Startup Budgeting•14 min read

Scenario Planning for Startups: Best, Worst, and Base Cases

Your base case forecast isn't guaranteed. Scenario planning helps you prepare for multiple futures and know exactly when to act.

What Is Scenario Planning?

Scenario planning models multiple possible futures for your business. Instead of one forecast, you maintain several: what happens if things go well, if things go poorly, and your most likely outcome.

You've built your budget. It's thorough, it's realistic, and you're proud of it. But here's the truth: it won't happen exactly as planned. Revenue might exceed expectations. A key customer might churn. The economy might shift.

Scenario planning isn't about predicting the future—it's about being prepared for multiple futures. When you know how you'll respond to different outcomes, you can act decisively instead of scrambling.

Why Scenario Planning Matters

Single-point forecasts create false confidence. When you only have one plan, any deviation feels like failure or requires real-time problem-solving. Scenario planning gives you:

Preparedness

Pre-decide how you'll respond to different outcomes. When things change, you execute a plan instead of panicking.

Risk Awareness

Understand your downside. How bad could it get? What would trigger a crisis? Knowledge reduces anxiety.

Upside Readiness

Know when to accelerate. If things go better than expected, have a plan to capitalize—more hires, more marketing, faster expansion.

Board Confidence

Investors love founders who've thought through scenarios. It signals maturity and risk awareness.

The Three Essential Scenarios

For most startups, three scenarios provide the right balance of insight and manageable complexity:

Best Case (Upside)

Things go better than expected. Revenue accelerates, churn decreases, key deals close faster. Not pie-in-the-sky optimism—achievable if things break your way.

Typical assumptions:

  • • Revenue +20-30% vs base case
  • • Faster customer acquisition
  • • Lower churn than historical
  • • Hiring on schedule or early

Base Case (Expected)

Your most likely outcome. This is your primary forecast—what you're planning against and tracking toward. Realistic, not optimistic.

Typical assumptions:

  • • Revenue based on pipeline + historical rates
  • • Churn at historical average
  • • Hiring with typical timelines
  • • Some expenses come in higher, some lower

Worst Case (Downside)

Things go poorly. Revenue misses, key customers churn, hiring is delayed. Not catastrophic (that's a different exercise)—but materially worse than planned.

Typical assumptions:

  • • Revenue -20-30% vs base case
  • • Higher churn, slower sales cycles
  • • Key deals slip or are lost
  • • Delayed or cancelled hires

Building Your Scenarios

Here's how to construct each scenario:

Step 1: Identify Key Drivers

What variables have the biggest impact on your financial outcomes? For most startups, these are:

  • New customer acquisition (count and speed)
  • Average revenue per customer (ARPU/ACV)
  • Customer churn rate
  • Headcount growth (timing and cost)
  • Marketing efficiency (CAC)

Step 2: Define Ranges for Each Driver

Sample Driver Ranges

DriverWorstBaseBest
New Customers/Month469
Monthly Churn Rate6%4%2%
Average ACV$18K$24K$30K
New Hires (Annual)357
CAC$5,000$3,500$2,500

Step 3: Calculate Outcomes

Run each scenario through your financial model. The key outputs to track:

Scenario Output Comparison

WORST

BASE

BEST

Year-End ARR

$580K

$840K

$1.1M

Monthly Burn (Avg)

$85K

$95K

$110K

Runway (months)

14

18

22

Cash at Year-End

$680K

$920K

$1.2M

Key Variables to Model

Focus your scenarios on the variables that matter most. For most startups:

Revenue Variables

  • • New customer count
  • • Sales cycle length
  • • Deal size / ARPU
  • • Churn rate
  • • Expansion revenue

Expense Variables

  • • Hiring pace and start dates
  • • Salary levels vs budget
  • • Marketing spend efficiency
  • • Infrastructure costs
  • • One-time costs

Pro Tip: Don't Over-Complicate

Vary 3-5 key drivers, not 20. Most of your outcome variance will come from a handful of variables (usually revenue growth and headcount). Focus there.

Trigger-Based Decision Framework

Scenarios are most powerful when paired with decision triggers: pre-defined conditions that prompt specific actions. This removes emotion from the decision-making process.

Decision Trigger Framework

Upside Triggers → Accelerate

If: Revenue exceeds base case by 20% for 2+ months

Then: Accelerate hiring plan, increase marketing budget

If: CAC drops below $2,500 with quality maintained

Then: Increase paid marketing spend by 50%

Caution Triggers → Monitor

If: Revenue is 10-20% below base case

Then: Freeze discretionary spending, delay non-critical hires

If: Runway drops below 15 months

Then: Begin preliminary fundraising conversations

Downside Triggers → Cut

If: Revenue is 30%+ below base case for 2+ months

Then: Implement runway extension measures, potentially including layoffs

If: Runway drops below 9 months

Then: Emergency measures: cut burn 30%+, aggressive fundraising

Important: Define these triggers in advance, when you're thinking clearly. In a crisis, emotions run high. Having pre-committed decisions makes it easier to act decisively.

Using Scenarios Effectively

In Board Meetings

Present all three scenarios to your board, not just the base case. This shows:

  • You've thought through risks and opportunities
  • You have contingency plans ready
  • You understand the range of possible outcomes

For more on board reporting, see our guide on board decks and investor reporting.

For Fundraising

Investors will ask "what if?" questions. Having scenarios ready shows you've done your homework. Key questions scenarios help answer:

  • "How much runway do you need and why?"
  • "What happens if growth slows?"
  • "What would you do with more capital?"

For Internal Planning

Use scenarios to stress-test decisions:

  • Hiring: Can we afford this hire in the downside case?
  • Marketing: What ROI do we need to justify this spend?
  • Pricing: How do different price points affect scenarios?

Common Scenario Planning Mistakes

Best Case Is Fantasy

Your best case should be achievable, not aspirational. "10x growth" isn't a scenario—it's a dream. Base it on what happens if things break your way, not magic.

Worst Case Isn't Bad Enough

Founders often sandbag their worst case to avoid uncomfortable conversations. If your worst case still shows 12 months of runway, it's probably not worst enough.

Not Updating Scenarios

Scenarios should be updated monthly alongside your rolling forecast. Static scenarios become irrelevant as the business evolves.

No Action Plans

Scenarios without triggers and actions are just interesting math. Each scenario should have a corresponding response plan.

Too Many Scenarios

Three scenarios is usually right. More than five creates complexity without added insight. Start simple, add nuance only if needed.

Key Takeaways

  • 1Build three scenarios: best case, base case, worst case
  • 2Focus on 3-5 key drivers—don't overcomplicate
  • 3Create trigger-based decision frameworks to guide action
  • 4Update scenarios monthly—static scenarios lose value
  • 5Be honest—best case should be achievable, worst case should be truly bad

Continue Reading

Startup Budgeting: The Complete Guide

Everything you need to know about startup budgeting

Rolling Forecasts

A modern alternative to annual budgets

12 Ways to Extend Runway

Actions to take when scenarios go south

Need Help With Financial Planning?

Eagle Rock CFO helps seed and Series A startups build scenario models, stress-test their plans, and prepare for multiple futures. Get the financial clarity to make confident decisions.

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