Spot Trends in Your Business with Simple Visuals

Use visuals to spot trends and patterns

There are only 3 ways to convey information:

1. Words
2. Pictures
3. Numbers

If we rank them from easiest-to-hardest-to-understand, then it probably goes: 1) pictures, 2) words, 3) numbers. So why are we exclusively using numbers to understand our financial position?

Enter: pictures.

Why this matters?

Aside from our inability to decode numbers in general, a single number (or a single month's P&L) in isolation tells us very little about a company, how it's doing, trends in performance, etc.

Pictures and visuals cut through that noise to simplify things for us.

Here are some ways we can spot trends and patterns:

• Review 6-12 months of financial statements in one view (numbers)
• Convert financial data into line or bar charts (pictures)
• Use a rolling 12-month analysis (numbers)
• Use ratios or growth rates (numbers)
• Try waterfall charts (pictures)

Having a base rate or reference point helps us understand trends and get meaning out of our finances. The techniques mentioned above use either numbers with clear reference points or visuals to spot upward or downward movements. Even a simpleton like me can understand a chart up-and-to-the-right is a good trend!

What some themes we can look at?

• Growth rates (whether trends are accelerating or slowing)
• Margin improvement (or deterioration)
• Working capital efficiency
• Overall business health
• Analyzing seasonality
• Expense creep

We're starting to crossover into financial statement analysis here but I wanted to give you a flavor for some of the items we can analyze more easily with visuals.

Ultimately, the goal of using these visuals isn’t just to understand your financials better — it’s to take action. If you see a trend where expenses are rising faster than revenue, you know it’s time to tighten the belt. If you notice a seasonal dip in sales every summer, you can plan a marketing push or a special promotion to counteract it.

Let's try an example...

Here's an annual P&L for a real business:

I see decent gross margins (nearly 40%) and overall profitability ($48 operating income) albeit at very low margins (0.4% operating margin). Maybe some room for improvement but nothing notable from this picture alone.

Now let's add some history and visualization...

Wow!

This company is imploding, and fast. Someone check the cash flow, quick! We have much more valuable information here – a historic reference point, baseline of performance, trends, etc.

Next, we could add an average or median to get an even clearer picture of the trend. Now we can really tell this company is underperforming against their own history (a benchmark).

(P.S. What this company should do next is a separate, and interesting, conversation.)

Key takeaway – Don’t just rely on your numbers alone. Use charts and visuals to give you a clearer picture of your business’s financial health and trends. It’s one of the easiest ways to stay ahead of the curve.