Scenario analysis for founder and research decisions
Explore consequences under explicit assumptions without presenting a scenario as a forecast.
For Public,Founders,Researchers · Reviewed 2026-10-09
A scenario asks what would happen under specified conditions; a forecast makes a claim about what is likely to happen. Keep those roles distinct. Central-bank stress testing, such as the Bank of England’s programme, illustrates the use of hypothetical conditions to examine resilience. A startup’s planning worksheet is a much smaller exercise with its own assumptions and limitations.
Our suggested starting point is one decision: hiring, entering a market, launching a feature or renewing a supplier contract. Define the planning horizon and the variables that actually affect the outcome. For a software business, these might include retention, acquisition cost, usage cost and payment timing. Give every assumed input a label and keep observed inputs in separate columns.
Build a base case and contrasting cases that change a few meaningful drivers. Do not assign probability weights merely to make the output look sophisticated. Calculate the implications consistently, then test whether the proposed action remains workable across cases. A sensitivity table can show which single assumption changes the conclusion most, helping the team decide what to research next.
Finally, connect each scenario to observable signposts and a review date. Decide in advance what evidence would prompt a change in spending or scope. Preserve the assumptions when updating the worksheet so the team can distinguish new evidence from a changed model. The valuable result is a decision with explicit conditions and a learning plan, rather than a confident-looking spreadsheet that hides uncertainty behind one revenue number.
Questions to investigate
- Which assumption most changes the decision when varied?
- What observable signpost would cause the team to revise the plan?
- Are these hypothetical cases being mistakenly presented as probable outcomes?
Primary sources
Related research
- Research startup adoption beyond announcements
Distinguish business formation, sign-ups, repeated use, paying demand and durable adoption.