Sensitivity Analysis

Sensitivity analysis is a technique used to understand how changes in key assumptions or inputs of a business model affect its outcomes. By adjusting these variables—like costs, sales volume, or market conditions—we can see how sensitive the results, such as profits or cash flow, are to these changes. This helps businesses identify which factors are most critical to their success and assess risks, enabling better decision-making and strategic planning. Essentially, it’s about understanding the potential impacts of uncertainty in a business’s financial projections.