range of insights, such as how a subject company compares to its peers, an industry index, or to a market index more generally.
What types of data work best in a benchmarking chart?
Again, one of the great things about benchmarking charts that you can use them to offer a comparison across any normalized metric. And in Pellucid we even have compound versions that allow for comparisons across multiple metrics in a single chart.
What are the main visual variations of a benchmarking chart in Pellucid?
We actually just released five new archetypes, so in addition to the analyst benchmarking charts, ranking charts, and others, we have even more benchmarking options. From these, there are over 70 product variants available, each of which can be further customized using the various data, appearance, and size options to create literally billions of different pitchbook exhibits. The new main archetypes are:
When would you use an arrow benchmarking chart?
The arrow benchmarking bar chart archetype is useful to show change over a defined period of time. The horizontal arrow for each company reflects the metric change (the longer the line, the greater the change) and the diverging stack of the lines show how the entities compare over the metric range.
Why use a linked benchmarking compound chart instead of a Ranking chart?
A ranking chart is a great visualization for displaying information about a bunch of variables for a set of companies, but, while it does label the absolute values of each metric for each entity, it doesn't "visualize" them. That is, it doesn’t map the numbers to some optical aspect, such as the length of a rectangle. The visual emphasis is on the rankings of the entities for each metric and the relationships between them.
Benchmarking bar charts, on the other hand, convert one metric's values to bar length for easy visual comparison of the data across an entity set. It uses up precious space to provide that cognitive information. The differences in the bar lengths must be perceivable for it to provide value in "benchmarking." When that is the case (not usually within the bounds of a rank chart column), it is the best way of processing a small, cross-sectional data set like a metric across a subject company and its comps.
The linked benchmarking charts provide a bit of the best of both worlds. The "links" drawn between the category axis labels provide similar information to the rank chart "ribbons", while each panel is obviously it's own benchmarking bar chart, with all its perks. The only difference is that with a Ranking chart, you can comfortably fit ten metrics on a typical full page layout, with a linked benchmarking chart, it would be a struggle to get more than four metrics in there (unless you stack or cluster metrics in each benchmarking panel).
How long would it typically take to create these benchmarking charts in Excel?
A basic benchmarking chart is actually pretty easy to create in Excel, which is partly why they are so ubiquitous in pitchbooks. But, the more complex the chart, the more of a challenge it is to create. For instance, a linked compound chart would take about 2 hours to make. But, as with anything produced in Excel, sometimes the pain of creation is not the amount of time it takes to initially create content, but the time required to update and edit the content and get it pitchbook ready. Obviously Pellucid solves all of these issues as each content item is fulfilled ready to go, and can be easily updated with no further work required.
Are there any benchmarking chart “gotchas”?
Benchmarking charts are deceptively simple and there are a few things that bankers should look out for when creating the charts in Excel.
- Bankers almost exclusively make bar charts with vertical bars, even though horizontal should be preferred since they afford more space for categorical company labels and make it less likely to experience data label collisions.
- When including summary stats, bankers often erroneously include the subject company's data in the calculation, when it should generally be just the comps. As such, a "summary line" that represents a comps stat should only traverse comps bars.
- Summary lines can be messy and don't truly reflect the fact that summary stats are technically index calculations that can easily be thought of as entities. I like to draw summary stats using bars, which allows for easy comparison without introducing a new, harder to manage visualization approach.
- Excel's standard bar gap parameter is 150%. I prefer way smaller. Best practice dictates that it should be 50%-150%, so I go to 50%.
Of course, you could always use Pellucid where these issues are mitigated, and you can just choose your chart, add your data, and order.
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