Every plan rests on assumptions that will turn out wrong. Flex the main profit drivers around a base case to see the range of outcomes and identify which assumption deserves the most attention.
How it works
Flex volume, price, variable cost and fixed costs around a base case to see upside and downside profit and rank which driver moves the result most.
Profit = Volume × (Price − Variable cost) − Fixed costs
Tornado: flex one driver to its low and high value, hold the others at base
Swing = |Profit at high − Profit at low|
Upside / downside: all drivers at their favorable / unfavorable values togetherCommon uses
- Budget and forecast risk assessment
- Investment and pricing decisions under uncertainty
- Board presentations of upside and downside cases
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Base volume (units) | 50,000 |
| Base price per unit | $40 |
| Base variable cost per unit | $22 |
| Base fixed costs | $600,000 |
| Volume range ± | 15% |
| Price range ± | 5% |
| Variable cost range ± | 8% |
| Fixed cost range ± | 10% |
| Base-case profit | $300,000 |
| Upside profit | $711,200 |
| Downside profit | ($54,800) |
| Most sensitive driver | Volume |
The downside case produces a loss: identify which drivers can be hedged or contracted.
Interpreting the results
- Drivers at the top of the tornado deserve the most forecasting effort and the closest monitoring.
- Combined scenarios are intentionally extreme; real outcomes usually mix favorable and unfavorable drivers.
- Base ranges on history or market evidence, not round numbers, so the ranking is meaningful.
Frequently asked questions
What is the difference between scenario and sensitivity analysis?
Sensitivity analysis changes one driver at a time while holding the others constant, which isolates each driver’s impact. Scenario analysis changes several drivers together to describe a coherent upside or downside situation.
What is a tornado chart?
A tornado chart ranks drivers by how much the result swings between each driver’s low and high values. The widest bars sit at the top, giving the shape its name and showing where forecasting effort matters most.
How should I set the ranges for each driver?
Base ranges on historical volatility, market data or contract terms rather than a uniform percentage. A driver that is contractually fixed deserves a narrow range, while demand in a new market may warrant a wide one.
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