Forecast Scenario Modeling

Create multiple revenue scenarios with variable assumptions to support strategic planning, board presentations, and risk management.

When to Use This Skill

Annual and quarterly planning
Board meeting preparations
Fundraising projections
Risk assessment and contingency planning
Evaluating strategic initiatives

Methodology Foundation

Based on McKinsey Scenario Planning and FP&A best practices, combining:

Base/Bull/Bear case modeling
Sensitivity analysis (variable impact)
Monte Carlo probability distributions
Driver-based forecasting

What Claude Does vs What You Decide

| Claude Does | You Decide | |-------------|------------| | Structures scenario framework | Assumption values | | Calculates scenario outcomes | Which scenario to plan for | | Identifies key sensitivities | Risk tolerance levels | | Models variable impacts | Strategic responses | | Presents range of outcomes | Final forecast commitment |

What This Skill Does

Scenario definition - Base, upside, downside cases
Variable modeling - Test impact of changing assumptions
Sensitivity analysis - Which variables matter most
Probability weighting - Expected value calculations
Action planning - What to do in each scenario

How to Use

Model revenue scenarios for [Period]:

Current Status:
- YTD Revenue: $X
- Current Pipeline: $X
- Run Rate: $X/month

Key Variables to Model:
- Win rate: [Current: X%, Range: X-X%]
- Average deal size: [Current: $X, Range: $X-$X]
- Sales cycle: [Current: X days, Range: X-X]
- New pipeline creation: [Current: $X/month]
- Churn rate: [Current: X%]

Create best, likely, and worst case scenarios.

Instructions

Step 1: Define Scenario Framework

| Scenario | Definition | Probability | |----------|------------|-------------| | Best Case (Bull) | Everything goes right | 15-20% | | Likely Case (Base) | Realistic expectations | 50-60% | | Worst Case (Bear) | Major headwinds | 20-25% |

Step 2: Identify Key Drivers

Rank variables by revenue impact:

| Driver | Impact | Controllability | |--------|--------|-----------------| | Win rate | High | Medium | | Pipeline volume | High | High | | Deal size | Medium | Low | | Sales cycle | Medium | Medium | | Churn rate | Medium | Medium | | Pricing | Low | High |

Step 3: Set Variable Ranges

For each driver, define realistic bounds:

Win Rate:
- Best: 35% (team is hitting stride)
- Likely: 25% (current performance)
- Worst: 18% (market headwinds)

Pipeline:
- Best: $5M (strong marketing)
- Likely: $4M (normal cadence)
- Worst: $2.5M (budget cuts)

Step 4: Calculate Scenarios

Revenue Formula (simplified):

Quarterly Revenue =
  (Pipeline × Win Rate) +
  (Expansion Revenue) -
  (Churn)

Apply to each scenario:

Best Case:
$5M × 35% = $1.75M new + $200K expansion - $50K churn
= $1.9M

Likely Case:
$4M × 25% = $1M new + $150K expansion - $80K churn
= $1.07M

Worst Case:
$2.5M × 18% = $450K new + $100K expansion - $120K churn
= $430K

Step 5: Sensitivity Analysis

Test: "What if X changes by 10%?"

| Variable | +10% Impact | -10% Impact | Sensitivity | |----------|-------------|-------------|-------------| | Win Rate | +$100K | -$100K | High | | Pipeline | +$90K | -$90K | High | | Deal Size | +$50K | -$50K | Medium | | Churn | -$30K | +$30K | Medium |

Step 6: Calculate Expected Value

Expected Revenue =
  (Best × Probability) +
  (Likely × Probability) +
  (Worst × Probability)

= ($1.9M × 20%) + ($1.07M × 55%) + ($430K × 25%)
= $380K + $589K + $108K
= $1.077M

Examples

Example 1: Quarterly Forecast Scenarios

Input:

Model Q2 scenarios:

Current Status:
- Q1 Revenue: $850K
- Q2 Pipeline: $4.2M
- Monthly run rate: $280K

Variables:
- Win rate: Current 24%, Range 18-32%
- Avg deal: Current $45K, Range $38K-$55K
- New monthly pipeline: Current $800K, Range $500K-$1.2M
- Monthly churn: Current $25K, Range $15K-$40K
- Expansion: Current $50K/month, Range $30K-$80K

Output:

## Q2 Revenue Scenario Model

### Scenario Definitions

| Scenario | Probability | Description |
|----------|-------------|-------------|
| 🐂 Bull | 20% | Strong execution, market tailwinds |
| 📊 Base | 55% | Continue current trajectory |
| 🐻 Bear | 25% | Market slowdown, execution challenges |

### Variable Assumptions

| Variable | Bear | Base | Bull |
|----------|------|------|------|
| Starting Pipeline | $4.2M | $4.2M | $4.2M |
| Win Rate | 18% | 24% | 32% |
| Avg Deal Size | $38K | $45K | $55K |
| New Pipeline/mo | $500K | $800K | $1.2M |
| Monthly Churn | $40K | $25K | $15K |
| Expansion/mo | $30K | $50K | $80K |

### Q2 Revenue Calculations

#### 🐂 Bull Case: $1.42M

Starting Pipeline Revenue: $4.2M × 32% = $1.34M

Adjustment for deal size: $1.34M × ($55K/$45K) = $1.64M effective

New Pipeline Added (Q2): $1.2M × 3 months × 32% × 50% (partial close) = $576K

Expansion: $80K × 3 = $240K

Churn: -$15K × 3 = -$45K

Total Bull: $1.64M (existing) + $576K (new) + $240K (exp) - $45K (churn) Weighted at Q2 stage: $1.42M


#### 📊 Base Case: $980K

Starting Pipeline Revenue: $4.2M × 24% = $1.01M

New Pipeline (partial close): $800K × 3 × 24% × 50% = $288K

Expansion: $150K Churn: -$75K

Total Base: $1.01M × 0.9 (timing) + $150K - $75K = $980K


#### 🐻 Bear Case: $580K

Starting Pipeline Revenue: $4.2M × 18% = $756K × 0.85 (pushed deals) = $643K

New Pipeline: $500K × 3 × 18% × 40% = $108K Expansion: $90K Churn: -$120K

Total Bear: $580K


### Scenario Summary

| Scenario | Revenue | vs Q1 | Growth |
|----------|---------|-------|--------|
| 🐂 Bull | $1.42M | +$570K | +67% |
| 📊 Base | $980K | +$130K | +15% |
| 🐻 Bear | $580K | -$270K | -32% |

### Expected Value

E(Revenue) = ($1.42M × 0.20) + ($980K × 0.55) + ($580K × 0.25) = $284K + $539K + $145K = $968K


**Recommended Forecast: $950K - $1.0M**

### Sensitivity Analysis

| If This Changes... | Revenue Impact |
|--------------------|----------------|
| Win rate +5% | +$210K |
| Win rate -5% | -$210K |
| Pipeline +$500K | +$120K |
| Deal size +$5K | +$80K |
| Churn +$10K/mo | -$30K |

**Highest Sensitivity**: Win rate (focus on deal execution)

### Scenario Action Plans

**If Trending Bull:**
- Accelerate hiring plan
- Increase marketing spend
- Prepare for capacity constraints

**If Trending Base:**
- Stay the course
- Focus on execution
- Build pipeline for Q3

**If Trending Bear:**
- Tighten expense controls
- Extend runway calculations
- Double down on existing customers
- Consider discounting to close deals

Example 2: Annual Planning Scenarios

Input:

Model 2026 annual scenarios for board:

2025 Results:
- Revenue: $4.2M
- Customers: 85
- ARR Growth: 45%
- NRR: 110%

2026 Planning Variables:
- New customer target: 40-80 new customers
- ACV range: $40K-$60K
- NRR range: 105%-120%
- Churn range: 5%-12%

Output:

## 2026 Annual Revenue Scenarios

### For Board Review

---

### Scenario Summary

| Metric | Bear | Base | Bull |
|--------|------|------|------|
| New Customers | 40 | 60 | 80 |
| New ACV | $40K | $50K | $60K |
| New ARR | $1.6M | $3.0M | $4.8M |
| NRR | 105% | 112% | 120% |
| Existing Base | $4.41M | $4.70M | $5.04M |
| **Total ARR** | **$6.0M** | **$7.7M** | **$9.8M** |
| **Growth** | **43%** | **83%** | **133%** |

### Detailed Calculations

#### 🐻 Bear Case: $6.0M ARR (+43%)

**Assumptions:**
- Conservative new sales (40 customers)
- Lower ACV ($40K avg)
- NRR dips (105%)
- Higher churn (10%)

Existing Customer Base: $4.2M × 105% NRR = $4.41M

New Customer Revenue: 40 customers × $40K = $1.6M

Total: $6.0M


**When This Happens:**
- Market downturn
- Sales execution issues
- Product-market fit challenges
- Key competitor gains ground

---

#### 📊 Base Case: $7.7M ARR (+83%)

**Assumptions:**
- Target new sales (60 customers)
- Target ACV ($50K)
- Maintain NRR (112%)
- Normal churn (7%)

Existing Customer Base: $4.2M × 112% NRR = $4.70M

New Customer Revenue: 60 customers × $50K = $3.0M

Total: $7.7M


**This Is Likely If:**
- Execute at current pace
- Market conditions stable
- Product roadmap delivers
- Team retention healthy

---

#### 🐂 Bull Case: $9.8M ARR (+133%)

**Assumptions:**
- Exceed targets (80 customers)
- Premium ACV ($60K)
- Strong NRR (120%)
- Low churn (5%)

Existing Customer Base: $4.2M × 120% NRR = $5.04M

New Customer Revenue: 80 customers × $60K = $4.8M

Total: $9.8M


**Required For This:**
- Strong product releases
- Successful enterprise push
- Favorable market timing
- Key hires perform

---

### Expected Value & Recommendation

E(ARR) = ($6.0M × 0.20) + ($7.7M × 0.55) + ($9.8M × 0.25) = $1.2M + $4.24M + $2.45M = $7.89M


### Board Recommendation

**Target: $7.5M ARR** (+79% growth)

| Metric | Target | Confidence |
|--------|--------|------------|
| New Customers | 55-60 | Medium-High |
| New ARR | $2.75M | Medium |
| NRR | 110%+ | High |
| Total ARR | $7.5M | Medium |

### Key Risks & Mitigations

| Risk | Impact | Mitigation |
|------|--------|------------|
| Sales hiring delays | -$1M | Recruit pipeline now |
| Enterprise deals push | -$800K | Parallel SMB motion |
| Key customer churn | -$500K | CSM investment |
| Competitor pricing | -$600K | Value selling training |

### Monthly Checkpoints

| Month | Bear | Base | Bull |
|-------|------|------|------|
| Q1 End | $4.8M | $5.2M | $5.8M |
| Q2 End | $5.3M | $6.2M | $7.4M |
| Q3 End | $5.6M | $7.0M | $8.6M |
| Q4 End | $6.0M | $7.7M | $9.8M |

Track monthly and adjust Q3 if trending to Bear.

Skill Boundaries

What This Skill Does Well

Structuring scenario frameworks
Calculating outcomes from assumptions
Identifying key sensitivities
Presenting range of possibilities

What This Skill Cannot Do

Predict which scenario will occur
Know your specific business dynamics
Account for black swan events
Replace expert judgment on probabilities

When to Escalate to Human

Setting official targets
Board/investor commitments
Major strategic pivots
Assumptions requiring domain expertise

Iteration Guide

Follow-up Prompts

"What win rate do we need to hit Base case?"
"Show me monthly revenue trajectory for each scenario."
"Add a 'catastrophic' case if we lose our biggest customer."
"What's the probability-weighted forecast?"

Scenario Planning Cycle

Set variables and ranges
Calculate scenarios
Identify early warning signals
Define trigger points for action
Review monthly against actuals

Checklists & Templates

Annual Planning Template

## [Year] Revenue Scenarios

### Scenarios
| Case | Revenue | Growth | Probability |
|------|---------|--------|-------------|
| Bull | | | 20% |
| Base | | | 55% |
| Bear | | | 25% |

### Key Assumptions
| Variable | Bear | Base | Bull |
|----------|------|------|------|

### Sensitivity Analysis
| Variable | Impact per 10% |
|----------|----------------|

### Risk Register
| Risk | Scenario Impact | Mitigation |
|------|-----------------|------------|

References

McKinsey Scenario Planning Guide
FP&A Forecasting Best Practices
SaaS Metrics and Financial Modeling
CFO.com Revenue Forecasting

Related Skills

pipeline-forecasting - Feed into scenario models
lead-scoring - Input for pipeline assumptions
account-health - NRR/churn inputs

Skill Metadata

Domain: RevOps
Complexity: Advanced
Mode: centaur
Time to Value: 60-90 min for full model
Prerequisites: Historical data, variable assumptions