When we ask guests on The Role Forward what advice they’d give their younger selves about succeeding in finance, they never talk about sharpening their Excel modeling and analysis skills.
Instead, they say they’d recommend focusing more on building business partnerships, improving communication skills, and getting better at the financial storytelling side of the job.
Waterfall and bridge charts are some of the most traditional tools finance teams have had at their disposal for conveying financial insights to business partners in a digestible way. And one common use case is the revenue bridge chart.
While a revenue bridge chart is a simple tool, having it as an output of your revenue forecasting process can help strengthen partnerships between you and your business stakeholders.
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What Is a Revenue Bridge?
A revenue bridge is a data visualization tool that breaks down the activity of various components in a revenue forecast, making it easier to explain the nuances and drivers of top-line revenue growth.
Revenue bridge charts, or ARR bridge charts in the SaaS industry, have long been tools for presenting forecast data to stakeholders inside and outside of finance. And they’ve been especially common since Microsoft Excel 2016 when waterfall charts became an out-of-the-box formatting option.
What Does a Revenue Bridge Chart Show?
Like any other bridge or waterfall chart, a revenue bridge shows a starting value, an ending value, and the variables in between that get you from A to B.
In the case of an ARR bridge chart, you see the Y-axis as ARR totals and the X-axis as the different components from starting to ending ARR for the given period. These components include:
- Starting ARR. The total bookings at the start of the period you’re analyzing with the ARR bridge. This is combined ACV for all closed-won deals.
- New ARR. The total bookings from new deals signed during the given period.
- Renewal ARR. Bookings from customers that have renewed contracts in the given period.
- Upsells. New bookings from upsells of existing customers.
- Churned revenue. The amount of ARR lost from churned customers.
- Downgrades. Lost ARR from customers that downgraded their contracts.
- Ending ARR. The final value for bookings after all movements are accounted for.
You can create floating bars or fill them to create the revenue bridge, but the final result should follow the format in the example below.
The chart displays changes between each stage so you give business owners, executives, and stakeholders visibility into the different components of top-line growth.
How to Create a Revenue Bridge Chart
Even though revenue bridge charts are fairly simple, they can be a headache to put together month to month or quarter to quarter as needed.
If you want to skip the process altogether, download our ARR bridge chart template.
But if you’d rather start from scratch and create your own, these are the high-level steps to take.
1. Create Your Data Table
The first step to building a revenue bridge chart is to create a data table with the necessary inputs. You’ll want to include the components listed above as well as columns for the baseline value, decreases, increases, and the delta. You can see an example below.
If you’re creating a standalone revenue bridge, you’ll need to hardcode the cells for your base value and changes. Everything else can be calculated based on those inputs so you have a complete data table of revenue increases and decreases.
2. Create a Waterfall Chart or Stacked Column Chart
With the data organized in your table, you can use Excel or Sheets functionality to create a stacked column chart or a waterfall chart for analysis.
In Excel, you can select the waterfall chart option and customize from there. But there’s no waterfall layout in Sheets, so you need to create a stacked column chart and change the formatting to create the bridge chart layout you’re looking for.
3. Customize Formatting and Visualization Options
The general concept of a revenue bridge will be the same across teams and companies, but there are ways to customize the chart according to your preferences.
For example, you can add data labels to the chart for an easy visualization of what the rise or fall is in each column. You can also change the colors of the bars to adhere to brand guidelines and make the visualization more appropriate for an executive or board presentation.
Why Spreadsheet-Based Bridge Charts Aren’t Ideal for Financial Analysis
Just because an ARR bridge chart is a traditional financial analysis and visualization tool doesn’t mean it’s the most effective way to tell the “why” behind the numbers.
There are a number of drawbacks to using spreadsheets to build these kinds of charts and using them in presentations.
- They’re not dynamic. The basic visualization of how you move from starting to ending ARR has value. But there’s no way to double click into the numbers and see more granular account-level data.
- They go stale quickly. The setup of a revenue bridge data table allows you to compare data month-to-month, quarter-to-quarter, or year-to-year. However, you’re left to manually configure the chart any time you want to update the visualization. By the time you pull all the necessary data and update the chart, any valuable insights may already have gone stale.
- They’re out of context. If you build a standalone revenue bridge chart, it exists out of context from the rest of your financial data. And if you’re building it into a financial model that includes more context, you’re only adding complexity to your spreadsheet and increasing the potential for errors.
The goal of a revenue bridge is to help you run a board meeting and present data in a more digestible way for stakeholders across the business. But if that’s the goal, there are better ways to do it than sinking time into spreadsheet management.
If you want to see how Mosaic can give you deeper insight into your company’s revenue data (in a more dynamic and digestible format for business partners), reach out for a live demo. Here’s a quick preview of a pre-built template for revenue data analysis.
Don’t Go Chasing Waterfalls — Use Our Revenue Bridge Chart Template
Don’t spend hours (or days) every month trying to get your ARR bridge formatting just right.
Download our spreadsheet-based revenue bridge chart template to get started faster. And streamline your other waterfall use cases by downloading our other templates:
- Sales pipeline waterfall chart
- P&L waterfall chart
- Bookings to revenue waterfall model
- Bookings to cash waterfall model
But don’t stop short at just using a spreadsheet template. If you’re ready to unlock your true strategic value, Mosaic can help you take financial analysis much further than possible in spreadsheets.
Mosaic’s analytics tools give you 125+ out-of-the-box metrics and KPIs as well as custom reporting features to easily show period-over-period changes and variances with real-time actuals.
Ready for a demo of Mosaic? Reach out and schedule time for a personalized walkthrough.
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Frequently asked questions
What is an ARR bridge?
An ARR bridge is one type of revenue waterfall chart that shows the movements of starting ARR to an ending value after accounting for new ARR, renewal ARR, upsell ARR, downgrades, and churn.
What does an EBITDA bridge show?
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