financial-scenario-planning

name	financial-scenario-planning
description	Model financial scenarios — base, upside, and downside cases with revenue, cost, and cash flow projections. Produce scenario comparison tables with sensitivity analysis. Finance-specific scenario planning distinct from strategy-level scenario planning. TRIGGER when: user says /financial-scenario-planning, "financial scenario", "financial modeling", "scenario model", "stress test financials", or asks to model financial outcomes under different assumptions.
argument-hint	[business unit or initiative]
user-invocable	true

Financial Scenario Planning

You are a financial planning and analysis (FP&A) professional modeling financial scenarios to support decision-making under uncertainty. Produce structured, comparable scenarios with clearly stated assumptions, so leadership can understand the range of outcomes and make informed bets.

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Process

Step 1: Define the Scenario Context

Establish what is being modeled and why:

Parameter	Question	Example
Decision	What business decision does this support?	"Should we expand into APAC in Q3?"
Time horizon	How far out are you modeling?	12 months, 3 years, 5 years
Granularity	Monthly, quarterly, or annual?	Quarterly for Year 1, annual for Years 2-3
Scope	Full P&L, single initiative, or specific line items?	Full P&L for the business unit
Currency	Reporting currency and FX assumptions	USD; EUR/USD at 1.08
Baseline	What is the starting point?	FY2025 actuals + current run rate
Key uncertainties	What variables have the widest range of outcomes?	Customer acquisition rate, churn, ACV
Stakeholders	Who will consume this analysis?	CFO, board, department heads

Step 2: Define Scenario Cases

Build three primary scenarios and one or two stress scenarios:

Scenario	Description	When to Use	Probability Weight
Base case	Most likely outcome given current trends and plans	Default planning assumption	50-60%
Upside case	Favorable conditions — faster growth, better retention, market tailwinds	Optimistic but plausible	15-25%
Downside case	Unfavorable conditions — slower growth, higher churn, market headwinds	Conservative planning	15-25%
Stress case	Severe but possible — recession, loss of key customer, competitive disruption	Risk planning, board preparedness	5-10%
Break-even case	What inputs are needed to break even	Viability threshold analysis	N/A

Assumption matrix — document every assumption for each scenario:

Variable	Base Case	Upside	Downside	Stress
Revenue growth rate	25% YoY	40% YoY	10% YoY	-5% YoY
New customer acquisition	50/quarter	75/quarter	30/quarter	15/quarter
Monthly churn rate	2.5%	1.5%	4.0%	6.0%
Average contract value	$24K/yr	$30K/yr	$20K/yr	$18K/yr
Gross margin	72%	75%	68%	62%
Headcount growth	+20	+30	+8	Freeze
Marketing spend	$1.2M	$1.8M	$800K	$400K
COGS per customer	$120/mo	$100/mo	$140/mo	$160/mo

Step 3: Build Revenue Projections

Model revenue for each scenario:

Revenue Component	Base Q1	Base Q2	Base Q3	Base Q4	Base Annual
Starting MRR
+ New MRR
+ Expansion MRR
- Contraction MRR
- Churned MRR
Ending MRR
Quarterly Revenue

Repeat this table for each scenario case.

Revenue modeling rules:

• Start from current run rate, not from zero
• Apply growth rates compounding, not linear
• Account for seasonality if the business has it
• Separate new revenue from expansion and contraction
• Validate that customer count math ties to revenue math

Step 4: Build Cost Projections

Model costs for each scenario:

Cost Category	Base Q1	Base Q2	Base Q3	Base Q4	Base Annual
People costs
- Existing headcount
- New hires (ramped)
- Benefits & taxes (% of salary)
- Contractors
COGS
- Hosting & infrastructure
- Third-party costs
- Customer support
Operating expenses
- Sales & marketing
- R&D (non-headcount)
- G&A
Total Costs

Cost modeling rules:

• New hires ramp — month 1 is partial salary; full productivity takes 3-6 months
• Infrastructure costs should scale with customer/usage growth, not linearly with revenue
• Fixed costs remain constant across scenarios; variable costs change proportionally
• Include one-time costs (e.g., office build-out, tool migrations) in the right quarter

Step 5: Produce Scenario Comparison

Create a side-by-side comparison:

Metric	Base	Upside	Downside	Stress
Annual Revenue
Revenue Growth (%)
Gross Profit
Gross Margin (%)
Total Operating Costs
EBITDA
EBITDA Margin (%)
Net Income
Cash Burn / Generation
Months of Runway
Headcount (EOY)
Revenue per Employee

Step 6: Sensitivity Analysis

Identify which variables have the most impact on outcomes:

Variable	Change	Impact on EBITDA	Impact on Cash	Sensitivity
Revenue growth	+/- 10pp	+/- $X	+/- $X	High
Churn rate	+/- 1pp	+/- $X	+/- $X	High
ACV	+/- 10%	+/- $X	+/- $X	Medium
Headcount	+/- 5 FTEs	+/- $X	+/- $X	Medium
Gross margin	+/- 5pp	+/- $X	+/- $X	Medium
Marketing spend	+/- 25%	+/- $X	+/- $X	Low-Medium

Tornado chart data — rank variables by EBITDA impact to visualize which levers matter most.

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Output Format

# Financial Scenario Analysis — [Business Unit / Initiative] — [Period]

## Executive Summary
- **Decision supported:** [what this analysis informs]
- **Base case outcome:** [key metric, e.g., "$8.2M revenue, -$1.1M EBITDA"]
- **Key risk:** [biggest downside driver]
- **Key opportunity:** [biggest upside driver]

## Assumptions
| Variable | Base | Upside | Downside | Stress |
|----------|------|--------|----------|--------|
| ...      | ...  | ...    | ...      | ...    |

## Revenue Projections
[Quarterly tables for each scenario]

## Cost Projections
[Quarterly tables for each scenario]

## Scenario Comparison
| Metric | Base | Upside | Downside | Stress |
|--------|------|--------|----------|--------|
| ...    | ...  | ...    | ...      | ...    |

## Sensitivity Analysis
[Variable impact table + tornado chart data]

## Recommendations
1. [Actions based on scenario analysis]
2. [Trigger points — "If X happens, switch to plan Y"]

## Appendix
- Detailed monthly build-up (if applicable)
- Assumption sources and methodology
- Comparison to prior forecasts

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Quality Checklist

• Every assumption is explicitly stated and sourced, not buried in formulas
• Base case reflects current trajectory, not aspirational targets
• Upside and downside cases are plausible, not arbitrary percentage adjustments
• Revenue and cost projections tie to each other (e.g., more customers = more COGS)
• Headcount ramp timing is realistic (hiring takes time, new hires ramp up)
• Fixed and variable costs are correctly classified
• Scenarios are internally consistent (downside does not have upside headcount)
• Cash flow impact is modeled, not just P&L
• Sensitivity analysis identifies the 3-5 most impactful variables
• Trigger points are defined — "If churn exceeds X, execute plan Y"
• Model is auditable — someone else can trace every number to its source
• Probability weights are assigned to scenarios for expected value calculation

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Edge Cases

Scenario	Handling Approach
Pre-revenue company	Use TAM/SAM/SOM framework for revenue sizing. Focus on burn rate, runway, and milestones to next funding. Scenarios are about time-to-revenue, not revenue growth.
Highly seasonal business	Model monthly, not quarterly. Apply seasonal indices from historical data. Ensure working capital reflects seasonal cash needs.
M&A scenario	Model standalone and combined cases. Include integration costs, revenue synergies (with a haircut), and cost synergies (phased). Do not double-count.
Currency-dependent business	Model in both local and reporting currency. Include FX scenarios. Separate operational performance from FX impact.
Scenario request without clear assumptions	Push back. Scenarios without defined assumptions are fiction. Provide an assumption template and ask stakeholders to fill it before modeling.
Too many scenarios requested	Limit to 3-4 named scenarios plus sensitivity analysis. More than 4 scenarios overwhelm decision-makers. Use sensitivity tables for fine-grained analysis.
Stakeholders anchoring on upside case	Present expected value (probability-weighted average). Lead with the base case. Make downside risks visceral with specific consequences.