# Scenario Planning > Scenario Planning - Skill: `brainbytes-dev/scenario-planning` (Agent Skill) - Install (CLI): `npx skillmds@latest add brainbytes-dev/scenario-planning` - Raw SKILL.md: https://api.skillmd.com/api/skills/brainbytes-dev/scenario-planning/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Coding & Dev Tools - Author: brainbytes-dev (https://skillmd.com/u/brainbytes-dev) - Updated: 2026-09-17 - Page: https://skillmd.com/skills/brainbytes-dev/scenario-planning --- # Scenario Planning name: scenario-planning description: Financial scenario planning — base, upside, downside, stress ## When to Activate - User needs to build financial scenarios for strategic decision-making - Presenting management or board with a range of financial outcomes - Evaluating the impact of specific risks or opportunities on the P&L and cash flow - Building probability-weighted expected outcomes - Defining management action triggers tied to scenario thresholds ## Core Concepts ### Scenario Definitions **Base Case (most likely outcome, 50-60% probability):** - Reflects management's best estimate of future performance - Anchored to current run-rate, pipeline, and known commitments - Incorporates consensus macro assumptions - This is typically the rolling forecast or budget case **Upside Case (favorable outcome, 15-25% probability):** - Key opportunities materialize (large deal wins, market tailwinds) - Revenue growth at the upper end of the reasonable range - Operating leverage kicks in (margin expansion) - Does NOT assume everything goes right simultaneously — that is fantasy, not a scenario **Downside Case (adverse but plausible outcome, 15-25% probability):** - Demand softens, customer decisions delay, competitive pressure increases - Revenue growth slows or declines moderately - Cost inflation exceeds assumptions - Represents a "soft landing" — things go wrong but the business adapts **Stress Case (severe but possible outcome, 5-10% probability):** - Recession, key customer loss, regulatory shock, or market disruption - Revenue declines materially (10-30% depending on industry) - Tests liquidity and solvency under extreme conditions - Purpose: ensure the business survives, not that it thrives - Informs liquidity reserves, covenant headroom, and contingency plans ### Key Driver Identification Scenarios should be built by modifying specific operational drivers, not by applying blanket percentage adjustments to the P&L. **Step 1: Identify the 10-15 drivers that most impact financial outcomes** ``` Revenue Drivers: - New customer acquisition rate - Customer retention / churn rate - Average revenue per customer (ARPU) - Pricing power / ASP changes - Market growth rate - Win rate on pipeline Cost Drivers: - Headcount growth / hiring pace - Wage inflation / merit increases - Input cost inflation (materials, energy) - Discretionary spend levels (marketing, T&E, consulting) - FX rates (for multi-currency businesses) ``` **Step 2: Define driver values for each scenario** ``` Driver | Base | Upside | Downside | Stress New logos/quarter | 15 | 20 | 10 | 5 Monthly churn rate | 1.5% | 1.0% | 2.0% | 3.5% ARPU | $500 | $550 | $475 | $450 Hiring (net adds) | 25 | 35 | 15 | -10 COGS inflation | 3% | 2% | 5% | 8% ``` **Step 3: Run each driver set through the financial model to generate scenario P&L, balance sheet, and cash flow.** ### Probability Weighting Calculate an expected (probability-weighted) outcome for key metrics: ``` Expected EBITDA = P(Base) × EBITDA_Base + P(Upside) × EBITDA_Upside + P(Downside) × EBITDA_Downside + P(Stress) × EBITDA_Stress Example: = 0.55 × $50M + 0.20 × $65M + 0.20 × $35M + 0.05 × $15M = $27.5M + $13.0M + $7.0M + $0.75M = $48.25M ``` **Use probability-weighted outcomes for:** - Valuation (expected cash flows in a DCF) - Debt capacity assessment (what can we comfortably service?) - Capital allocation decisions (invest only if NPV positive across weighted scenarios) - Investor communications (sensitivity ranges around guidance) ### Sensitivity Tables Two-dimensional tables isolating the impact of two key drivers: ``` === EBITDA SENSITIVITY: Revenue Growth × Gross Margin === EBITDA ($M) | GM = 58% | GM = 60% | GM = 62% | GM = 64% Rev Growth = 0% | $__ | $__ | $__ | $__ Rev Growth = 5% | $__ | $__ | $__ | $__ Rev Growth = 10% | $__ | $__ | $__ | $__ Rev Growth = 15% | $__ | $__ | $__ | $__ ``` Build sensitivity tables for the most critical driver pairs: - Revenue growth × gross margin - Volume × pricing - Churn rate × new customer acquisition - FX rate × revenue growth - Interest rate × leverage level ### Scenario Comparison Dashboard ``` === SCENARIO COMPARISON === Metric | Stress | Downside | Base | Upside Revenue ($M) | ____ | ____ | ____ | ____ Revenue Growth | ____% | ____% | ____% | ____% Gross Margin | ____% | ____% | ____% | ____% EBITDA ($M) | ____ | ____ | ____ | ____ EBITDA Margin | ____% | ____% | ____% | ____% Net Income ($M) | ____ | ____ | ____ | ____ Free Cash Flow ($M) | ____ | ____ | ____ | ____ Net Debt / EBITDA | ___x | ___x | ___x | ___x Cash Runway (months)| ___ | ___ | ___ | ___ Covenant Headroom | ____% | ____% | ____% | ____% Probability | 5-10% | 15-25% | 50-60% | 15-25% ``` ## Methodology ### Scenario Construction Process 1. **Define purpose** — what decision does this scenario analysis support? 2. **Identify key drivers** — 10-15 drivers that explain 80%+ of variance 3. **Define scenario narratives** — coherent story for each scenario (not random combinations) 4. **Set driver values** — specific, justified assumptions for each driver in each scenario 5. **Run financial model** — generate full P&L, balance sheet, and cash flow for each 6. **Analyze outputs** — compare key metrics across scenarios 7. **Probability weight** — assign probabilities, calculate expected values 8. **Identify action triggers** — what metric levels trigger which management actions 9. **Build contingency plans** — pre-approved actions for downside/stress scenarios 10. **Present to management** — decision-focused, not analysis-focused ### Scenario Narratives Each scenario needs a coherent narrative — the drivers should tell a consistent story. **Example narratives:** ``` Upside: "Accelerated digital transformation drives demand pull-forward. Enterprise segment grows 25% as large deals close faster. Gross margins expand 200bp from favorable mix shift toward high-margin products. Headcount scales efficiently due to productivity improvements." Downside: "Economic uncertainty causes enterprise customers to delay purchasing decisions. SMB churn increases as smaller customers cut discretionary spend. Wage inflation persists at 5%, compressing margins. Two planned product launches slip by one quarter." Stress: "Recession triggers a 20% decline in new business. Largest customer (8% of revenue) announces vendor consolidation. Credit markets tighten, refinancing costs increase 200bp. Workforce reduction of 15% required to preserve cash." ``` ### Management Decision Triggers ``` === DECISION TRIGGER FRAMEWORK === Metric | Green | Yellow | Red | Action Quarterly revenue | > 95% of plan | 90-95% of plan | < 90% of plan | [Hiring pause] Monthly cash burn | < $__M | $__M - $__M | > $__M | [Cost reduction] Net retention rate | > 110% | 100-110% | < 100% | [CS intervention] Pipeline coverage ratio | > 3.0x | 2.0-3.0x | < 2.0x | [Lead gen surge] Covenant ratio | > 30% headroom | 15-30% headroom| < 15% headroom | [Lender dialogue] Cash runway | > 18 months | 12-18 months | < 12 months | [Fundraise/cut] ``` **Pre-approved contingency actions:** - Yellow zone: management-level response, enhanced monitoring frequency - Red zone: executive team activation, board notification, specific pre-approved actions ## Templates ### Scenario Planning Summary ``` === SCENARIO PLANNING SUMMARY === Company: [Name] Purpose: [Decision being supported] Date: [Date] --- Scenario Definitions --- Base Case: [2-sentence narrative] Upside Case: [2-sentence narrative] Downside Case: [2-sentence narrative] Stress Case: [2-sentence narrative] --- Key Driver Assumptions --- [Driver table as shown above] --- Financial Outcomes --- [Scenario comparison dashboard as shown above] --- Probability-Weighted Expected Outcome --- Expected Revenue: $____M Expected EBITDA: $____M Expected Free Cash Flow: $____M --- Decision Triggers and Contingency Plans --- [Decision trigger framework as shown above] --- Recommendation --- [Specific recommendation based on scenario analysis] [Actions to take now regardless of scenario] [Contingency actions to prepare but not yet execute] ``` ## Quality Gate Before finalizing scenario analysis, verify: - [ ] Each scenario has a coherent narrative (drivers tell a consistent story) - [ ] Scenarios span a meaningful range of outcomes (not clustered around base case) - [ ] Driver values are justified with supporting evidence or precedent - [ ] Base case aligns with the current rolling forecast or budget - [ ] Stress case tests liquidity and covenant compliance, not just profitability - [ ] Probabilities assigned to scenarios sum to approximately 100% - [ ] Probability-weighted outcome is calculated for key decision metrics - [ ] Full financial statements are modeled (not just P&L — include cash flow and balance sheet) - [ ] Decision triggers are specific, measurable, and tied to pre-approved actions - [ ] Scenarios are not stale — refresh when material new information emerges - [ ] Management has reviewed and validated scenario assumptions - [ ] Presentation focuses on decisions and actions, not just analysis