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What Is a Waterfall Chart? Everything You Need to Know

According to certain industry professionals, the most important thing a chart can do is create impact. If you’re still collating information in a bar chart or a pie chart, how much impact are you really making?

A waterfall chart on the other hand? Now that’s something totally different.

A waterfall chart can be the best way of showing certain business information to potential partners, clients, or staff members. It also can be a brilliant way of assessing your own growth.

Few people use them. That’s why we’ve gone into exactly what a waterfall chart is. We’ll also teach you how to create a waterfall chart yourself, so you can give it a try after reading this post.

What is a Waterfall Chart?

First things first; a waterfall chart is obviously a type of chart or graph similar to a pie chart. The main difference with a waterfall chart lies in how data is represented.

The trick here lies in the name. Waterfall charts present data as blocks, but sometimes they’re suspended, flowing downwards not unlike a waterfall.

So that’s why it’s called a waterfall chart, but what is it used for?

A waterfall chart is useful for showing how different variables are added and subtracted to create a final total.

For example, you can show the annual revenue of your business as the first data entry on the chart. Then, you’re able to subtract the direct costs of your business. 

You could then subtract other variables, like the cost of your employees or your rent. A waterfall chart can then combine all these data points to provide you with a total amount. In this case, that would be your total profit gained in a year.

The color coding used in a waterfall chart makes it easy to understand what’s being added and subtracted from the total amount. 

What Else Can a Waterfall Chart be Used For?

In addition to revenue statistics waterfall charts can be used to calculate other business information.

For example, they’re a great way of working out product controls. You can add in your total amount of a certain product, as well as an amount that has perished or gone unsold.

This then provides you with the total statistic of a certain product sold in a given time period.

The same basic idea can apply to contracts earned by your company in a given year. 

They don’t always have to be applied to business information though. Waterfall charts can also be used to calculate your performance on an examination.

You can see the total points that are obtainable, as well as the amount you earned in each category. This is a great way of revision planning, as you can see which subjects or exam questions you need to improve on.

What Are the Benefits of a Waterfall Chart?

The general rule is that waterfall charts work best for statistics where lots of addition and subtraction are involved. It doesn’t matter how many variables you have in total, as long as addition and subtraction are the main way they impact each other.

The main benefit of a waterfall chart is being able to visualize how each of these statistics impacts the others.

The nature of a waterfall means you can segment data and look at it closely in relation to the whole. This also works in things like pie charts, but a waterfall chart has the benefit of being sequential.

You start with the main figure, then add or subtract from there. That means you can see a step-by-step process of the data changing based on certain factors.

Once you start using them to illustrate your finances or other information, you’ll see the overwhelming benefits they have over other charts.

How Can I Make My Own Waterfall Chart?

Now you know what they are and what they’re used for, you likely want to create a waterfall chart of your own.

The main question you need to answer is where you want your waterfall chart viewed? What software are you hoping to visualize the waterfall chart within?

The obvious answer to this is on your mobile or desktop through a platform like Excel. This can work well, but there are better solutions available to you today.

Take for example viewing a waterfall chart on Qlik dashboards. This can help you compare your waterfall chart with other essential business and marketing information. It’s the superior way to ensure all your statistics and analysis are in one place.

If you do want to create a waterfall chart in Excel, however, it’s not impossible. You’ll just need to do a lot more manual work to make it a reality.

The first step is to insert your data into the cells. Once you’ve done this, make sure to go to Insert, and then select the relevant chart image.

In Excel a waterfall chart can sometimes be referred to as a Stock chart, so select this. Excel will then automatically collate your data into a chart for you.

This is an easier solution than some software, but the end result of your waterfall chart won’t be as impressive as if you use something like Qlik. You might also need to change some of your cell information to ensure that the information is being presented properly.

Where Can I Find Out More About Waterfall Charts?

You should now know what exactly a waterfall chart is, as well as the many benefits it has when representing data. Hopefully, you’ve also been able to try making a waterfall chart of your own.

If you do want to find out more about analytics, charts, and business marketing, make sure to take a look through previous posts on our website. We’ve written a number of articles to assist business managers and marketers, to help you get the most out of your business data.

The trick to a successful business is visualizing your data and using it to make real changes for the future.

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