A manager asks, Sales are down 8% from last month. Should we be worried?
The calculation is easy. The analytical decision is not.
Comparing with last month may seem logical, but it can produce a misleading conclusion when the business has strong seasonality, unusual events or significant changes in customer mix.
Last Month Is Not Always the Right Benchmark.
Imagine a business normally generates lower sales in June and higher sales in July. A 10% increase from June to July might look positive.
But if similar businesses historically grow 20% during that period, the company may actually be underperforming. This is where a baseline becomes more useful.
A baseline could represent:
- Historical performance for the same period
- Expected business performance
- A budget or target
- A stable operating period
- A relevant peer or segment benchmark
The right comparison depends on the question the analysis needs to answer.
If the manager wants to know, Did we improve from last month?, month-on-month comparison may be appropriate.
If the question is Are we performing normally?, a historical or expected baseline may be more meaningful.
Turn Ambiguity Into an Analytical Approach
Before opening Power BI or writing SQL, clarify: What are we trying to determine?
Then ask: What should normal performance look like? That question changes the analysis.
You may discover that last month is not the appropriate benchmark at all.
Analyst in Action:
Good analysts do not simply calculate the requested comparison. They test whether the comparison actually supports the decision.
The best benchmark is not the easiest number to retrieve. It is the comparison that makes the business question answerable.
You know the tools. Now use them to choose the right comparison.
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