📌 Stage 5 · Scenarios and Variance · Assumptions · scenario stress test · 40–50 min
One dropdown, three very different years
Learning goals
- Run the three scenarios end to end and read the headline outputs
- Explain which drivers create the Worst-case loss
- Locate the first covenant breach month under Worst
- Use the Best-to-Worst spread as the studio's risk budget
Concepts
How to stress test
Switch Assumptions C5 and read three outputs: Monthly P&L O27 (FY net profit), Cash Roll-Forward N8 (December closing cash), and Cash Roll-Forward row 11 (covenant status). One dropdown, three stories:
Best: FY net profit $203,025.97, covenant never close.
Base: FY net profit $56,865.97, covenant OK every month, tightest cushion $10,384.00.
Worst: FY net profit −$84,614.03, covenant BELOW MINIMUM from March onward.
What the Worst case actually changes
The Worst year is not chaos — it is five specific disappointments at once: a retainer client leaves (3 → 2), the retainer fee drops to $6,000.00, project fees soften to $8,500.00 with the same volume, clients pay slower (30% in-month, 25% two months out instead of 40% / 15%), and freelance help costs more per project (28% versus 25%). Each driver alone is survivable; together they turn the year into an $84,614.03 loss.
Notice what does not change: payroll, rent, and the loan are still paid. The Worst case is unforgiving precisely because costs are fixed.
The covenant breach
Under Worst the cash balance goes below the $30,000.00 floor in March and never recovers — row 11 flags every month from March through December. The mechanism is the collection curve: billings keep arriving but a quarter of them lands 60 days out, while payroll and rent are paid on their normal rhythm. March is also when the studio pays the insurance renewal and the first loan payment.
This is the scenario the lender is worried about, and the reason the covenant exists in the model at all.
The spread is the risk budget
Best minus Worst is roughly $287,640.00 of net profit — the range the studio's decisions have to endure. That spread tells the owner what a single lever is worth: deferring the camera kit protects $6,300.00 of the downside, deferring the hire protects $29,640.00, and keeping a third retainer client protects the largest single block of revenue.
Lesson 17 pulls exactly these levers. The point of the spread is not fear; it is knowing which levers are worth pulling before the year starts.
Practice
Fixed case: Harbor Creative Studio LLC, a four-person design studio in Austin, Texas, planning calendar year 2026. Cached numbers are the Base scenario. Pale-green cells are formulas; white cells are typed inputs. The exercise opens on the sheet this lesson teaches. Cell C5 (the scenario switch) is blank: retype a scenario name and watch the model follow.
- Open Assumptions — The exercise opens on Assumptions. Cell C5 is empty in this exercise; it is normally a dropdown holding Best, Base, or Worst.
- Type Worst — Type Worst into C5 (exactly as spelled in row 13) and confirm. F14 should drop to 2 retainer clients and F15 to $6,000.00 — the switch works.
- Read the P&L under Worst — Open Monthly P&L: O27 (FY net profit) should read −$84,614.03. Scan a few months of row 8 to see revenue fall while row 22 costs hold.
- Read the covenant under Worst — Open Cash Roll-Forward: row 11 should read BELOW MINIMUM from March (column E) onward, with December closing cash (N8) far below the $30,000.00 floor.
- Restore Base — Return to Assumptions, type Base into C5, and confirm the cached plan is back: Monthly P&L O27 reads $56,865.97 and Cash Roll-Forward N8 reads $80,465.15 with status OK all year.
Online exercise
The spreadsheet below is editable — follow the practice steps right on this page. Steps that need ribbon menus should be done in your own Excel with the downloadable practice file.
Checklist
Work through each item; when every box passes, this lesson is done:
- ☐ Retyped Worst into C5 and confirmed F14 dropped to 2 retainer clients
- ☐ Read the Worst outputs: FY net profit −$84,614.03 and BELOW MINIMUM from March
- ☐ Read the Best output: FY net profit $203,025.97
- ☐ Restored Base: O27 back to $56,865.97 and N8 back to $80,465.15