Which assumption is this strategic bet actually resting on?
Most big bets get argued, not tested. This template starts from the hurdle the initiative has to clear, then solves each assumption backwards for the level it would have to hit to get there, so you can see which single number the whole case is standing on before anyone opens a slide.
Words on this sheet
- Contribution: What is left of the income after the costs that come with it, before the fixed costs are paid.
Finance Advanced Monte Carlo Pro engine
After you install, this is the model to open.
What Has to Be True: Strategic Bet Stress Test
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
One click runs 10,000 trials across all eight assumptions at once and ranks them by how much room each one has left.
- Plan-case NPV
- 3.8 $M at a 12% hurdle
- Odds the bet clears the hurdle
- 43 %
- Break-even price
- 2,363 $/unit, 9.1% below plan
- Median outcome
- -1.2 $M NPV
At plan the initiative shows +$3.8M of net present value, which reads like an easy yes. Run the same model with honest ranges and it clears its hurdle only 43% of the time, with a median outcome of -$1.2M. The assumption with the least room is price: at $2,363 a unit, only 9.1% below plan, the entire case goes to zero, while every other assumption can slip somewhere between 14% and 72% before it breaks. Share captured is the one that swings the answer hardest, so the two things worth settling before you fund this are what you can charge and what share you can really hold.
The model
A seven-year cash flow model for a new product line, discounted at a 12% hurdle rate, driven by eight named assumptions your team can argue about.
| Addressable market | 90k – 120k – 150k units a year |
| Peak share captured | 3% – 6% – 10% |
| Competitor response drag | 5% – 18% – 35% of share lost |
| Price per unit | $2,150 – $2,600 – $2,850 |
| Variable cost per unit | $850 – $936 – $1,150 |
| Fixed operating cost | $2.0M – $2.4M – $3.3M a year |
| Time to launch | 6 – 9 – 20 months |
| Build cost, upfront | $10M – $12M – $18M |
| Hurdle | 12% discount rate over 7 years |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- The headline says $12M. What is the earn-out worth?What Is the Earn-Out Actually Worth?
- Will the synergies actually cover the premium?Will the Synergies Cover the Premium?
- Can you afford the hiring plan?Can We Afford This Hiring Plan?
- Sign the flat round, or wait for the milestone?Raise Now, or Wait for the Milestone?
- What does ignoring correlation cost you?
- Do your two holdings actually diversify each other?How Two Assets Move Together
Every model like this one, and the method behind them: Monte Carlo simulation.