One forecast hides uncertainty
Sales volume, conversion, ad cost, return rate, freight, and exchange rates can all move. A single forecast makes uncertainty look like precision. Three cases show which variables matter most and how much downside the business can absorb.
Change connected assumptions together
- Base case: use the most supportable current assumptions.
- Downside case: lower sales or conversion while raising selected costs and lead times.
- Upside case: increase demand but also include the inventory and advertising required to serve it.
- Keep the formulas identical so only assumptions drive the difference.
Measure profit and cash in every case
The upside case can require the most working capital, while the downside case can leave excess inventory. Review contribution profit, inventory investment, lowest cash balance, and the time needed to recover cash.
Preassign an action to each outcome
Decide what you will change if the downside begins to appear, what evidence permits additional investment, and when the project should stop. Scenario planning is useful when it produces faster responses, not only a wider spreadsheet.