5 WAYS TO MODEL BUSINESS SCENARIOS USING EXCEL'S WHAT-IF ANALYSIS

Excel's What-If Analysis tools are incredibly powerful for strategic planning, risk assessment, and decision-making. Instead of manually changing values to see outcomes, these features allow you to explore different scenarios, find optimal solutions, and analyze sensitivity with ease. They help answer questions like "What if sales drop by 10%?" or "How many units do we need to sell to reach our profit target?"

5 Ways To Model Business Scenarios Using Excel's What-If Analysis

Here are five ways to model business scenarios using Excel's What-If Analysis.

• Scenario Manager: Compare Multiple Input Sets

  Purpose: Stores and manages different sets of input values (scenarios) and allows you to quickly switch between them to see their impact on results.

  How to use:

  - Go to Data > What-If Analysis > Scenario Manager.

  - Define cells that change (inputs) and cells that show results.

  - Create scenarios (e.g., "Best Case," "Worst Case," "Most Likely") by entering different values for the changing cells.

  - Use "Show" to apply a scenario, or "Summary" to create a report showing all scenarios' outcomes.

  Business Scenario: Analyze profitability under different sales volumes and cost structures (e.g., high sales/low costs vs. low sales/high costs).

  
  

• Goal Seek: Find the Input for a Desired Outcome

  Purpose: Works backward from a desired result to determine what input value is needed to achieve that result.

  How to use:

  - Go to Data > What-If Analysis > Goal Seek.

  - Specify the cell you want to "Set cell" to a target "To value," by changing another single "By changing cell."

  Business Scenario: Determine the selling price needed to achieve a specific profit target, or the sales volume required to break even.

  
  

• Data Tables: See Results for One or Two Varying Inputs

  Purpose: Shows how a result (or multiple results) changes when one or two input variables are varied across a range of values.

  How to use:

  - For one-variable: Set up a column or row with varying input values. Reference your main result formula. Select the table range, then Data > What-If Analysis > Data Table. Specify your input cell (row or column).

  - For two-variables: Set up varying inputs in both a row and a column.

  Business Scenario: Analyze how profit changes with different product prices and different production costs.

  
  

• Solver Add-in: Optimize for Multiple Variables and Constraints

  Purpose: A more advanced tool (requires enabling the Solver Add-in: File > Options > Add-ins > Excel Add-ins > Go > Solver Add-in) that finds the optimal value for a target cell by changing multiple input cells, subject to various constraints.

  How to use:

  - Set an "Objective" cell (e.g., maximize profit, minimize cost).

  - Define "By Changing Variable Cells" (inputs you can adjust).

  - Add "Subject to the Constraints" (e.g., budget limits, resource availability).

  - Choose a solving method (e.g., Simplex LP for linear problems).

  Business Scenario: Optimize production mix to maximize profit given limited raw materials and labor hours.

  
  

• Forecast Sheet: Project Future Trends

  Purpose: While not strictly "What-If" in the sense of changing inputs for immediate results, the Forecast Sheet (Excel 2016+) allows you to project future trends based on historical data, enabling scenario planning for future outcomes.

  How to use:

  - Select your historical time-series data.

  - Go to Data > Forecast Sheet.

  - Choose a chart type (line or column) and adjust confidence intervals.

  Business Scenario: Predict future sales given past performance, then use those predictions in your financial models to plan for different growth scenarios.

  
  

By leveraging Excel's What-If Analysis tools, you can move beyond static budgeting and reporting, building dynamic models that help you thoroughly explore potential business outcomes and make more informed, data-driven decisions.