FA-201a · Module 2

Sensitivity Analysis

3 min read

Scenario analysis tells you what happens when multiple assumptions change at once. Sensitivity analysis tells you what happens when one assumption changes in isolation. This isolation is what makes it powerful — it reveals which single variable has the most leverage over your outcome. If a 5-point change in win rate swings revenue by $2M but a 5-point change in churn rate only swings it by $400K, you know where to focus your improvement efforts and your anxiety.

Impact of ±5pp Change on Annual Revenue:
───────────────────────────────────────────────
Variable          -5pp        Base      +5pp
───────────────────────────────────────────────
Win rate          $22.4M     $25.4M    $28.3M   ← Highest leverage
Avg deal size*    $23.1M     $25.4M    $27.7M
Net retention     $24.2M     $25.4M    $26.6M
Churn rate        $25.8M     $25.4M    $25.0M
───────────────────────────────────────────────
*Normalized to percentage impact for comparison

Win rate drives 2.3x more variance than churn.
Focus improvement effort where leverage is highest.

Do This

  • Test each key assumption independently to identify the highest-leverage variables
  • Build a tornado chart showing the impact range of each variable from high to low
  • Focus improvement efforts on the variable with the highest sensitivity
  • Share the sensitivity analysis with the leadership team — it changes the conversation

Avoid This

  • Change all assumptions at once — that is scenario analysis, not sensitivity analysis
  • Only test the assumptions you are worried about — the ones you ignore may have the most leverage
  • Present a single forecast number without showing its sensitivity to key inputs