Chief Content Officer, Eric Rattner, shares his thoughts on benchmarking charts series and how they 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. At Pellucid, we have even developed compound versions that allow for comparisons across multiple metrics in a single chart.
What are the main visual variations of a benchmarking chart?
I have developed five archetypes, from which over 70 product variants available. Each can be further customized with data, appearance, and size options to create literally billions of different pitchbook exhibits. The 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.
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. Pellucid has developed solutions to these issues so that content can be easily created and edited.
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%.
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