Scenario Planner

Scenario Planning for Revenue Ops

Scenario planning is the process for modeling out various possible events or scenarios that can take place in the future. When putting together the Go-To-Market Model for an organization, scenario planning is a key tool used early in the process to determine the best course of action when it comes to allocation of available resources to extract the maximum returns for the company.

The Scenario planning process becomes a way for the Chief Revenue Officer to guide decisions on what go-to-market programs to use, what capacity can be deployed in which roles and where, what composition of products to sell and what discretionary expenditure to budget for. These decisions are usually made in the context of input from the Finance team who may provide guidance on expected revenue goals for the future and the expense envelope that is available to achieve these goals.

When performing Scenario Analysis, it is very common to start with three basic scenarios: Best Case, Worst Case and Base Case scenario. However, throughout the year various unforeseen events could also force teams to adjust and build new scenario plans. An example of this in the recent years is COVID-19 and its impact on various businesses and industries.

The fullcast scenario planner allows you to do exactly this. Once you build a base case scenario, you can easily snapshot it and then create the best case and the worst-case scenarios from it.

The Profit & Loss Statement Model

Return on Investment (ROI) is a measure of the profit or loss the company receives to its bottom line as a result of the investment in sales and marketing. It is also referred to as “Contribution Margin” in finance circles. The factors that contribute often to the ROI are things like:

  • Productivity of employees
  • Profitability of various sales programs
  • Efficiency of deploying the right mix of resources for maximum return

For this reason, the scenario planner in fullcast.io uses a proforma Profit and Loss template to model the ROI in a particular scenario based on various inputs. Using a consistent model in scenarios allows a comparison between different models such that the combination of resource allocation that generates the best returns can be understood. This allows for an apples-to-apples comparison between scenarios.

The elements of the proforma P&L statement for Revenue teams:

  1. Revenue Items which as its name implies is the projected revenue from various products and services sold by the company.
  2. Cost of Goods Sold (COGS) includes all the costs and expenses related to the production of the products sold by the company. COGS excludes sales and marketing costs. COGS should only consider the cost incurred in producing the products sold to customers in the year of concern.
  3. Gross Income – is calculated by subtracting the COGS from Revenue. Gross profit includes variable costs and does not account for fixes costs.
  4. Net Income indicates a company’s profit after all the expenses have been deducted from revenues. Net Income or Net Contribution can be thought of as the returns on the investment into sales, marketing and customer management functions.

Model Inputs & Sensitivity Analysis

The P&L items mentioned above are typically projected based on assumptions made along various independent variables (or drivers). In order to perform Scenario Analysis, these input drivers can be adjusted to create various scenarios models that can then be used to determine the best course of action.

Sensitivity Analysis determines how different values (or uncertainty) of a model input affect the scenarios. This is also referred to as “What-if” or “simulation” analysis. This differs from Scenario analysis where specific events or situations are modeled as opposed to uncertainty in a particular model input. For example, in scenario analysis you may model an economic downturn whereas in sensitivity analysis you may look at what happens if the employee productivity assumption varies by +/- 5% on either side.

You can perform both Scenario and Sensitivity analysis using the fullcast scenario planner.