What if analysis tool in excel

Create Different Scenarios | Scenario Summary | Goal Seek

What-If Analysis in Excel allows you to try out different values (scenarios) for formulas. The following example helps you master what-if analysis quickly and easily.

Assume you own a book store and have 100 books in storage. You sell a certain % for the highest price of $50 and a certain % for the lower price of $20.

If you sell 60% for the highest price, cell D10 calculates a total profit of 60 * $50 + 40 * $20 = $3800.

Create Different Scenarios

But what if you sell 70% for the highest price? And what if you sell 80% for the highest price? Or 90%, or even 100%? Each different percentage is a different scenario. You can use the Scenario Manager to create these scenarios.

Note: You can simply type in a different percentage into cell C4 to see the corresponding result of a scenario in cell D10. However, what-if analysis enables you to easily compare the results of different scenarios. Read on.

1. On the Data tab, in the Forecast group, click What-If Analysis.

2. Click Scenario Manager.

The Scenario Manager dialog box appears.

3. Add a scenario by clicking on Add.

4. Type a name (60% highest), select cell C4 (% sold for the highest price) for the Changing cells and click on OK.

5. Enter the corresponding value 0.6 and click on OK again.

6. Next, add 4 other scenarios (70%, 80%, 90% and 100%).

Finally, your Scenario Manager should be consistent with the picture below:

Note: to see the result of a scenario, select the scenario and click on the Show button. Excel will change the value of cell C4 accordingly for you to see the corresponding result on the sheet.

Scenario Summary

To easily compare the results of these scenarios, execute the following steps.

1. Click the Summary button in the Scenario Manager.

2. Next, select cell D10 (total profit) for the result cell and click on OK.

Result:

Conclusion: if you sell 70% for the highest price, you obtain a total profit of $4100, if you sell 80% for the highest price, you obtain a total profit of $4400, etc. That’s how easy what-if analysis in Excel can be.

Goal Seek

What if you want to know how many books you need to sell for the highest price, to obtain a total profit of exactly $4700? You can use Excel’s Goal Seek feature to find the answer.

1. On the Data tab, in the Forecast group, click What-If Analysis.

2. Click Goal Seek.

The Goal Seek dialog box appears.

3. Select cell D10.

4. Click in the ‘To value’ box and type 4700.

5. Click in the ‘By changing cell’ box and select cell C4.

6. Click OK.

Result. You need to sell 90% of the books for the highest price to obtain a total profit of exactly $4700.

Note: visit our page about Goal Seek for more examples and tips.

What-if-analysis in Excel is a tool in Excel that helps you run reverse calculations, sensitivity analysis and scenarios comparison.

Decision making is a crucial part of any business or job role. When you can take decisions, which are informed based on data, the outcome of the business or project or task is always more in control.

Thus, What if Excel is used by almost every data analyst and especially middle to higher management professionals, to make better, faster and more accurate decisions based on data.

3 parts of what-if-analysis in Excel

• Goal Seek – Reverse calculations
• Data Table – Sensitivity analysis
• Scenario Manager – Comparison of scenarios

Goal Seek in What if analysis

Let’s consider a simple dataset, where the invoice amount is Rs. 10,000, on which there is 9% CGST and 9% SGST, which thus amounts to a total of Rs. 11,800.

The customer asks you for a discount of Rs. 800 and thus the final amount should be Rs. 11,000.

Now, the equation in simple terms is, X + 18% = 11000, where X is the invoice amount, 18% is the total GST.

To find out, how much + 18% = 11000, we will use Goal Seek in What if analysis.

• Place your cursor on the ‘Total’ cell
• Under the ‘Data’ tab, click on ‘What-If-Analysis’, then on ‘Goal Seek’

• In ‘Set Cell’, B4 will automatically be selected as you had kept your cursor on it.
• In ‘To value’, enter the desired value, 11000 in this case.
• In ‘By changing cell’, choose the value that needs to be changed, invoice amount in this case. Thus cell B1 is selected.
• Press Ok

Excel will reverse calculate and immediately give you the value Rs. 9,322, which + 18% equals exactly to Rs. 11,000

This was a very simple example of using Goal Seek in what-if analysis. You can use Goal Seek even for more complex models, let’s take an example of a Car loan model.

The ‘EMI’ calculated Rs. 19,786 is the outgoing amount per month. The value is negative as money is going out of your pocket.

But, you have a budget of only Rs. 17,000 per month. So, how much can you afford as ‘Price of Car’?

Put the Goal Seek values as above and you will know the Price of Car that you can afford.

This was calculations at multiple levels that Goal Seek in What-if analysis did, as it had to consider Available funds, ROI, Number of payments to reverse calculate and give you the answer.

That’s how powerful it is.

Data Table in What-If analysis

Data Table is used for Sensitivity analysis. What this means is basically, either 1 or 2 of the inputs in your model are changing, you want to know output based on each change.

Let’s take the same Car loan example as earlier.

Now, after applying the Goal Seek, you know you can afford to buy a car worth Rs. 7,15,526 instead of Rs. 8,00,000.

1-input Data Table

Then you go to the Car showrooms and research on more cars available. You find out 5 cars that you like, you want to know what would be the EMI amount for each of the car?

Car 1 – Rs. 5,54,000

Car 2 – Rs. 5,96,000

Car 3 – Rs. 6,24,000

Car 4 – Rs. 7,36,000

Car 5 – Rs. 7,94,000

Use what if analysis data table to find this.

Since only 1 input is changing, that is, Price of Car, we will use 1-input data table.

Make this structure in your Excel sheet next to your model.

In D3, you can write anything you want, doesn’t matter.

Next to that, in E4, put =B9. Basically, you are pointing to the formula that is used to calculate the EMI. Thus, here you have informed Excel that you want to calculate the resulting EMI for each value, using the formula in B9.

Now select this structure you have created and go to ‘Data table’ under what-if analysis in Data tab.

Since our options of Prices of Cars are put vertically in a column, we will use Column input cell. Select cell B1 to inform Excel that the 5 values are Price of Car values.

Press OK

Excel has calculated for you, the EMI for each change in Price of Car.

2-input Data Table

Similarly, you can have 2 inputs varying and still get the respective outputs.

So now you think about what if I change the duration of the loan, and compare for all these 5 cars?

Go to Data Table and select Row input cell as ‘No. of payments in months’ and Column input cell as ‘Price of car’

You will get the EMI amount for each combination in no time, without much effort or any complicated formulas.

Scenario Manager in what if analysis

Let’s say you are working in a Car Showroom in the Sales department. You have been given the task to plan the sales for the next quarter. You must build multiple scenarios and prepare a comparison of all the scenarios.

You make a model as below and then want to create multiple scenarios based on number of cars that you will be able to sell for each of the cars.

Under What-if analysis, go to scenario manager.

Click on ‘Add’

Let’s start building our 1^st scenario

• Scenario Name – Best Case
• Changing Cells – select cells C2:C6 as these are the No. of cars that you will be able to sell, basically the variable cells
• Press OK
• Enter values for each Car

I have entered values as above, you can enter whatever you like.

Similarly add 1 more Scenario and name it as ‘Worst Case’. The changing cells will ofcourse remain the same.

I have put in the below values for Worst case.

You can create many more scenarios like this.

Compare the scenarios

Now that your scenarios are created, let’s compare them.

In the Scenario Manager window, click on Summary.

You will now be asked for ‘Result cells’. Choose the Total Sales Value, cell D8, as that’s what you want to compare. If you want to compare more outputs, you can choose multiple cells here too.

A new Sheet will be created automatically on pressing OK which will give you a comparison of the Current values in your Sheet + the 2 scenarios you created.

Thus, in best case, the Total Sales is over Rs. 6 CR. Worst Case is 3.77 CR.

Now you can take your business decisions based on this output.

Conclusion

Thus, we can conclude that what-if analysis is an integral part of the tools any data analyst or middle to senior management uses. Using the 3 tools in what if, you can analyze data much quickly than if you try to do the same using formulas, thereby allowing you to take faster and accurate decisions.

• Goal seek is for Reverse calculations.
• Data Table is for 1 or 2 inputs changing, resulting changes in output.
• Scenario Manager is to compare multiple business scenarios based on multiple inputs changing.

Many features in different versions of excel work differently, but what if analysis in excel 2010 works same way as what if analysis in excel 2013 and what if analysis in 2007 or 2016.

Take up the Data Analytics using Excel Course to become a proficient Data Analyst.

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If you’ve ever experimented with different variables to see how your changes would affect the outcome of a situation, you’ve done a what if analysis. 

Would you be able to sell more items if you had a sale this week? Or would you make more money by increasing the price instead? In the above scenarios, you want to know the degree to which each change affects the overall outcome. For this reason, a what if analysis is also known as a sensitivity analysis.

Most what if analyses are really mathematical calculations, and that is Excel’s specialty. To help you do a what if analysis, Excel uses commands from the Forecast command group on the Data tab to prepare simple forecasts or advanced business models. 

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Goal Seek

The simplest sensitivity analysis tool in Excel is Goal Seek. Assuming that you know the single outcome you would like to achieve, the Goal Seek feature in Excel allows you to arrive at that goal by mathematically adjusting a single variable within the equation.

To illustrate how it works, imagine that the bank is offering an interest rate of 9% per annum on personal loans with 24 months to repay, and that you would like to borrow $40,000. 

Using the above information, the bank calculates that the amount borrowed plus interest over the loan period will be $47,200, as shown in cell B5. The amount to be paid each month is also calculated and shown in cell B6.

By using the Goal Seek command, we can indicate a desired outcome and Excel will determine the adjustment we need to make to a single variable.

In the example above, cell B5 is dependent on the variables in cells B1, B2, and B3. Cell B6 is dependent on cells B3 and B5. Therefore, if we determine that the monthly repayment amount quoted is higher than desired, we can use Goal Seek to set the monthly amount to $1750. Excel can work backwards to change either cell B1, B2, or B3 to reach that goal.

Practically speaking, we may not have much control over the interest rate, so it is more likely that we have the option of adjusting the amount we borrow, or the repayment period. 

Our first inclination may be to find out how much we will be able to borrow if we pay $1750 per month and all other variables remain the same. Excel will change the principal (B1) based on the number we enter as the new value for cell B6.

Assuming that the interest amount (9%) and loan period (24 months) remain the same, the new principal amount is calculated and displayed in cell B1 if a valid solution exists.

Points to note:

1. The cell chosen in the “Set cell” field must be a cell containing a formula.
2. The cell chosen in the “By changing cell” field must be a cell containing a constant.
3. Once “OK” is selected from the Goal Seek Status window, the values on the worksheet are adjusted and are only retrievable by selecting the ‘Undo’ command (Ctrl+Z Windows shortcut/Cmd+Z Mac shortcut).

Scenario Manager

Another what if analysis tool is the Scenario Manager. This option is somewhat more advanced than Goal Seek in that it allows the adjustment of multiple variables at the same time. 

Some other noticeable differences between Goal Seek and Scenario Manager are listed below:

• The Scenario Manager allows the creation of an unlimited number of possible scenarios by changing up to 32 variables at a time.
• Each scenario can be saved for comparative purposes.
• Scenarios may be named and edited, and a brief description provided.
• Only constant values should be changed within the Scenario Manager — cells with formulas should not be manually adjusted.

If we continue our bank loan example, we can determine our model’s sensitivity to change by adjusting any or all of the values in cell B1, B2, or B3.

Best practice

As a best practice, the original worksheet data should be saved as a scenario so that you can revert to it after all the experiments have been completed.

Step 1 — Click ‘What If Analysis’ from the Data tab and select Scenario Manager.

Step 2 — Click ‘Add’ from the Scenario Manager pop-up window.

Step 3 — Name this scenario “Original” and enter the cell references of all cells with constant values that you may consider changing in other scenarios (maximum 32 cells). Click OK.

Step 4 — For the “Original” scenario, do not adjust any values in the ‘Scenario Values’ window.

Step 5 — Click ‘Add’ to create your first experimental scenario.

Creating experimental scenarios

When creating an experimental scenario, give the scenario a descriptive name from the ‘Add Scenario’ pop-up window. The changing cells will be the same as the ones referenced in your ‘Original’ scenario. 

Even if you will not be adjusting all the values in those cells, it is highly recommended that they remain referenced in the ‘changing cells’ field. You may place additional details about the experimental scenario in the ‘Comment’ field (see below).

As illustrated above, our experimental scenario is given the name “36 months” and refers to cells B1 to B3 as changing cells. An additional comment indicates that this scenario is to determine the effect of borrowing $40,000 over a 36-month period.

In the ‘Scenario Values’ window, each changing cell is displayed as a field where we can manipulate the constant value so as to affect the outcome of the dependent cells — in our case, cells B5 and B6. As described in our scenario name and comments, we only adjust cell B3 by changing the value to 36.

To add another scenario at this point, select ‘Add’. If not, click OK. 

Adjust multiple variables

To experiment with adjusting multiple variables within one scenario, the steps are the same as above, with the exception that the desired changes would be made in the Scenario Values window.

For example, to get Excel to perform a what if analysis on borrowing $50,000 over a 36-month period in the above situation at the same rate of interest, we would simply adjust the fields referencing those variables after creating a new scenario. Excel’s Scenario Manager can handle an unlimited number of scenarios created in this same way. 

A list of created scenarios can be viewed by clicking OK from the Scenario Values window, or by selecting Scenario Manager from the What If Analysis dropdown menu.

To see the outcome of each adjustment on the output cell(s), either double click on a scenario name, or highlight a name and click Show. 

Scenario summary

Scenarios that have been created may also be compared side by side with the creation of a Scenario summary worksheet, which is generated by selecting ‘Summary’ from the Scenario Manager window. 

There are two report types available — Scenario summary and Scenario PivotTable report. Result cells are the cells that will be displayed in the summary. Ideally, these should include all cells which were adjusted as well as result cells. It’s also a good idea to select cells that contain header names so that these are clearly displayed in the summary.

Choosing the ‘Scenario summary’ option will create a new sheet within the workbook that displays each scenario in columnar format. Changing Cells are highlighted in gray, and Result Cells are displayed under Changing Cells.

Note that if named ranges were created for Changing or Result Cells, range names will be displayed instead of cell references.

Selecting the Scenario PivotTable report type will create a pivot table report in a new worksheet. Learn more about pivot tables from our Resource Library.

Using data tables for what if analysis

The third what if analysis tool from the Forecast command group is the Data Table. Data tables allow the adjustment of only one or two variables within a dataset, but each variable can have an unlimited number of possible values. Data tables are designed for side-by-side comparisons in a way that makes them easier to read than scenarios, once they are set up correctly.

Data tables are under-utilized, but are not as scary as they may seem.

One-variable data tables 

If the only variable to be considered in our loan example were the amount being borrowed, we could set up a one-variable data table.

Step 1 — make a list of all possible principal loan amounts. The list may be by column or row. In our example, we will enter a column list in the range D9 to D12.

Step 2 — In an adjacent column, enter the formula which was used to arrive at the original outcome. In this case, we can simply type =B6 in cell E8. This links our new data table to the original variables. 

Step 3 — Select the entire data table range, including the list of variable values, the formula, and blank cells. 

Step 4 — From the What If Analysis dropdown menu, select Data Table. 

Step 5 — In the column input cell field (since we entered our variables in column format), enter the cell reference that was used to calculate the result in the original dataset. In the above example, this would be cell B1 since this is the variable we have adjusted. No value is entered in the ‘Row input cell’ field in this instance since this is a one-variable data table.

Step 6 — Select OK. The result is a list of outcomes created by adjusting the one variable in cell B1, assuming that all other variables remain constant.

To create a row-oriented data table, the variables would be listed horizontally, and the row input cell would be used in the Data Table window instead of the column input cell.

Two-variable data tables

When creating a two-variable data table, one set of values is listed horizontally and the other set is listed vertically. In our example, we will add the loan period (term) as our second variable, displayed horizontally.

In this case, the formula which was used to arrive at the original outcome must be replicated above the vertical list of variables. As shown below, we type =B6 in cell D7. This links our new data table to the original variables. 

As before, highlight the entire data table range and select Data Table from the What If Analysis menu. The row input cell is the cell reference (B3) that corresponds to the horizontal variables from the original dataset, while the column input cell (B1) corresponds to the vertical variables.

When we select OK, Excel returns a matrix that can be used to compare the outcome of different changes to our original scenario. It may be necessary to adjust the output cells to the appropriate number format for your data type (in the case of the above example, currency).

Summary

Now that you’ve taken the time to demystify how to do a what if analysis in Excel by using these three main tools, why not experiment with using them in different settings — like budget management, profit margin percentages, project completion targets, and the like? 

Once you get the hang of these, you’ll want to check out our resource center and take our Basic and Advanced Excel course to become a real pro!