Sales forecasts can feel like guesswork for UK SMEs and start-ups right now. Costs keep rising, customers hesitate, and late payments can turn a good month into a cash crunch.
That’s why scenario planning sits at the centre of Financial Modelling and Forecasting when you’re asking for funding. Lenders and investors don’t want a single optimistic forecast, they want to see that you’ve stress-tested the numbers and understand what drives cash.
In this post, you’ll get a clear approach to building a base, downside, and upside case that people can trust. Each case will tie straight to cashflow, show repayment ability, and set out the actions you’ll take if sales land above or below plan.
Consult EFC builds lender-ready models that stay practical and easy to run, so you can make decisions fast and stay in control as conditions change.
Start with a base model lenders can follow in five minutes
A lender does not want to decode your spreadsheet. They want to see a clean story, what drives sales, what turns into cash, and what could break. In Financial Modelling and Forecasting, a strong base case is the one that reads like a simple operating plan with numbers attached.
If you can explain your base model in five minutes, you usually have something fundable. If you cannot, it is a sign the model is doing too much guessing and not enough measuring.
Photo by Mikhail Nilov
Use driver-based sales assumptions, not one big revenue guess
A single revenue number is easy to type, and hard to defend. A driver-based forecast is the opposite. It forces you to connect sales to real activity in the business, so you can explain it under pressure, and adjust it quickly when reality changes.
Start by choosing the few sales drivers that genuinely move your top line, then make each one measurable. Practical drivers most lenders recognise include:
- Volume: units sold, projects delivered, billable days, seats filled, or active users.
- Price: average selling price, day rate, or average order value, with planned price changes dated.
- Conversion rate: lead-to-meeting, meeting-to-proposal, proposal-to-win, or trial-to-paid.
- Pipeline coverage: pipeline value compared to target (for example, the next 90 days).
- Churn and retention: customer churn rate, logo retention, revenue retention, and contract renewal timing.
- Sales cycle length: the time from first contact to cash-in, not just to signing.
- Seasonality: month-by-month patterns (holidays, budget cycles, weather, school terms).
- Channel mix: direct sales vs. partners vs. online, each with its own conversion and margin.
- Repeat orders: reorder rate, frequency, and typical time between purchases.
The key is linking each driver to an operational story you can stand behind in a meeting. If you say conversion improves, explain why: a new offer, a stronger lead source, a higher-quality pipeline, or a better sales process. If you assume price rises, show the trigger: supplier increases, improved value, or a planned product tier change. If you forecast repeat orders, tie it to customer behaviour and contract terms.
Keep it simple. Many strong base models can be explained with one basic formula per revenue stream:
Revenue = volume x price, then layer in the operational drivers that create volume (leads x conversion, or active customers x repeat rate).
Finally, document assumptions like you would write instructions for a colleague covering your role. Use plain English, include dates and sources, and avoid vague notes like “management estimate”. Examples of defendable sources include CRM reports, signed contracts, historic invoicing, website analytics, or named customer conversations, with the date you pulled them.
Make cash flow the main event, because funding decisions are about cash
Funding decisions are not based on profit. They are based on whether cash will be there, on time, to pay staff, suppliers, tax, and debt repayments. A business can look profitable on paper and still run out of cash if money gets trapped in working capital, or if tax and payroll timing catches you out.
Build your base model so cash flow is front and centre, not an afterthought. The usual pressure points are working capital, VAT, payroll cadence, and capex.
Working capital is where sales forecasts meet reality. Tie cash receipts and payments to operational timing:
- Debtor days (DSO): how long customers take to pay. If you sell to larger firms, assume longer payment terms unless you have proof.
- Stock turns: how quickly you turn inventory into sales. Growth often needs more stock before cash comes back.
- Creditor days (DPO): how long you take to pay suppliers. Stretching payments may help cash, but can damage supply and pricing.
VAT is another common trap. A strong model shows VAT timing, not just VAT amounts. If sales rise, VAT bills can rise fast, and they are usually paid quarterly. That creates lumpy outflows that can wipe out a “good month”.
Payroll cadence matters too. Wages tend to be monthly and fixed. Commission, bonuses, pension, and employer NIC add further cash pressure. If you plan new hires, show start dates and whether the team becomes billable immediately or after ramp time.
Capex needs the same treatment. If you are buying kit, vehicles, software builds, or fit-out, the cash often leaves before the growth arrives. Show when spend happens, what it enables, and whether it is one-off or repeated.
To keep your base case lender-friendly, sense-check it using a short set of cash checkpoints:
- Runway: how many months you can operate before cash hits a critical point.
- Monthly cash low point: the lowest bank balance you hit, and in which month.
- Covenant headroom (if debt is involved): how close you get to thresholds under the base case.
- Funding timing: the exact month you need funding, plus how early you must start the process.
If your model cannot answer those four points clearly, it is not ready for a lender conversation. Your base case should make it obvious what you need, when you need it, and what the business can do to stay in control of cash.
Build base, downside, and upside cases that feel real, not cosmetic
A scenario model only builds trust if each case has a believable cause and effect. In practice, that means you’re not just changing a revenue growth percentage and calling it “downside”. You’re changing the drivers that create revenue, the timing of cash, and the costs that move with activity.
In Financial Modelling and Forecasting, aim for three cases that answer three different questions:
- Base case: What’s most likely to happen, based on what you can prove today?
- Downside case: What breaks first, how quickly does cash tighten, and what will you do about it?
- Upside case: If demand jumps, can you deliver it without running out of cash?
Base case: the most likely path, backed by evidence you can show
Evidence is anything you can put on the table in a meeting and explain in one minute. For SMEs and start-ups, it often isn’t years of audited history. It’s a mix of trading data, commercial proof, and operational reality.
Here’s what “evidence” commonly looks like in a base case:
- Historic run-rate: recent monthly sales, units, average order value, gross margin, debtor days, and refund rates. Use the last 3 to 12 months depending on volatility.
- Signed contracts and renewals: contracted revenue by month, with start dates, break clauses, and renewal timing.
- Pipeline by stage (with conversion and time to close): not a single pipeline total. A simple stage view (lead, qualified, proposal, negotiation, won) with historic conversion rates is easy to defend.
- Customer interviews and call notes: what buyers say they will do, what they won’t pay for, and what blocks the deal.
- Market benchmarks: not as a crutch, but as a reasonableness check for CAC, churn, win rates, and pricing levels.
- Pricing tests: quotes sent, win loss notes, A B price tests, discount ranges, and evidence of price sensitivity.
- Capacity plans: how many jobs you can actually deliver per month, billable hours, production limits, stock availability, and supplier lead times.
Build the base case at monthly detail (at least for the next 12 to 18 months). That’s where seasonality, VAT timing, payroll timing, and working capital swings show up. Group revenue and costs in a way that matches your accounting system so you can update quickly without rebuilding the model. If your P&L uses three sales lines and six cost lines, keep the model close to that structure.
A few red flags weaken a base case fast:
- Hockey-stick growth with no driver change (no new channel, no headcount, no pricing shift, no product change).
- Missing seasonality (every month looks identical, even though your trade doesn’t).
- Marketing spend with no link to leads (spend rises, but lead volume and conversion stay flat, or are not shown at all).
A base case doesn’t need to be exciting. It needs to be explainable, repeatable, and easy to update as results land.
Downside case: show what breaks first, then show your fix plan
A downside case earns respect when it shows the chain reaction, what changes first, what cash impact follows, and what you will do within weeks, not months. Think of it like a fire drill. It’s not pessimism, it’s preparation.
Common downside shocks to model include:
- Slower conversion: the same lead volume, but fewer deals close.
- Deal slippage: wins happen, but one to three months later than planned.
- Price pressure: deeper discounting, smaller contract sizes, or weaker renewal pricing.
- Churn spike: a few customers cancel, or renewals take longer and involve concessions.
- Loss of a key customer: one large account exits or materially reduces spend.
- Supplier cost increases: cost of goods rises before you can reprice.
- Higher wage costs: pay rises, higher employer costs, or tougher hiring markets.
The model becomes credible when you add management actions with clear timing and limits, rather than vague statements like “reduce costs”. Examples that can be modelled cleanly:
- Hiring freeze and delayed backfills: date it, and show the effect on delivery capacity and payroll.
- Marketing re-allocation: shift spend to the best channel, and reduce low-performing spend, then reflect what that does to lead volume.
- Targeted price rises: apply to new sales only, or to renewals, and include expected churn impact.
- Supplier re-negotiation: reduced unit costs, extended payment terms, or alternative suppliers.
- Inventory reduction: slower purchasing, clearance activity, and improved cash tied up in stock.
- Short-term funding: bridging facility, director loans, invoice finance, or staged equity, with realistic timing.
- Capex delay: move non-essential spend, but show the operational consequence if it limits growth or efficiency.
Lenders pay close attention to survival metrics in the downside. They tend to focus on:
- Minimum cash level: your lowest bank balance (and whether it breaches a sensible buffer).
- Ability to service debt: whether interest and repayments are still covered when sales soften and cash collections slow.
- Covenant buffer: how close you get to covenant thresholds, and for how long.
- Recovery timeline: when the business returns to a stable cash position, and what actions drive the recovery.
A strong downside case reads like a plan you can run on a Monday morning. It shows you know what you’ll stop, what you’ll protect, and how you’ll communicate the changes.
Upside case: prove you can handle growth without blowing up cash
Upside is not “add 20 percent to sales”. Real growth has friction. You need stock, people, systems, and time, and cash often leaves before it returns.
Start by stating what triggers the upside (a new contract, a new channel that’s working, a price increase that sticks, a partner deal, a new region). Then show the constraints that could cap the result:
- Stock and supplier lead times: can suppliers scale, and do payment terms worsen as volumes rise?
- Fulfilment and delivery capacity: warehouse space, logistics, installation slots, project management, or billable staff.
- Hiring and ramp time: weeks to hire, weeks to train, and the lag before new team members become productive.
- Systems and processes: order processing, customer onboarding, finance ops, and reporting, especially if volumes double.
- Quality and returns: more volume can mean more defects, more refunds, and higher support load if processes don’t keep up.
Upside also brings growth costs that get missed in optimistic models:
- onboarding and implementation time
- customer success and support headcount
- returns, rework, and service credits
- higher debtor days (bigger customers often pay slower)
- higher working capital (more stock, more WIP, more receivables)
To make upside believable, model when growth becomes cash-negative. That’s the month where profit can look great, but the bank balance falls because working capital expands faster than cash receipts.
Finally, show how you fund the upside without panic. Common routes include trade finance, a revolving facility, invoice finance, staged equity, or a mix. The key is timing. Funding needs to arrive before the cash trough, not after. An investor-ready upside case shows the point where you need extra headroom, how much, and what the funds pay for (stock, hires, systems, or all three).
If your upside case proves you can scale without losing control of cash, it doesn’t just look ambitious, it looks investable.
Pressure-test the model the way investors and banks do
If your forecast only works when everything goes to plan, it isn’t a forecast, it’s a hope. In Financial Modelling and Forecasting, the quickest way to build trust is to show you’ve tried to break the model on purpose. Banks want repayment comfort, investors want to see risk and response. Both want to know the same thing, when the numbers move, do you still stay solvent, and do you understand why?
A good pressure-test focuses on the few inputs that truly drive revenue, margin, and cash. It also produces outputs a reviewer can audit fast, without a long call or a “walkthrough” that turns into a defence.
Run sensitivities and find the break-even points that matter
Start with single-variable sensitivities. These tell a reviewer you know your biggest levers and you’ve measured the impact cleanly. Pick a short list and run them one at a time, keeping everything else constant:
- Price: What happens if you discount by 5 percent for two quarters, or if you raise price by 3 percent and churn ticks up?
- Volume: What if units, projects, or billable days land 10 percent below plan?
- Churn: What if monthly churn rises from 2 percent to 3 percent, or renewals slip by one month?
- CAC: What if cost per lead rises, or conversion drops, so CAC increases by 20 percent?
- Gross margin: What if supplier costs rise and margin falls by 2 points before you can reprice?
- Debtor days (DSO): What if customers pay 15 days later than assumed?
Then move to multi-variable sensitivities, because real life rarely changes one input at a time. A simple and credible approach is a 2×2 table (or a small matrix) combining two drivers that interact, for example:
- Price and volume (discounting may lift volume but cut margin)
- Churn and CAC (retention weakens and acquisition gets more expensive)
- Gross margin and debtor days (profit falls and cash takes longer to arrive)
Keep the stress realistic. Investors and lenders prefer a few sensible shocks over ten extreme ones.
Once sensitivities are clear, add break-even views that answer practical questions:
- Sales break-even (to cover fixed costs): the monthly sales level needed to cover fixed overhead and contribution margin.
- Cash break-even month: the first month where operating cash flow stays positive (after working capital and tax timing).
- Minimum runway needed: the cash headroom required to survive the downside trough, including VAT and debt payments.
Two simple visuals make this easy to review in minutes:
- A bridge chart from base to downside, showing which drivers explain the change (volume, price, margin, churn, collections).
- A cash runway line chart (base vs downside), showing the low point and the month you recover.
Finally, make formatting consistent so the model can be audited quickly. Use one input style (for example, blue font), one output style (black), and clear labels for units and time periods. Reviewers don’t “trust” spreadsheets, they audit them.
Package it for due diligence, so the numbers survive scrutiny
A model can be right and still fail due diligence if it’s hard to follow. Your goal is to make the pack read like a clear set of working papers, where assumptions, outputs, and evidence line up.
Include a tight lender or investor pack with the essentials people actually check:
- Assumptions page: dated, sourced, and written in plain English (pricing, conversion, churn, headcount starts, pay terms, VAT treatment).
- Scenario summary table: base, downside, upside, showing revenue, gross margin, EBITDA, cash low point, funding need, and covenant headroom (if relevant).
- Monthly cash flow forecast (12 to 24 months): with working capital movements shown, not hidden.
- Three-statement links: P&L, balance sheet, and cash flow tied together, so cash moves for a reason.
- Debt schedule: opening balances, drawdowns, interest, repayments, and closing balances by month.
- Covenant calculations: DSCR, leverage, interest cover, or any agreed tests, with clear definitions that match the term sheet.
- Unit economics and cohort views (where relevant): contribution margin, CAC payback, LTV, churn, retention, and gross margin by product or channel.
- KPI dashboard: a small set of operating KPIs that connect to the model (pipeline coverage, win rate, utilisation, DSO, stock turns).
- Audit trail of sources: links or references to accounts, bank statements, CRM exports, contracts, price lists, payroll reports, and board notes.
If you want the pack to hold up under questioning, add a short “change log” tab. It should show what changed since the last version, why, and who approved it. That single step prevents messy back and forth during a live deal.
There are a few common deal-killers that create instant doubt, even when the business is strong:
- Circular references no one can follow, which makes the model fragile and hard to audit.
- Hard-coded totals, where outputs don’t tie back to drivers and the numbers feel “typed in”.
- Missing balance sheet links, which often hides working capital, VAT timing, and debt movements.
- Assumptions that change without explanation, especially headcount, margin, and collections timing.
- Hidden rows, merged cells, and inconsistent formulas, which slows review and raises suspicion.
If you’re aiming for funding, it’s worth having the model reviewed as if you were the bank credit team. This is exactly where Fractional CFO support pays for itself, not by adding complexity, but by tightening logic, evidence, and presentation so the numbers can stand up to scrutiny.
Turn scenarios into decisions, not just spreadsheets
A scenario model has one job, help you act early. If it sits in a folder until month-end, it’s failed. The best models feel less like finance paperwork and more like a set of traffic lights for the business.
In Financial Modelling and Forecasting, your base, downside, and upside cases should translate into a short list of signals to watch and moves you’ll make when those signals show up. That’s how you stay in control when sales wobble, margins tighten, or cash receipts slip.
Set trigger points and actions, so you’re not reacting too late
Triggers work best when they’re tied to drivers you already track, or can track in under 15 minutes a week. The point isn’t to predict the future, it’s to spot drift early enough to do something about it.
Below are practical trigger examples for SMEs with small teams. Each trigger pairs with a clear action and a timeframe, so you don’t end up “discussing it next month” while cash keeps sliding.
| Driver trigger | What it usually means | Action you take | Timeframe |
|---|---|---|---|
Pipeline coverage drops below target (for example, under 3x the next 90 days sales target) | Next month’s revenue is already at risk, even if you work harder | Rebuild weekly pipeline review, re-assign best closer to late-stage deals, launch a 10-day outbound sprint to fill top-of-funnel | Within 7 days |
Churn rises above threshold (for example, >3% monthly for subscription, or renewals slipping by >30 days) | The base case is no longer valid, and CAC payback gets worse | Call top 10 at-risk accounts, offer fixed-term save plan (service fix, training, or revised package), freeze discounting until reasons are known | Within 14 days |
Gross margin drops by >2 points vs plan for two consecutive months | Costs moved, pricing slipped, or delivery is inefficient | Stop unapproved discounting, renegotiate top supplier lines, reprice new quotes, tighten scope control on projects | Within 30 days |
Cash runway falls under 6 months in base case, or under 3 months in downside | You’re running out of choices, and funding options shrink fast | Start funding process, cut or delay non-essential spend, pause hiring (except revenue-critical roles), move to weekly cash reporting | Within 48 hours to 14 days |
Debtor days (DSO) creep up by >10 days vs plan | Sales are not turning into cash, and you’re funding customers | Put credit control on a weekly cadence, chase before due date, tighten terms for new customers, consider staged billing or deposits | Within 7 days |
A useful rule is to define one owner per trigger. It might be you, your finance lead, or your ops manager, but it can’t be “the business”. Keep the response simple and repeatable, like a fire drill. When the trigger hits, you run the play, no debate.
Also, set a review rhythm that fits real life:
- Weekly: pipeline coverage, cash balance, overdue debtors.
- Monthly: churn, gross margin, overhead creep.
- Quarterly: pricing, capacity constraints, working capital policy.
That way, scenarios become part of how you run the company, not a one-off exercise for investors.
Use scenarios to time fundraising and explain your story clearly
Fundraising rarely fails because the spreadsheet is wrong. It fails because the story is fuzzy, the timing is late, or the use of funds looks like a patch rather than a plan. Scenarios help you stay crisp.
Start by presenting funding across three points in each case: amount, timing, and purpose. You want an investor or lender to see, at a glance, what you need and why it’s sensible.
In practice:
- Downside case sets the minimum ask. This is the “keep control” number. It covers the cash low point, plus a buffer for delays (customer payments, legal, DD, drawdown timing). If the downside shows a cash trough in month 6, you start the process in month 3 or 4, not month 5.
- Base case explains the plan. This ties money to the operating steps in your model: hires, marketing spend, product work, stock build, or working capital support. It should read like a plan you can deliver with your current team.
- Upside case supports a growth option. This is not a bigger number for the sake of it. It’s staged capacity spend (people, stock, systems) that you only trigger once demand is proven. It helps investors see a path to faster growth without reckless cash burn.
A clear way to frame it in your deck and model is to split the raise into two buckets:
- Protection capital (downside): keep the business solvent, protect core delivery, avoid forced decisions.
- Growth capital (base and upside): fund specific activities with measurable outputs (leads, capacity, delivery time, margin).
Your scenario narrative also has to line up with valuation conversations. If you’re asking for a higher valuation, the upside case must show how you achieve it and what it costs in cash and execution. If you’re taking a more cautious valuation, the downside should still show that the business stays investable and doesn’t drift into a rescue round. For a plain-English refresher, see understanding valuation basics.
Finally, be explicit about timing. Investors and lenders think in calendars, not intentions. Put months on everything:
- When cash hits its low point in each case.
- When you must start the raise to avoid a cash crunch.
- When funds land, and what the first 30, 60, 90 days spend looks like.
That’s how your scenarios stop being “three tabs in Excel” and start being a decision tool that investors can trust.
Conclusion
Scenario planning only builds trust when it’s grounded in a clean base model, three driver-led cases (base, downside, upside), and pressure tests that mirror how lenders and investors review risk. The downside case should be honest and practical, because credibility comes from showing what breaks first, how cash tightens, and what you’ll do quickly to protect runway and repayments. The upside case matters just as much, because fast sales growth can still create a cash squeeze through stock, hiring lag, and slower-paying customers.
If you want Financial Modelling and Forecasting that stands up in funding talks and still helps you run the business week to week, work with Consult EFC to build a lender-ready model, clear actions, and a story you can defend with confidence. Thanks for reading, what would have the biggest impact on your sales next quarter, conversion, timing, or cash collection?
