Is your business plan STILL insane?

In business planning, sensitivity analysis is a way to sanity-check the assumptions underlying your plan

-          It identifies the variables that have most impact on the outcome of your plan (for instance, sales volume or materials price)

-          In this table, your plan is shown in the “base case” column

	Previous year	Base case	Variance	Best case		Worst case
				Variance	£	Variance	£
Volume of sales	600	660	10%	12%	672	0%	600
Average unit price	£9.09	£10	10%	10%	£       10	-5%	£         9
Sales income	£5,454	£6,600	21%		£ 6,719		£ 5,181
Average unit cost	£6	£6	0%	0%	£         6	10%	£         7
Direct costs	£3,600	£3,960	10%		£ 4,032		£ 3,960
Salaries	£1,800	£1,800	0%	0%	£ 1,800	0%	£ 1,800
Rent	£720	£738	2.50%	0%	£    720	5%	£    756
Net profit	-£666	£102			£    167		-£1,335

-          The best case assumes that you can achieve the best possible values for all the main variables (volume of sales, materials prices and so on) given all you know about the market, your competition and other relevant factors

-          The worst case assumes the opposite and that you achieve the worst possible values for the same variables

-          A credible business plan will be based somewhere in the middle of these two outcomes

-          A credible plan will specify what arrangements you have in place to

o   Ensure that you achieve the best values you can for the variables identified

o   Minimise the impact should key variables go against you

If you'd like to know more about developing a business plan then this event is for you.

Get more great business tips on our website.