Scenario planning for technology companies
Technology companies navigate considerable uncertainty. Not only is the tech sector prone to disruption, but the larger economic, social, and political landscape is increasingly volatile. From pandemic-induced lockdowns to supply chain shortages, one thing is certain: we don’t know what’s coming next.
It makes sense, then, for tech companies to mitigate risk and maximize upside. Our scenario planning software can help them chart a sustainable course through a volatile landscape.
What is scenario planning?
Scenario planning is an FP&A discipline that supports effective decision-making and has been used by some of the world’s most successful companies.
In a scenario planning session, executives ask “what if” questions and explore the outcomes of different contingencies. When done with the right framework (hint, hint: Profit Frog), scenario planning can result in robust modeling capabilities using a company’s actual data extrapolated into hypothetical futures.
Now, the power of scenario planning is available at an affordable pricepoint for tech startups to use. Profit Frog helps tech companies model profitability under hypothetical futures and chart a course to maximum profits.
Which, of course, is the reason you’re in business.
Benefits of scenario planning for technology companies
Scenario planning is incredibly beneficial to a tech company’s profitability. Some benefits of scenario planning include:
- Be decisive and move quickly. Tech leaders can react quickly to external events because they’ve already modeled their response and have a plan.
- Have a competitive advantage over competitors. Investors, customers, and employees will be inspired by decisiveness and agility.
- Minimize risk by not being caught off guard. Because a tech firm has prepared for specific scenarios, they are less at risk because they can act quickly to keep the impact minimal.
- Maximize upside. A tech company can become more antifragile by being prepared to take advantage of opportunities introduced by change; meanwhile, unprepared competitors cannot mobilize quickly enough to capitalize on the opportunity.
Smart tech companies become smarter with Profit Frog
Scenario planning was once the province of mega-corporations with unlimited budgets and financial wizards on staff. Over the past several years, a new crop of scenario planning tools have emerged. Most of these cater to enterprise organizations and have a steep learning curve and too much complexity.
Profit Frog is the only scenario modeling tool built for startups and small businesses. With an intuitive interface and the ability to dynamically model multiple scenarios easily, we give you everything you need…and nothing you don’t.
With Profit Frog, you don’t need an army of MBAs or God-level Microsoft Excel skills. Simply follow our prompts and you’ll be modeling scenarios like a pro.
Our scenario planning software lets you model a range of possible outcomes and impacts. Then you can steer your company toward best-case scenarios while being prepared for worst-case ones.
- Learn where to allocate resources
- Be strategically and financially prepared for a worst-case scenario
- Identify potential risk and turn it into gain
- Recognize and seize amazing opportunities
- Gain confidence in your decision-making skills by preparing for things you can’t control
- Be ready for disruptive change and take advantage of it
- Have a proactive rather than reactive orientation to the future
Scenario Planning vs Strategic Planning
Many companies mistake strategic planning for scenario planning, when the two processes are actually quite different in orientation and result.
- Strategic planning assumes a known future outcome and strategizes how to get there
- Scenario planning assumes a dynamic, chaotic future and helps you plot the course to maximum profitability through all the unknowns
In other words, strategic planning is a more static process and is disrupted by variability, where scenario planning is designed to navigate variability.
Profit Frog’s scenario analysis is designed to be dynamically updated as conditions change. This sort of dynamic planning is much more effective and actionable than many static planning models.
Tech companies that adopt scenario planning are better positioned for variability than those that undertake strategic planning alone.
Scenario planning FAQ
How should a SaaS company calculate the cost of goods sold?
Cost of goods sold, or COGS, is a financial metric originally developed for companies that make and sell physical products. For a SaaS company, COGS should probably be termed “cost of software delivered,” or COSD—but we’re not holding our breath on that term being adopted.
SaaS companies still have costs of producing and delivering their software, even though it’s not a physical good. See our guide to COGS vs OPEX in SaaS for more detail on this.
How does Profit Frog’s scenario planning software differ from other options on the market?
Other scenario planning software is overly complex and expensive. Ours is easy and affordable.
How to use scenario planning in situations caused by the Covid-19 pandemic?
In a world remade by the pandemic, every organization needs to invest in financial, strategic, and operational scenario planning. Profit Frog helps you model organizational viability across all types of scenarios, including disruptions caused by pandemics, supply chain issues, recessions, or other events.
How much does Profit Frog’s scenario planning software cost?
We price our software on a sliding scale based on total revenue. For custom pricing, don’t hesitate to contact us for a custom estimate.
How do you create a scenario planning project with Profit Frog?
Profit Frog is an effective scenario planning tool that allows you to model as many scenarios as you like, easily and quickly.
- Identify scenarios you want to model
- Input actuals (data about your organization) into Profit Frog
- Adjust variables dynamically to see how they influence scenarios
- Create an action plan and update it dynamically as conditions change
With a Profit Frog scenario plan, you can look at local or global scenarios with the lens of how they will impact your nonprofit. You can then look at the various alternative futures posed by those scenarios and develop a plan to navigate them.
Is there a free trial available for Profit Frog’s scenario planning software?
Yes, we offer a 14-day free trial of our software.
How does Profit Frog’s scenario planning software help my technology company make better, more informed decisions?
When you create scenarios in Profit Frog, you’ll be using your actual company data and then strategically altering certain variables. This gives you valuable insight into how specific factors will affect net profit—without having to actually experience the situations. You’ll use the insights gleaned from these exercises to craft a dynamic business plan that is antifragile and tailored to specific possibilities.
Further reading on small business financial management
What is COGS and how do you calculate it?
Understanding revenue vs profit
Why forecasting matters for small businesses
Advantages of scenario planning
Measuring year over year growth
Net profit vs gross profit metrics
Using profit and loss effectively
What are the best profitability modeling tools?
Calculating COGS for service businesses
Making sense of P&L vs cashflow
Which COGS metrics matter most?
COGS vs operating expenses explained
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