What is vertical and horizontal analysis? Differences, formulas, and examples explained

Why every startup needs financial statement analysis

Most founders can tell you their monthly revenue or burn rate. Fewer can explain why their gross margins compressed last quarter or whether their current growth rate justifies their spending level.

Financial statement analysis transforms your income statement, balance sheet, and cash flow statement from compliance documents into strategic tools. Here's what it delivers:

• Early warning signals: Catch concerning trends before they become crises. A gradual increase in your accounts receivable as a percentage of revenue might signal collection problems brewing.
  
• Investor confidence: Investors expect you to understand your numbers deeply. When you can explain why your operating expenses dropped from 85% to 72% of revenue, you demonstrate operational maturity.
  
• Strategic clarity: Should you hire that salesperson or invest in marketing automation? Financial data helps you make resource allocation decisions based on evidence rather than intuition.
  
• Competitive positioning: Understanding your cost structure relative to industry benchmarks reveals whether you're operating efficiently or leaving money on the table.
  

Founder personas: How different roles use these analyses

A technical founder launching their first SaaS product uses vertical analysis to understand whether their 45% gross margin is healthy compared to industry standards of 70-80%. This insight prompts them to renegotiate hosting costs and restructure their pricing.

A growth-stage CEO preparing for Series A uses horizontal analysis to show investors how their customer acquisition cost decreased by 30% over six months, whilst revenue per customer increased by 25%. These metrics prove the business model is improving, not just growing.

A bootstrapped e-commerce founder uses both analyses together. Vertical analysis shows inventory consuming 40% of total assets; too high. Horizontal analysis reveals inventory growing faster than sales for three consecutive months. Together, these insights trigger a strategic shift toward drop-shipping for slow-moving products.

Financial analysis and its types

Financial statement analysis encompasses several techniques that help startups understand their financial performance and position. The three primary types include horizontal analysis (examining changes over time), vertical analysis (understanding financial structure and proportions), and ratio analysis (calculating relationships between financial metrics to assess liquidity, profitability, and efficiency).

For startups and SMEs, horizontal and vertical analysis provide the most immediate practical value. They require no complex calculations, work with standard financial statements you already produce, and deliver insights you can act on immediately. Whilst ratio analysis adds depth, mastering these two foundational techniques gives you 80% of the financial insight you need to run your business effectively.

What is horizontal analysis?

Horizontal analysis, also known as trend analysis or time-series analysis, examines how specific financial metrics change across multiple periods. It creates a clear picture of your trajectory by calculating the percentage change between a base period and subsequent periods.

Think of it as your startup's growth chart. Just as parents track a child's height over the years to ensure healthy development, horizontal analysis tracks your financial performance over months or quarters to ensure healthy business development.

Formula for horizontal analysis

The calculation is straightforward:

Percentage Change = [(Current Period Amount - Base Period Amount) / Base Period Amount] × 100

Example: Your January revenue was SGD $50,000. March revenue reached SGD $65,000.

Percentage Change = [(65,000 - 50,000) / 50,000] × 100 = 30%

This means revenue grew 30% from January to March.

How to perform horizontal analysis: Step-by-step guide

Following a systematic approach ensures your analysis is accurate and actionable.

Step 1: Gather your financial statements

Collect income statements, balance sheets, or cash flow statements for the periods you want to compare. Ensure they use consistent accounting methods and categories. Export these from your accounting software (QuickBooks, Xero, FreshBooks) or pull them from platforms like Aspire that provide real-time financial visibility.

Step 2: Choose your comparison periods

Decide whether you'll compare month-over-month, quarter-over-quarter, or year-over-year. Early-stage startups benefit from monthly comparisons to spot problems quickly. More mature SMEs might use quarterly comparisons for strategic planning. Businesses with seasonal patterns should always include year-over-year comparisons.

Step 3: Select your base period

Your base period is the starting point for comparison. This might be your first month of operations, the start of your fiscal year, or the period before a major strategic change. All subsequent periods will be compared against this baseline.

Step 4: Create your analysis spreadsheet

Set up columns for each period you're analysing. Add a column for the absolute change (Current Period - Base Period) and another for percentage change using the formula above. Format percentage changes with conditional formatting: green for positive growth in revenue or decreases in costs, red for concerning trends.

Step 5: Calculate changes for each line item

Work through each line item systematically. Calculate both absolute changes (the dollar amount difference) and percentage changes. Both matter: a 200% increase sounds dramatic, but if revenue only grew from SGD $1,000 to SGD $3,000, the absolute impact is small.

Step 6: Identify significant trends

Look for patterns across multiple periods. Is revenue growth accelerating or slowing? Are expenses growing faster than revenue? Focus on trends rather than single-period fluctuations. Three consecutive periods moving in the same direction indicate a genuine trend worth investigating.

Step 7: Investigate anomalies

When you spot unusual changes, dig deeper. A 60% spike in operating expenses might reflect annual insurance payments rather than a spending problem. Context matters. Document one-time events so you don't mistake them for trends.

Step 8: Compare against benchmarks

Research typical growth rates for your industry and stage. A 15% monthly revenue growth might seem excellent, but if your market is expanding at 30% monthly, you're losing ground. Use resources like industry reports, startup databases, or peer networks to find relevant benchmarks.

Benefits for startups

Horizontal analysis delivers specific advantages for startups and SMEs:

• Trend identification: Spot whether growth is accelerating, plateauing, or declining. A startup that grew revenue 15% in Q1, 12% in Q2, and 8% in Q3 needs to investigate why momentum is slowing.
  
• Forecasting foundation: Historical data patterns inform realistic projections. If your marketing expenses historically convert to revenue increases within two months, you can model future scenarios more accurately.
  
• Performance benchmarking: Compare your growth rates against industry standards or competitors. A 25% quarterly growth rate might seem impressive until you learn your market is expanding at 40%.
  
• Problem detection: Identify issues before they escalate. When your operating expenses grow faster than revenue for two consecutive quarters, you're heading toward unsustainable burn rates.
  

Example and use cases

Consider this horizontal analysis example of a Singapore-based fintech startup's quarterly performance:

[Table:1]

The analysis reveals a concerning pattern. Whilst revenue grew steadily, 30% then 10%, the Cost of Goods Sold increased much faster, 52% then 26%. This compression of gross margins caused net income to actually decline in Q3 despite higher revenue. The founder needs to investigate pricing, supplier costs, or product mix issues immediately.

Monthly tracking works well for early-stage startups with high volatility. Year-over-year comparisons suit businesses with seasonal patterns or longer sales cycles. Choose the timeframe that captures meaningful changes without drowning in noise.

Drawbacks

Horizontal analysis has limitations you need to understand:

• Requires consistent data: Changing accounting methods, acquisitions, or business model shifts can make comparisons misleading. If you switched from cash to accrual accounting mid-year, your comparisons need adjustment.
  
• Percentage distortion with small bases: A revenue increase from SGD $1,000 to SGD $3,000 shows 200% growth, impressive on paper but still small in absolute terms. Always consider both percentage changes and absolute amounts.
  
• External factors ignored: A 50% revenue increase might result from seasonal demand, not improved operations. Horizontal analysis compares numbers but doesn't explain why they changed.
  
• Short-term volatility: Month-to-month fluctuations can mislead. A spike in expenses one month might reflect annual insurance payments, not a trend.
  

What is vertical analysis?

Vertical analysis, also known as common-size analysis, expresses each line item as a percentage of a base figure, typically total revenue for the income statement or total assets for the balance sheet. This technique standardises your company's financial statements, making it easy to understand your financial structure and compare it against industry benchmarks or competitors of different sizes.

Formula for vertical analysis

For income statements:

Line Item Percentage = (Line Item Amount / Total Revenue) × 100

For balance sheets:

Line Item Percentage = (Line Item Amount / Total Assets) × 100

Example: Your startup generated SGD $200,000 revenue with SGD $80,000 in operating expenses.

Operating Expenses Percentage = (80,000 / 200,000) × 100 = 40%

This means operating expenses consume 40% of every revenue dollar.

How to perform vertical analysis: Step-by-step guide

Vertical analysis is even more straightforward than horizontal analysis, but the insights can be equally powerful.

Step 1: Select the financial statement to analyse

Choose which statement provides the insights you need. Income statements reveal your cost structure and profitability drivers. Balance sheets show how you've allocated capital and what comprises your assets and liabilities. Cash flow statements highlight where cash comes from and where it goes.

Step 2: Identify your base figure

For income statements, your base is total revenue (the top line). For balance sheets, use total assets. For cash flow statements, use total cash inflows. This base becomes your denominator—it represents 100%.

Step 3: Calculate percentages for each line item

Divide each line item by your base figure and multiply by 100. Create a new column in your spreadsheet labelled "% of Revenue" or "% of Assets". Use formulas that automatically calculate these percentages when you update your numbers.

Step 4: Organise results in a common-size statement

Create a three-column table: Line Item Name, Actual Amount, Percentage of Base. This common-size statement lets you see both the absolute numbers and their relative importance at a glance.

Step 5: Identify your largest line items

Focus on items consuming more than 10% of your base figure. These represent your major cost drivers or asset allocations. Understanding and managing these categories delivers the biggest impact on your financial health.

Step 6: Research industry benchmarks

Find typical percentages for your industry and stage. Sources include industry associations, startup databases, accelerator reports, and published financial statements of comparable public companies. Singapore startups can reference reports from Enterprise Singapore, Tech in Asia, or regional venture capital firms.

Step 7: Compare your structure to benchmarks

Place your percentages next to industry averages. Where do you differ significantly? Higher gross margins might indicate pricing power or operational efficiency. Higher operating expenses might signal inefficiency or growth investments. Context determines whether differences are positive or problematic.

Step 8: Set structural targets

Based on your analysis and benchmarks, establish target percentages for key categories. "We need to reduce operating expenses from 65% to 55% of revenue over the next two quarters." These targets inform budget decisions and spending priorities.

Benefits for startups

Proportional analysis helps startups in several critical ways:

• Cost structure transparency: Understand exactly where your money goes. When you see that customer acquisition costs consume 35% of revenue whilst product development takes only 15%, you can make informed decisions about resource allocation.
  
• Size-neutral comparisons: Compare your 10-person startup against established competitors. If your SaaS company spends 25% of revenue on sales and marketing, whilst the industry average is 40%, you might be under-investing in growth or operating more efficiently.
  
• Investor communication: Investors think in percentages. Saying "our gross margin is 68%" communicates more than "we made SGD $136,000 on SGD $200,000 in sales."
  
• Financial health assessment: Quickly identify whether your financial structure makes sense. A retail startup with inventory representing 60% of total assets might face cash flow problems.
  

Example and use cases

Here's a vertical analysis of financial statements for a Singapore ecommerce startup:

[Table:2]

This vertical analysis reveals the startup is performing within industry norms for most categories. However, operations expenses at 15% (the high end of the benchmark) warrant investigation. Perhaps warehouse inefficiencies or overstaffing exist.

Income statement vertical analysis proves particularly valuable when preparing for funding rounds or making major strategic decisions like expanding to new markets.

Drawbacks

Vertical analysis has constraints:

• Snapshot limitation: Shows only one point in time. A healthy-looking 65% gross margin might be declining from 75% three months ago, vertical analysis alone won't reveal that trend.
  
• Industry variation: Benchmarks vary significantly across sectors. A 60% gross margin is excellent for e-commerce but poor for software. Always compare against relevant industry standards.
  
• Doesn't show absolute changes: Your marketing expenses might consistently represent 20% of revenue, but if revenue doubled, you're spending twice as much in absolute terms. That matters for cash flow.
  
• Context required: A line item consuming 30% of revenue might be too high, perfectly appropriate, or even too low, depending on your growth stage and strategy.
  

Vertical vs horizontal analysis: What's the difference?

Both techniques analyse the same financial statements but answer fundamentally different questions. Understanding when to use each method helps you extract maximum insight from your financial information.

[Table:3]

Understanding this difference prevents analytical mistakes. A startup founder might notice that operating expenses increased 15%, seemingly concerning. Horizontal analysis compares this to the previous period. However, vertical analysis reveals that operating expenses actually decreased from 55% to 52% of revenue because revenue grew even faster. The absolute increase is fine; the proportional improvement is excellent.

How startups should use both analyses together

The real power emerges when you combine these techniques. Here's how to build a comprehensive financial analysis practice that leverages both methods:

Using both analyses in tandem

Start with horizontal analysis to identify trends. Look at your revenue, gross profit, and operating expenses across the last 6-12 months. Calculate the percentage change quarter-over-quarter or month-over-month, depending on your growth stage.

Apply vertical analysis to understand whether those changes improved or hurt your financial structure. Revenue might be growing, but if the cost of goods sold is growing faster, your margins are compressing.

Compare both against industry benchmarks. Your operating expenses might be trending down, good according to horizontal analysis, but still represent 65% of revenue when the industry average is 45%, concerning according to vertical analysis.

Create a regular cadence. Monthly reviews catch problems early. Quarterly deep dives inform strategic decisions. Annual comparisons provide the long view needed for major pivots or funding rounds.

Pro tip for founders: How to communicate vertical and horizontal analysis to your team

For startups, a negative horizontal trend, such as rising costs or slowing revenue growth, can trigger anxiety across a small team. When founders share financial results without context, employees may interpret short-term fluctuations as signs of instability, even when the business fundamentals remain sound.

The role of financial analysis isn't to assign blame, but to create shared awareness. Instead of presenting a “red” trend as a failure, frame it as early visibility:

• “This trend shows us where pressure is building, so we can act before it affects our runway.”
  
• “We are seeing costs rise faster than revenue in one area, which gives us a clear focus for improvement next quarter.”
  

Experienced founders use financial insights to guide calm, informed conversations. By pairing transparency with clear next steps, you maintain trust and morale whilst reinforcing that the business is being actively managed.

In practice, the value of vertical and horizontal analysis lies not just in identifying problems early but in helping teams stay aligned, confident, and focused on solutions.

When to use each analysis separately

Different business scenarios call for different analytical approaches. Knowing which tool to deploy saves time and sharpens your decision-making.

Use vertical analysis alone when:

• Evaluating new investments or expenses: You're considering spending SGD $15,000 monthly on a new marketing channel. Vertical analysis shows this represents 7.5% of your SGD $200,000 monthly revenue. Industry benchmarks suggest marketing should be 15-20% of revenue, and you're currently at 12%. You have room to invest.
  
• Comparing against competitors or benchmarks: You want to understand if your cost structure is competitive. Pull financial statements from comparable public companies or industry reports. Convert them to common-size statements using vertical analysis. Your SaaS startup spends 35% on R&D whilst competitors spend 25%, are you over-investing, or do you have a superior technology focus?
  
• Explaining your business model to stakeholders: Investors, board members, or potential partners need to understand your business quickly. A vertical analysis of your income statement shows your margins, cost drivers, and profitability structure at a glance. "We maintain 70% gross margins, invest 25% of revenue in growth, and achieve 15% operating margins."
  
• Making resource allocation decisions: Your finance team requests more headcount. Vertical analysis shows administrative costs at 8% of revenue, already above the 5-7% industry benchmark. Better to improve efficiency than add resources.
  
• Assessing financial risk: Your balance sheet vertical analysis shows accounts receivable at 45% of total assets. This concentration creates a significant risk if customers delay payments. You decide to tighten payment terms and diversify your customer base.
  
• Use horizontal analysis alone when:
  
• Forecasting future performance: You need to project next quarter's revenue. Horizontal analysis shows you've grown 18%, 22%, and 25% over the past three quarters; acceleration indicates you can reasonably forecast 28% growth if current conditions hold.
  
• Tracking operational improvements: You implemented new inventory management software three months ago. Horizontal analysis shows inventory turnover improved from 4x to 6x annually. The investment is working.
  
• Measuring strategic initiative success: Six months ago, you launched a customer retention programme. Horizontal analysis of your customer lifetime value shows it increased 35% whilst acquisition costs dropped 15%. The programme succeeded.
  
• Identifying emerging problems: Monthly horizontal analysis reveals customer acquisition costs increasing 10%, 15%, and 22% over consecutive months. This troubling acceleration demands immediate attention; your growth marketing strategy needs revision.
  
• Validating growth sustainability: You need to confirm whether revenue growth is sustainable or temporary. Horizontal analysis covering 12+ months reveals consistent 20-25% quarterly growth with no signs of deceleration. Growth appears sustainable.
  
• Preparing growth narratives for investors: Your Series A pitch emphasises momentum. Horizontal analysis provides compelling proof: "We've grown revenue 300% year-over-year whilst reducing customer acquisition costs by 40%. Our monthly recurring revenue increased from SGD $50,000 to SGD $200,000 in just nine months."
  

This strategic separation of techniques prevents analysis paralysis. Not every question requires both methods. Match the analytical tool to the business problem, and you'll extract insights more efficiently.

Practical use cases for Singapore startups

Singapore's startup ecosystem presents unique challenges where these analyses prove invaluable. Let’s walk you through specific scenarios where founders can apply these techniques effectively.

• Navigating growth requirements: SMEs and startups seeking government grants or accelerator programmes need to demonstrate sustainable growth. Horizontal analysis provides clear evidence of consistent revenue increases and improving unit economics.
  
• Managing multi-currency operations: Singapore startups often operate across ASEAN markets. Vertical analysis helps you understand whether foreign exchange costs are consuming too much margin, whilst horizontal analysis reveals whether your regional expansion is accelerating or stalling. A fintech startup operating in Singapore, Indonesia, and Vietnam might discover that FX costs represent 8% of revenue, double what they assumed. This insight prompts hedging strategies or pricing adjustments.
  
• Preparing for funding: Singapore investors are sophisticated and metrics-driven. They expect you to present clean financial data showing both your current structure (vertical) and growth trajectory (horizontal). Aspire's budgeting tools help you track these metrics and create investor-ready reports that demonstrate financial maturity.
  
• Scaling across borders: As you expand from Singapore to Indonesia, Thailand, or Vietnam, vertical analysis helps you compare operational efficiency across markets. Are your Jakarta operations spending 60% of revenue on customer acquisition whilst Singapore spends only 35%? That signals the need to refine your go-to-market strategy. Aspire's multi-currency visibility and automated expense categorisation make cross-market comparisons accurate and effortless.
  
• Regulatory compliance: Singapore's accounting standards require clear financial reporting. Regular vertical and horizontal analyses ensure your financial statements tell a coherent story to IRAS, investors, and stakeholders. When auditors review your financials, having systematic analysis documentation demonstrates financial maturity and control.
  

Pro tip for founders: Accounting for Singapore-specific seasonality

When performing horizontal analysis for a Singapore-based startup, always adjust for the Chinese New Year effect. Many businesses experience a sharp dip in February revenue or activity due to extended holidays, delayed invoicing, and slower procurement cycles.

This is often a seasonal anomaly rather than a structural decline, especially for B2B, logistics, and professional services companies. Year-over-year comparisons help separate true trends from calendar-driven fluctuations.

Key metrics startups should pair with these analyses

Financial analysis becomes more powerful when you combine it with operational metrics. This creates a complete view of business performance.

• Customer Acquisition Cost (CAC) trends: Use horizontal analysis to track whether your CAC is improving. Pair with vertical analysis to ensure CAC as a percentage of revenue remains sustainable.
  
• Customer Lifetime Value (LTV) ratios: Calculate LTV:CAC ratios over time. A ratio improving from 2:1 to 3:1 indicates increasingly efficient growth.
  
• Cash conversion cycle: Track how long it takes to convert inventory or services into cash. Horizontal analysis reveals whether this cycle is improving or deteriorating.
  
• Burn rate and runway: For pre-revenue or high-growth startups, combine horizontal analysis of monthly cash outflows with vertical analysis of spending categories to optimise runway.
  
• Gross margin trends: This metric deserves special attention. Use horizontal analysis to spot margin compression early. Use vertical analysis to understand which cost components are responsible.
  

Common mistakes startups make with vertical and horizontal analysis

Even experienced founders make these errors that undermine analytical accuracy.

• Inconsistent periods: Comparing February (28 days) to March (31 days) without adjusting for different month lengths. Always normalise to 30-day periods or use quarterly comparisons.
  
• Ignoring seasonality: A 40% revenue decline from December to January might reflect normal seasonal patterns, not business problems. Year-over-year comparisons control for seasonality better than month-over-month.
  
• Analysis paralysis: Creating elaborate spreadsheets but never acting on insights. Set clear decision rules: "If operating expenses exceed 60% of revenue for two consecutive months, we reduce discretionary spending by 15%."
  
• Comparing apples to oranges: Benchmarking your early-stage startup against established companies, or comparing your financial ratios against the wrong industry vertical.
  
• Neglecting absolute values: A 100% increase sounds impressive until you realise revenue only grew from SGD $10,000 to SGD $20,000. Always consider both percentage changes and absolute amounts.
  
• One-time events treated as trends: A spike in expenses for a trade show or a revenue surge from a large one-off contract shouldn't inform strategic decisions. Separate recurring patterns from exceptions.
  

How to present financial analysis to investors

Investors see hundreds of pitches. Make your financial information stand out with these presentation strategies.

• Start with the headline: Open with your most compelling metric. "Our gross margin improved from 45% to 62% whilst revenue tripled" immediately captures attention.
  
• Show both analyses side by side: Present a table with absolute amounts, vertical analysis percentages, and horizontal analysis percentage changes. This complete view demonstrates analytical sophistication.
  
• Highlight improvements: Frame your story around positive trends. "Operating expenses decreased from 75% to 58% of revenue over 12 months through automation and process improvements."
  
• Acknowledge challenges transparently: If your customer acquisition costs are rising, explain why and what you're doing about it. Investors respect founders who spot problems and respond proactively.
  
• Connect metrics to strategy: Don't merely present numbers. Explain how your financial position informed strategic decisions. "Vertical analysis revealed technology costs at 25% of revenue, double the industry average, prompting our migration to more cost-effective infrastructure."
  
• Use visuals: Charts showing trend lines (for horizontal analysis) and pie charts (for vertical analysis) communicate faster than tables of numbers.
  

Tools and templates for vertical and horizontal analysis

You don't need expensive software to start analysing your finances effectively.

Basic tools

• Spreadsheets: Excel or Google Sheets handle both analyses easily. Create templates with formulas that automatically calculate percentages when you input raw numbers.
  
• Accounting software: QuickBooks, Xero, and FreshBooks generate basic financial statements. Export these to your spreadsheet templates for analysis.
  
• Template structure: Build a master template with three columns: actual amounts, vertical analysis percentages, and horizontal analysis changes. Create separate tabs for monthly, quarterly, and annual views.
  

Advanced tools

• Business intelligence platforms: Tools like Tableau or Power BI create interactive dashboards that update automatically as new financial data flows in.
  
• Integrated finance platforms: Aspire provides real-time visibility into spending patterns, multi-currency operations, and cash flow, essential inputs for meaningful financial analysis. The platform's budgeting features help startups track actuals against projections, whilst corporate cards and automated expense management ensure your financial results are accurate and up-to-date.
  
• Scenario planning tools: Software like Finmark or Jirav allows you to model how changes in various line items affect your overall financial health.
  

How Aspire helps startups improve financial insight and analysis

Running accurate financial analysis requires clean, organised data. We, at Aspire, help solve the data collection challenge that many Singapore startups face. Our:

• Real-time expense tracking eliminates the lag between spending and recording. You don't discover next month that last month's operating expenses were 20% higher than expected.
  
• Multi-currency management provides accurate visibility into cross-border operations. See exactly what percentage of revenue goes to international suppliers or how much foreign exchange costs impact your margins.
  
• Automated categorisation ensures consistent expense classification across periods. This consistency makes horizontal analysis reliable and vertical analysis meaningful.
  
• Corporate cards with spend controls prevent budget overruns before they happen. Set category limits based on your vertical analysis benchmarks.
  
• Integrated cash flow visibility shows you the complete picture. Track not only income and expenses but also timing, critical for startups managing tight runways.
  

By handling the operational complexity of financial management, Aspire frees you to focus on what the numbers mean rather than whether they're accurate.

Ready to transform your financial analysis from monthly guesswork to real-time insight? Open an Aspire account and start making data-driven decisions with confidence.

Frequently asked questions

What are the three types of financial analysis?

The three main types are horizontal analysis, comparing financial data across periods to identify trends; vertical analysis, expressing each line item as a percentage of a base figure to understand structure; and ratio analysis, calculating relationships between financial statement items to assess performance, liquidity, and efficiency.

What is meant by vertical analysis?

Vertical analysis expresses each line item on a financial statement as a percentage of a base amount; revenue for income statements, total assets for balance sheets. It shows your company's financial structure at a specific point in time, revealing what percentage of your revenue goes to different expense categories or what proportion of assets is tied up in inventory versus cash.

How do I perform a horizontal analysis?

Select a base period and one or more comparison periods. Calculate the change in each line item between periods. Divide the change by the base period amount and multiply by 100 to get the percentage change. Performing horizontal analysis regularly (monthly or quarterly) helps you spot trends early and make data-driven decisions.

Which analysis method is better for startups?

Neither is "better"; they serve different purposes. Use horizontal analysis to track whether you're improving over time, growing sustainably, and achieving strategic objectives. Use vertical analysis to understand your cost structure, compare against benchmarks, and communicate your business model. Horizontal and vertical analysis together provide the complete picture startups need.

How do I calculate percentages for vertical analysis?

Divide the line item amount by the base figure (usually total revenue for income statements or total assets for balance sheets), then multiply by 100. For example, if marketing expenses are SGD $40,000 and total revenue is SGD $200,000: (40,000 ÷ 200,000) × 100 = 20%. Marketing represents 20% of revenue. The vertical analysis formula is straightforward but provides powerful insights.

How many months of data should I use for horizontal analysis?

This depends on your growth stage and business model. Early-stage startups benefit from monthly comparisons to catch problems quickly. More established SMEs might focus on quarterly comparisons for strategic decisions and annual comparisons for long-term planning. Include at least three periods to distinguish trends from one-time fluctuations. Year-over-year comparisons work well for businesses with seasonal patterns, helping you understand whether this June performed better than last June.