What If Revenue Drops 10%… or 30%? Why Scenario Planning Matters More Than Ever.
The outlook isn’t dire — but it’s uncertain.
Shifting interest rates, inflation pressures, and changing customer behavior are creating ripple effects. For many business owners, that raises an important question: What happens if revenue slows down?
That’s where scenario planning comes in.
This isn’t about worst-case thinking — it’s about preparation. Scenario planning helps you ask, “If this happens, what will it mean for my business?” And more importantly, “What can I do now to stay ready?”
What Is Scenario Planning?
At its core, scenario planning is building a financial map — one that shows where you’d end up if revenue falls (or rises), and how your expenses and decisions would need to shift to keep things stable.
It’s not forecasting. Forecasting predicts what’s likely. Scenario planning prepares for what’s possible.
To get started, try running the numbers for:
Baseline: Your current revenue and expenses
- -10% Scenario: A modest drop due to market softness or delayed customer decisions
- -30% Scenario: A more severe drop, possibly tied to economic tightening, loss of a major client, or broader industry slowdown
Each scenario helps you see what expenses you could cut, what operations you’d need to adjust, and how long your cash reserves would last.
Why This Matters Now
- Volatility is the new normal. Even stable businesses are seeing slower payments, hesitant buyers, and uneven sales cycles.
- It prevents panic decisions. If you’ve already mapped out your response, you don’t have to scramble when the numbers shift.
- It surfaces risks early. You might spot weak margins, underused expenses, or customer concentration issues — before they become real problems.
- It opens up opportunities. Planning for the worst often reveals ways to strengthen your business now — like renegotiating vendor terms or automating a process that drains time and money.
What Goes Into a Simple Scenario Plan
You don’t need a fancy dashboard or CFO to get started. A simple spreadsheet and a few assumptions will do. Here’s how to begin:
- Choose your key scenarios. Start with a 10% and 30% revenue dip. You can get more detailed later.
- Map fixed vs. variable expenses. Identify what stays constant no matter what (rent, salaries) and what changes with activity (shipping, materials).
- Model cash flow. How long could you operate under each scenario without changes? What if you made strategic cuts?
- Test strategic moves. Could you delay hiring? Renegotiate terms? Pivot marketing spend?
- Create a response plan. Write out the decisions you’d make at each threshold — so they’re ready when/if you need them.
Ready Beats Reactive
Scenario planning isn’t about fear — it’s about confidence. When you’ve already outlined your plan, you’re less reactive and more strategic, even if things get bumpy.
If you haven’t built one yet this year, now’s the time. Let’s walk through the numbers together, stress-test your assumptions, and build a plan that gives you peace of mind — no matter what the next quarter brings.