Scenario Simulator
Don't bet the farm on one outcome. Model Best, Base, and Worst case scenarios to quantify risk and reward before changing prices.
1. Base Case (Today)
Optimistic
Pessimistic
Total Profit Comparison
Risk Assessment
Is the squeeze worth the juice?
The Spread
The gap between Best ($63,700) and Worst ($58,500) profit is $5,200. A wide spread implies high uncertainty.
Downside Protection
Risky Move. The pessimistic case destroys value.
Margin Expansion
Notice how price increases (Optimistic) often boost profit disproportionately compared to revenue, due to fixed unit costs.
Execution Steps
Enter your Current Financials (Price, Volume, Unit Cost).
Define your 'Optimistic' scenario (e.g., Price +5%, Volume -2%).
Define your 'Pessimistic' scenario (e.g., Price +5%, Volume -15%).
Compare the Net Profit bars to see if the upside justifies the downside risk.
Pro Strategy
- Always model a 'Disaster' scenario where volume drops 2x more than you expect. If you survive that, the move is safe.
- Use this for Board/CFO presentations. Showing you have considered the worst case builds credibility.
- If the Pessimistic Profit is still higher than today's Base Profit, the price increase is a 'No Brainer'.
Core Concepts
Sensitivity Analysis
Testing how sensitive your profit is to changes in key variables like volume or price. It reveals your business's breaking point.
Asymmetric Risk
When the potential downside is much larger (or smaller) than the potential upside. Good strategy seeks asymmetric upside.
Expected Value
The weighted average of all possible outcomes. (Prob_Best * Value_Best) + (Prob_Worst * Value_Worst).
What is Scenario Simulator?
This tool performs a comparative statics analysis. It takes a snapshot of your current unit economics and projects three parallel universes based on varying elasticity assumptions. It visualizes the 'Range of Outcomes' to help decision-makers assess risk tolerance.
Best For
- • Planning an annual price increase.
- • Evaluating a new product launch strategy.
- • Stress-testing a business model against recession (volume drop).
Limitations
- • Assumes linear relationships.
- • Does not account for competitor reaction (Game Theory).
- • Static time horizon (doesn't show month-by-month ramp).
Alternative Methods
Monte Carlo Simulation
Runs thousands of random scenarios to generate a probability distribution.
Break-Even Analysis
Finds the single point of failure rather than comparing three distinct outcomes.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
SaaS Price Hike
Wanted to raise prices 20%. Feared 30% churn.
Scenario Sim showed that even with 25% churn (Pessimistic), revenue would be flat but support costs would drop 25%, increasing net profit.
Retail Black Friday
Planning a 30% off doorbuster.
Simulated volume needed. Pessimistic case (2x vol) showed a massive loss. Optimistic (4x vol) showed only 10% profit gain.